What Might Have Been: Proposition 19 and California Employers

Anyone following the recent election in November saw that Proposition 19 was soundly defeated by California voters. The proposition asked voters to allow the state to “regulate, control and tax cannabis.” Employers may have asked themselves, “What effect would Proposition 19 have had on me as an employer in California had it passed?”

First, if Proposition 19 had passed, employers in California would have been allowed to discharge or otherwise discipline only those employees whose legal use of marijuana impaired “actual job performance.” As such, an employer smelling marijuana on a worker’s clothes would not have been sufficient to justify discipline of that employee. Likely, formal discipline of an employee, such as a write-up, suspension, etc. would only be permissible if it were based on problems with job performance, not merely the use of the marijuana.

It is not difficult to see how employees would react to such discipline, write-ups, or terminations. Chances are employees would argue that the discipline, even discipline based on poor performance, was merely a pretext for the employee’s legally protected use of marijuana. Employers levying such discipline could expect prompt discrimination lawsuits.

Also, Proposition 19 would not have only affected current employees. Denial of employment to a marijuana-using job applicant would also be prohibited, raising the issue of whether employers have a right to conduct pre-employment drug screening for use of marijuana.

Luckily for employers, this increase in litigation pertaining to employee marijuana use will have to wait for another day. California voters have spoken, and thus California employers can breathe a sigh of relief. At least for now.

Treading carefully around non-compete agreements

As outlined previously in this series, employee non-competition agreements in California are generally unenforceable and against public policy under Business and Professions Code section 16600. Nevertheless, employers (especially out-of-state employers) frequently include such provisions in employment contracts. Such employers usually apply the following rationale: “it can't hurt" to have them as a deterrent and a potential source of leverage.

The result of these provisions is usually a strongly-worded “cease and desist” letter from a previous employer to a new employer. What employers may not know is that such letters can carry certain risks for the employer seeking to enforce the non-compete provision, such as a claim for intentional interference with contract. However, a recent Court of Appeal decision, Silguero v. Creteguard, held that the new employer may be liable if it responds to the threat by terminating the employee.

In reaching its decision, the court began with the theory that in California, "the interests of the employee in his own mobility and betterment are deemed paramount to the competitive business interests of the employers." Based on this strong public policy the Court determined that any explicit no-hire agreement between the two companies would have been illegal and unenforceable. The Court further concluded that terminating Silguero "out of respect for" the non-compete agreement with his prior employer was merely achieving the same result in an indirect manner. As a result, the Court found that if Silguero could prove his allegations, his new employer would be liable for the tort of Wrongful Termination in Violation of Public Policy.

What should you do if you receive an aggressive cease-and-desist letter from a prior employer seeking to enforce a non-competition agreement? Do not automatically terminate a new employee in such situations. First, the underlying agreement is almost certainly unenforceable anyway. Second, you could face a wrongful termination claim if you do.

A little tip on Tip Pooling

In certain industries and occupations, tips are incredibly important to employees. Some business incorporate tip pools, where employees are required to contribute a certain portion of their tips into a tip pool that is distributed among various employees. In a recent California Supreme Court case, Lu v. Hawaiian Gardens Casino, the plaintiff argued that the Casino’s tip pooling requirement violated Labor Code section 351, which states that the tips are the property of the employee for whom they are left.

The California Superior court held that Labor Code section 351 did not provide private litigants a direct right to sue for the alleged taking of their tips by their employer. The Court looked at the express language of the statute and the legislative history in reaching its decision. The Court noted that in certain circumstances, an employee could pursue a civil tort claim for conversion, and that the Legislature could change the Labor Code to allow a private right of action.

Finally, the Court was clear that its ruling was limited solely to the issue of whether a private right of action exists for employees under Labor Code section 351. The Court did not give an opinion on whether tip pooling itself is lawful, nor did it give any parameters for tip pooling plans. As such, the Lu opinion should not be construed as to eliminating the ability of employees to sue for violations of tip pooling plans. Employees could still bring a claim under California’s conversion or unfair competition laws. If your business incorporates tip pooling, be sure that the process is handled fairly and administered accurately. Also, be on the lookout for further clarification from the courts on tip pooling in the near future.

The Curse of the Blackberry

Blackberries and take-home laptops are all too common in the workplace today. Studies have shown that 50% of workplace email users check work-related email on the weekends; 34% say they check email on vacation. Many employers expect and even require their employees to read and respond to work-related emails when not at work. Problem arise when these policies are applied to hourly employees – salaried employees are generally expected work as long as the job requires.

There are of course two schools of thought on the issue. Employees feel like employers are getting a free ride by not paying for this off-hour activity. Employers respond by arguing that employees cannot be expected to be paid around-the-clock, 24 hours a day, simply because they have a cell phone.

