Round and Round We Go: Rounding Policies in California

A California court recently held that employers may lawfully use rounding policies, i.e. policies that round an employee's time worked to the nearest tenth of an hour worked (or other similar increment) for purposes of calculating pay. 

In the case of Silva v. See's Candy, See's employees were required to use a timekeeping system to record their start and end times of work.  See's incorporated a rounding policy in which times would be rounded to the nearest tenth of an hour (up or down) for payroll purposes.  A former See's employee filed a lawsuit claiming the rounding policy resulted in underpayment of wages. 

The court held that "the rule in California is that an employer is entitled to use the nearest-tenth rounding policy if the rounding policy is fair and neutral on its face and it is used in such a manner that it will not result, over a period of time, in failure to compensate the employees properly for all the time they have actually worked."  Thus, the legality of a rounding policy depends on (1) whether it operates over time to pay employees for all time worked and (2) whether it does not to short employees.  In the See's case, there was an expert’s report filed with the court that concluded that the See’s rounding policy actually had a net effect of slightly overpaying employees. 

The See’s case is the first published California decision to uphold the use of rounding policies.  However, not all rounding policies would be found legal in the eyes of the law.  The key requirement is that the policy, over time, properly compensates employees for hours worked and that it does not result in underpayment.  Absent these requirements, a rounding policy can create substantial liability for employers. 

Social media and privacy rights

Virtually everyone – yes, probably even your parents – is on Facebook.  Facebook’s hundreds of millions of users share untold photos, stories, random thoughts and personal information all day, every day.  And unlike a phone call or in-person conversation, Facebook, and other social media sites, keeps a permanent record of every user’s online life.  As such, social media can create new and unique challenges for employees and employers alike.    

Potential employees may have online identities employers consider useful when choosing whether to hire a job applicant.  However, privacy settings on many social media sites allow an applicant to hide his/her online information from potential employers. As a result, a new trend in applicant background investigation has emerged: asking an applicant for his/her username and password to social media sites during the interview process.

In light of this trend, some states have drafted legislation seeking to outlaw what some consider an invasion of a job applicant’s privacy. Lawmakers in California, as well Illinois and Maryland, have proposed legislation that would prohibit employers from requiring that current or prospective employees provide or disclose any user names, passwords, or other ways of accessing personal online accounts. State lawmakers from Connecticut and New Jersey are considering drafting similar legislation, as is the United States Senate.

Social media isn’t going anywhere.  If anything, Facebook, Twitter and others are becoming ever more entrenched in virtually every aspect of online life.  Similarly, employers are not going to stop screening and investigating job applicants, and social media can often give employers an unfiltered glimpse as to who an applicant really is.  So for the time being, employers are free to mine social media sites for information on potential applicants, but California law has made it very clear that employers cannot demand that applicants or employees hand over user names and passwords. 

Preserving the at-will relationship

California is an at-will employment state.  A landmark California case put it thusly: “An employment, having no specified term, may be terminated at the will of either party on notice to the other." Dore v Arnold Worldwide, Inc. (2006) 39 C4th 384, 391, 46 CR3d 668.  It is in every employer’s best interest to keep the at-will relationship intact.  Failure to do so can create situations where the employment relationship may be only be terminated upon a showing of good cause.  There are several ways in which the at-will status of an employee can be modified.  This article will explore some of these.

Certain employer communications or actions can give rise to an enforceable expectation by the employee that he or she may only be terminated for good cause.  Some examples include verbal assurances of job security, regular promotions, salary increases, and bonuses.  Some creative employee-rights attorneys will even use birthday cards with innocuous statements from supervisors – like “Keep up the good work!” or “What would we do without you?” – as evidence that an employee expected that termination could only be for good cause. 

However, oral assurances, or regular promotions and salary increases, do not automatically establish an implied contract, i.e. that termination can only be for good cause. Several courts have concluded that without more, "promotions and salary increases are natural occurrences of an employee who remains with an employer for a substantial length of time... and should not change the status of an 'at-will' employee to one dischargeable only for just cause." Miller v Pepsi-Cola Bottling Co. (1989) 210 CA3d 1554, 1559.

Courts will often consider other documents prepared by the employer to determine the existence of an implied contract to terminate only for cause.  These writings include employment applications, letters, stock option agreements, bylaws, and other writings bearing on the employment relationship.  

Yet the safest bet is to include express language in an employee handbook which makes the at-will relationship explicit, and states that such relationship can only be modified in writing by the president/owner of the company.  It’s also imperative to have the employee sign-off on his or her copy of the employee handbook, showing that he or she has read, understands, and agrees to be bound by the at-will relationship. 

It’s vacation time!

Summer time is vacation time.  Like many employers, you probably offer some sort of vacation benefits to your employees.  While such benefits are universally appreciated by employees, employers can run into trouble if the rules regarding vacation pay are not properly followed.  This article will explore the ins and outs of vacation pay in California.

Vacation pay is a form of wages

There is no requirement that employers provide vacation pay, but if this benefit is offered, it must comply with numerous rules. Vacation pay is contract between the employee and the employer; it is a form of wages.  Employers can set the amount of vacation that an employee earns.  However, employers must be clear about how much vacation is offered, how it accrues, and when it starts to accrue.  It is legal to require that a certain period of time pass before an employee starts to accrue vacation. 

Because vacation is a form of wages, the right to vacation accrues on a daily basis.  Employers are free to require that employees take vacation only when they have already accrued or earned it.  

Avoid use-it-or-lose it vacation policies

Once an employee has earned vacation, an employer cannot take it away.  California law strictly prohibits Use-It-Or-Lose-It vacation policies, i.e.  where an employee loses accrued vacation that has not been used by a specific time.  However, as shown below, reasonable caps on vacation and cash-out policies are allowed.

A reasonable cap on vacation is legal

Employers can establish a reasonable cap plan, meaning that once a certain level of accrued vacation is earned but not taken by the employee, no new vacation will accrue until some of the accrued vacation is taken.  Once some vacation is taken by employee, vacation must continue to accrue again at the regular rate. 

The cap on vacation must be reasonable.  The most common caps used by employers are one-and-one-half or two times the annual accrual rate.  For example, if an employee earns 40 hours of vacation per year, a reasonable cap would be 60 hours or 80.

Cash-out policies are also legal

Employers are also free to offer employees the option to cash-out their accrued vacation benefits.  Cash-out policies can be on an “as needed” basis or allowed only once a month or once a year.  Many employers require employees to accept pay at the end of each year for vacation time that

employees accrued but did not take. 

Vacation must be paid at termination

Because accrued vacation is a form of wages, an employer must pay out all accrued, unused vacation at the termination of the employment relationship.  This pay-out must be at the employee’s final rate of pay, regardless of the rate of pay at which the vacation time was earned.

Working in a post-Brinker world

One of the most widely-followed labor and employment cases of the last decade finally reached a conclusion a few weeks ago.  In the case of Brinker Restaurant Corporation v. Superior Court of San Diego, the California Supreme Court handed down a landmark decision concerning meal and rest breaks.  Below is a summary of the key points from the Brinker decision. 

Rest Periods

The Court held that employees are entitled to 10 minutes of rest for shifts from three and one-half to six hours in length, 20 minutes of rest for shifts of more than six hours up to 10 hours, and 30 minutes for shifts of more than 10 to 14 hours. 

Regarding the timing of the rest breaks, the Court rejected the suggestion that employers have a “legal duty” under “to permit their employees a rest period before any meal period.”  Instead, the Court found that employers are “subject to a duty to make a good faith effort to authorize and permit rest breaks in the middle of each work period, but may deviate from that preferred course where practical considerations make it infeasible.” 