Regardless of the viewpoint, the problem appears to be getting worse. In today’s job market, employers require fewer employees to do more, and attempt to squeeze maximum productivity from a minimum number of workers. Also, workers remain less likely to complain about after-hours work so they can keep their hard-to-come-by jobs.

That hasn’t stopped some workers from challenging the practice in the courts. Recent lawsuits against T-Mobile and CB Richard Ellis Group involve legal claims that hourly workers should be paid for time spent responding to work emails during off hours. The outcome of these cases will provide much needed guidance for employers and employees alike. This issue has shown that the wage and hour laws are getting behind the times – thus, it might be time for the Legislature to get involved to clarify the issue. Because, as we all know, the Blackberries aren’t going anywhere.

Getting Meal and Rest Breaks Right

Virtually all employers understand that their employees are entitled to breaks throughout the day. However, California’s regulations regarding meal and rest breaks are more involved than would appear. Penalties can be stiff for violations of these rules, so it behooves all employers to understand them.

Employers in California must provide non-exempt employees rest breaks of at least 10 minutes for each four hours worked. An employer must also provide a meal break of at least one half-hour for every work period more than five hours. During the meal break the employee must be relieved of duty and free to leave the premises. A second meal break is required if the employee’s work day is longer than 10 hours. Yet if an employee’s shift is six hours or less, the employee can choose to forego the meal break.

California Labor Code section 226.7 provides that if an employer fails to provide employees with these meal and rest breaks, the employee is owed “one hour of pay” for each missed break.

With respect to the penalty, rest breaks and meal breaks are different. With rest breaks, the employer is required to authorize and permit all employees to take the rest periods. An employer is not required to pay for the missed rest break if the employee, who was truly allowed and authorized to take the rest break, freely chooses to forgo it. Meal breaks are different, however. The employer has an affirmative obligation to ensure that workers are actually relieved of all duty during lunch breaks. Thus, it is the employer’s duty to allow employees to take rest breaks, and to ensure that employees take meal breaks.

Commuting and Compensation: Federal law vs. California law

Commuting in a company vehicle is required for many employees in California. An important question is whether or not that commuting time is compensable for the employee. California and federal law differ, however, in regards to such commutes. A recent Ninth Circuit federal case highlights this sharp distinction.

In Rutti v. LoJack, the plaintiff was a technician who installed LoJack anti-theft units in cars. He was dispatched each day directly from his home to the homes of customers, where he would install the units. During these trips he was required by the employer to use a company vehicle, and he was prohibited from making any personal stops or detours. Mr. Rutti was paid on an hourly basis; however, he was only paid from the time he arrived at the first customer’s house until he finished the last installation of the day.

The federal court found that the time Mr. Rutti spent “commuting” was not compensable time under the Fair Labor Standards Act (FLSA). Therefore, he was not entitled to FLSA pay for the time he spent traveling to and from his first and last jobs of the day.

California law operates differently. In California, the law requires compensation for all time “during which an employee is subject to the control of an employer.” Thus, the requirement to use a company vehicle and to refrain from any personal detours would be sufficient “control” to trigger the employer’s duty to compensate the employee under the Labor Code. Because California’s law regarding commuting and compensation is more favorable to employees, employers need to be mindful of it.

Drafting a proper termination letter

Terminating the employment relationship with an employee is never easy. Yet when the time has come to let an employee go, it is important to do it the right way. Oftentimes employers get into trouble for how a termination occurred, not why. Drafting a proper termination letter can help avoid such problems.

Employers may wish to include the following in a termination letter: (1) Notice that the action was a termination; (2) The date of the termination; (3) The reasons for the termination ­– avoid being too vague or too specific; (4) The dates and subject matter of prior warnings – this is especially useful when documentary evidence supports prior discipline; (5) Benefits to which the employee is entitled; (6) Circumstances under which the employee had access to a second review or appeal of the termination – here is where an employer may agree to characterize the employee's departure as a layoff, resignation, or retirement; (7) The employee's last day of work and what company property must be returned by that date; and (8) The date, time, and place for an "exit interview" – at the exit interview, the employer should notify the employee that a paycheck for final wages, including accrued unused vacation time, will be provided.

At the termination meeting, the employee should be given the original letter. Employers would be wise to also give a copy of the letter to the employee’s immediate supervisor and place an additional copy in the employee’s personnel file.
While there are no guarantees that a terminated employee will not seek redress after a termination, a properly drafted termination letter goes a long way to prevent problems down the road.

Simple safeguards to prevent workplace violence

It goes without saying that workplace violence is a serious thing. Violence at work is often sudden. It strikes fear into the heart of employees and can create severe liability for employers.

Employers can be liable for workplace violence under the following legal theories: (1) negligent hiring or retention of an employee with violent tendencies; (2) when the violence occurs within the course and scope of employment, or when the employer could reasonably have foreseen the violence; (3) an employer's failure to warn, when the employer has actual knowledge of a known danger; and (4) premises liability, as the owner of the property on which the violent act occurred.