Meal Periods

Regarding the timing of meal breaks, the Court looked to the language of Labor Code section 512(a), holding that, absent a waiver by the employee, “employees are entitled to a first meal period no later than the end of an employee’s fifth hour of work and a second meal period no later than the end of an employee’s 10th hour of work.” 

There is NO requirement that an employer ensure work is not being performed

The plaintiff in the Brinker case argued that employers were required to “ensure” that work ceases for the 30 minute meal period.  The Court did not agree.  Using Wage Order No. 5 and Labor Code section 512(a) as a guide, the Court held that an employer must “relieve” the employee of work, “but need not ensure that the employee does no work.”  The Court used the following analysis:

“An employer’s duty with respect to meal breaks…is an obligation to provide a meal period to its employees. The employer satisfies this obligation if it relieves its employees of all duty, relinquishes control over their activities and permits them a reasonable opportunity to take an uninterrupted 30-minute break, and does not impede or discourage them from doing so. What will suffice may vary from industry to industry…

On the other hand, the employer is not obligated to police meal breaks and ensure no work thereafter is performed…[R]elief from duty and the relinquishing of control satisfies the employer’s obligations, and work by a relieved employee during a meal break does not…place the employer in violation of its obligations…”

Employers have waited years for this decision.  The Brinker case provides much-needed clarification on an issue relevant to virtually all employers in California.  Employers state-wide can now breathe a small sigh of relief, knowing that they are not required to police meal breaks.  Instead, employers must (1) relieve employees of their duties, (2) relinquish control over employees’ activities, (3) permit employees a reasonable opportunity to take an uninterrupted 30-minute break, and (4) not discourage employees from doing so.

Will being unemployed soon be a protected class?

California, as well as the nation as a whole, in is the midst of very trying times.  Unemployment is high; qualified and experienced men and women everywhere are finding it hard to find work.  Some have been out of the workforce for so long, they are finding it difficult to get back in. 

State and federal legislators are taking action to combat this problem.  There is a movement by both California and the federal government to make being unemployed a new protected class.  And with a higher-than-normal percentage of potential voters out of work, politicians seeking re-election this year will surely attempt drum up support for this proposed legislation.

In California, legislation has been introduced to protect unemployed workers, and thus prohibit an employer from using a person’s unemployed status at the time of applying for a job as a negative criteria in the hiring process.  This bill, AB 1450, was introduced a few months ago in January.  Similar to the California bill, Congress has introduced HR 2501 in the House and S 1471; these two bills would provide similar protections to workers on a nationwide level.

Currently, most protected status complaints and lawsuits deal with harassment and termination of the employment relationship; lawsuits based on failure to hire are generally rare.  Yet if either of these bills are passed, employers can expect an uptick in litigation by unemployed applicants who apply for positions and are not hired, especially if those applicants appear to be otherwise qualified.  Employers would be wise to consider altering their hiring practices, and provide some additional training to those making the decision to hire new employees in order to avoid problems down the road.  And while these proposed bills are not yet the law, given the state of California and the country’s economic woes, and the fact that this is an election year, employers could very soon have another thing to worry about.  

Shades of Gray in Discrimination Law

Everyone knows discrimination in the workplace is illegal.  The prohibition of discrimination based on age, race, national origin, religion, sex, and disability are well known in California.  But not all discrimination is cut and dry – gray areas abound in this arena.  This article will explore four such situations.

Dress Standards
An employer is not discriminating when it requires reasonable dress and grooming standards of employees.  Of course appropriate business attire may generally be different for men and women when there is a clear, nondiscriminatory rationale.  For example, men may be required to cut their hair short, while women may be allowed to wear their hair longer.  However, it is illegal to prohibit women from wearing pants in the workplace (Government Code section 12947.5).  Employers must also accommodate an employee’s religious beliefs that affect his or her dress standards, physical appearance or grooming.

Tattoos and Piercings
California’s discrimination laws do not protect employees because of their tattoos and body piercings.  Employers are free to create policies prohibiting visible tattoos and piercings.  Moreover, these policies may differ as applied to men and women – i.e. employers can prohibit men from wearing earrings, while allowing women to do so.