There are, however, safeguards that employers can implement to reduce the likelihood of workplace violence. Some preventative measures include: (1) good lighting; (2) adequate security in parking and common areas; (3) limiting access to work areas; (4) alarms and surveillance cameras, where appropriate; (5) discouraging visits from former employees; (6) educating supervisors about characteristics associated with potentially violent employees; (7) training supervisors in conflict resolution; (8) Periodically surveying employee perceptions about working conditions and problems with the work environment; (9) implementing policies concerning violence and harassment that encourage reporting of incidents; (10) after investigating an incident, taking appropriate action to promptly counsel, discipline, or terminate the violent employee.

While these measures cannot eliminate the risk of workplace violence, they can go a long way in preventing it. To learn more about how to prevent workplace violence, attend the Workplace Violence Seminar, at the International Agri Center in Tulare on May 11, 2010, call (559) 622-8889 for more information.

The Dangers of the Daily Commute

California courts have long recognized the “coming and going rule,” which is that employees are outside the scope of their employment during their daily commute. However, a recent case is re-examining the rule. In Lobo v. Tamco, an employee collided with a police officer on the employee’s commute home. The officer died, and the officer’s family brought a wrongful death suit against the employer, arguing that the employee was acting in the course and scope of his employment when the accident occurred. At the trial court level, the employer successfully argued the “coming and going rule.”

However, on appeal the family argued that the employer was liable under the “required vehicle” exception – which is that a personally-owned vehicle is a condition of employment. The family argued that the employee, a Quality Control Manager, was required to visit customer sites, and thus having a vehicle was a condition of his employment.

The appellate court sided with the family, finding that the employee’s commute was within the course and scope of his employment because the employer “relies upon the employee to make his personal vehicle available…for the employer’s benefit and the employer derives a benefit from the…vehicle.” The Court noted that, “the fact that the employer only rarely makes use of the employee’s personal vehicle should not…defeat the plaintiff’s case.”

This case puts employers on notice that if they require employees to use their personal vehicles to perform aspects of their job, an employer may be vicariously liable for conduct occurring outside of work hours. Thus, it may be wise to re-examine positions that require even infrequent use of an employee’s personal vehicle.

Workplace Violence Seminar - May 11

Have your business or employees ever been threatened with a violent situation at work? Are you aware of your rights and responsibilities as an employer when such situations arise? Do you have the tools to prevent workplace violence? These are challenging times for employers, and knowledge is power.

Our firm, along with several other local businesses, is sponsoring a comprehensive seminar on Workplace Violence on May 11 at the International Agri-Center in Tulare. There will be multiple speakers including representatives from local law enforcement, nationally recognized security experts, and attorneys to answer your questions and provide information that will prepare you for difficult employment situations.

Come join us for an insightful and informative discussion of how you as an employer can prevent violence in the workplace. The seminar will help your business remain a safe place for your employees, customers and clients. The conference begins at 9:00 am on May 11 at the International Agri-Center in Tulare.

For more information, or to sign-up for the seminar, contact Pipkin Detective Agency at (877) 730-3532.

Determining an employee’s regular rate of pay

It is common knowledge throughout California workplaces that non-exempt employees are entitled to overtime if they work more than eight hours in a day or over forty hours in a week, and that employees earn “time and a half” or “double time” for overtime hours worked. However, some employers run into problems in determining the rate of pay which is ultimately multiplied by 1.5 or doubled. The rule in California is that the regular rate of pay must include all remuneration from the employer.

A common example is the restaurant employee. Suppose a restaurant employee receives a free meal during her shift. If her regular rate of pay is $15 per hour, then she would be paid $120 for an eight hour shift. However, her regular rate of pay must include the cost of the free meal (the lesser of the actual cost to the employer or the fair market value). If each meal costs the employer $10, then the employee’s total daily compensation is actually $130, or $16.25 per hour. This employee’s overtime rate would be $24.38, not the $22.50 that might be expected for a $15 per hour employee.

In this example, failure to properly calculate the employee’s regular rate of pay would result in the employee being short-changed $1.88 for each overtime hour worked. Such a shortfall could result in liability for unpaid wages, penalties under Labor Code section 203, interest and attorney’s fees.

These shortfalls are common in situations dealing with bonuses, incentives, mandatory gratuities at restaurants, free or subsidized lodging, or free trips or prizes for hitting sales targets. If any of these incentives are offered, or if anything of value is offered to an hourly employee beyond base wages, be sure to include that value when calculating the employee’s regular rate of pay.

The proper policing of company computers

In virtually every line of work, computers are a necessity. It has become difficult to even imagine a workplace without a computer. Yet whether computers are a “necessity” or a “necessary evil” varies from business to business. Thus, many employers create policies governing the use of office computers and access to the Internet.

A California case offers some guidance. TBG Insurance fired an employee for accessing pornographic websites on his work computer. The company requested a court order requiring the employee to turn over a computer provided by the company for home use. The company wanted to see whether the employee used the home computer for similar purposes. The employee first wanted to delete personal information he had placed on the computer, claiming such information was subject to privacy laws.

The court rejected the employee’s claim, stating that the employee signed an agreement to be bound by the company’s computer policy, which provided that the computers were provided for business purposes and not for personal use. The policy also prohibited computer use for obscene purposes and allowed the company to monitor such use. The court said the employee had no reasonable expectation of privacy (TGB v. Superior Court of Los Angeles (2002) 96 Cal.App.4th 443).

A computer/Internet policy should make it clear that company computers are to be used for business purposes, and that employees have no expectation of privacy regarding communications sent and received via the company’s email system or access to the Internet. Many companies also block potential time-wasting websites such as Facebook or Myspace. These safeguards can ensure that computers increase efficiency rather than decrease it.

Regulation of employees’ off-duty activities

Employers of course have the power to restrict certain activities of their employees at the workplace. But what about restricting activities of employees after the work day has ended? An employer can surely mandate that an employee may not smoke at his or her desk. But what about prohibiting an employee from smoking anywhere? What if the employer is motivated by a desire to keep the employee healthy, or to reduce company health insurance costs?

According to California law, employers of any size cannot discriminate based on lawful off-duty conduct of employees. Employees cannot be fired, threatened with firing, or in any way disciplined against because of lawful off-duty activities (Labor Code sections 98(k) and 98.6). Common examples are employers that discriminate against employees who drink or smoke, date other employees, or “moonlight” with second jobs.

In order for an outside activity to be protected, it must be (1) lawful and (2) performed outside working hours. Many employer conflict-of-interest policies – i.e. policies that attempt to curb employee “moonlighting” – face problems with this rule. A conflict-of-interest policy is only valid if the employee’s second job would (1) actually and directly conflict with the employer’s essential business-related interests, and (2) cause a substantial disruption of business operations. Thus, it is imperative that employers have well-drafted conflict-of-interest and trade secret policies.

So under California law, even when motivated by proper reasons, employers must use extreme caution when attempting to regulate lawful, off-duty activities of their employees.

Random Drug Testing of Current Employees

Last month’s article discussed drug testing of job applicants. This article addresses random drug testing of current employees. “Random” drug testing programs are those where an employer informs employees that they may have to submit to drug testing at any time during their employment, for any reason, or for no reason at all.

Cases upholding random drug testing are limited to those involving employees in narrowly-defined, specific professions in highly regulated industries or where positions are critical to public safety or national security. The rationale is that employees in these fields have less of an expectation of privacy given the nature of their employment. Random drug testing has been upheld for truck drivers, pipeline workers, aviation employees, and correctional officers having contact with prisoners.

The justification needed to randomly test employees is as follows: the intrusion into the employee’s privacy must be justified by a compelling interest. In one case example, where random drug testing was not allowed, the court held that safety was not a compelling reason for testing a computer operator for a railroad company in a non-safety sensitive position, and that her firing for refusing to consent to the test was a breach of the employer’s covenant of good faith and fair dealing.

Unless the employee fits into these narrowly-defined exceptions, random drug testing is not allowed in California. So even though random drug testing is often the most effective program to detect and resolve drug abuse issues at the workplace, chances are that a random drug testing policy at your business would not be legal under California law.

Drug Testing of Job Applicants

No employer wants to conduct a drug or alcohol test of an employee. And while such instances are rare, there are times when a business has no choice but to do so. This article will outline some important requirements pertaining to drug tests of job applicants. Next month’s article will discuss drug testing of current employees.

In a landmark case, the California Supreme Court refused to allow the City of Glendale to drug test current employees applying for promotions; however, the court did allow testing of job applicants. The court held that because the testing program was administered in a reasonable fashion as part of a lawful pre-employment medical examination required of every job applicant, it was permissible as to job applicants. The court held that the employer had a significantly greater interest in testing job applicants than current employees seeking a promotion (Loder v. City of Glendate (1997) 14 Cal.4th 846). This ruling holds true even where a job applicant delays submitting to the drug or alcohol test until after beginning work (Pilkington Barnes Hind. v. Sup. Ct. (1998) 66 Cal.App.4th 28, 32).

Be advised that employers may run into problems if only certain job applicants are tested and not others. Selective testing may bring complaints of discrimination. As evidenced by the ruling from Loder case cited above, the safest thing is to either test all applicants or none.

In conclusion, the current cases show that the drug testing of a job applicant generally will be upheld. Yet as will be discussed in more detail next month, the testing of current employees is held to a much higher standard.