Height and Weight Standards
Employers cannot establish height or weight standards which, in effect, discriminate against protected classes.  If an employer can show that  a weight or height restriction both relates directly to, and is an essential function of, the job, then selection of employees according to justifiable height and weight standards is not discriminatory.

English-only Policies
Employers are limited in their ability to adopt an “English-only policy.” If an employer has five or more employees (unless the employer is a non-profit religious association or religious corporation), an employer may not adopt or enforce a policy limiting or prohibiting the use of any language in the workplace unless (1) The language restriction is justified by a “business necessity”; and (2) The employer notifies the employees of the circumstances and time when the language restriction must be observed and of the consequences for violating it. 
What constitutes a business necessity?  A business necessity is a legitimate business purpose such that: (1) The language restriction is necessary for the safe and efficient operation of the business; (2) The language restriction effectively fulfills the business purpose it is supposed to serve; and (3) There is no alternative practice to the language restriction that would accomplish the business purpose equally well with a lesser discriminatory impact.

Conclusion
These are of course not the only gray areas in California discrimination law.  It is sometimes difficult to keep up with all the changing facets of discrimination law, and each fact pattern creates new challenges.  Yet these examples are instructive, and the basic tenets of each can applied across the broad spectrum of discrimination law issues.

Governor Brown sets a deadline for written commissions agreements

There are a myriad of ways in which employers can their employees.  Some employees earn their wages on an hourly basis; some receive a regular salary, while other are paid via commissions.  Oftentimes an employee’s pay is a hybrid of the above.  This article focuses on a new law dealing with employees who are paid via commissions. 

On October 7, 2011, Governor Brown signed AB 1396. This bill requires all California employers to draft written contracts for any agreements with employees that involve commissions as a method of payment for services. Commission wages are defined as compensation paid to any person for services rendered in the sale of an employer’s property or services and based proportionately upon the amount or value thereof.

The bill imposes a deadline of January 1, 2013 for employers to reduce all commission agreements to writing.   The bill also requires employers to provide a signed copy of the contract to every employee covered by the commission agreement and obtain a signed receipt for the contract from each employee. While the new law does not spell out any specific penalties for violation of the law, presumably an employee could bring a suit under California’s Unfair Competition Law in the event of a violation.

California already regulates the payment of commissions, the calculation of commissions and what happens with a commission upon termination/resignation.  There are also technical regulations on the books dealing with overtime compensation to commissions-based employees.  As such, not only must employers must draft written commission agreements by the January 1, 2013 deadline, they should also review the contents of these written agreements to ensure they are clear and comply with established California law.

The Only Constant is Change: New Workplace Regulations for 2012

California employment law is always changing.  And it looks like 2012 will be no exception.  Below are some proposed changes to the employment law landscape.  These new bills, signed by Governor Jerry Brown become effective January 1, 2012.  

Pregnancy Disability Leave (SB 299)

SB 299 prohibits employers from refusing to maintain and pay for group health insurance coverage for the duration of pregnancy disability leave, up to four months in a 12-month period.

The law also authorizes employers to recover insurance premiums from the employee if the employee fails to return from pregnancy disability leave, provided that the employee’s failure is not due to leave taken for a health condition, or other circumstances beyond the employee’s control.

Organ and Bone Marrow Donor Leave (SB 272)

Under existing law, an employer must grant a leave of absence of up to 30 days in a one-year period to an employee who is an organ donor and up to five days in a one-year period to an employee who is a bone marrow donor. SB 272 provides that the days of leave are business days, rather than calendar days, and that the one-year period is measured from the date the employee’s leave begins and consists of 12 consecutive months.

Credit Reports (AB 22)

AB 22 imposes significant restrictions on an employer’s ability to obtain a credit report for employment purposes. It generally permits employers that are seeking to fill only specific, identified exempt positions to obtain and use credit reports to screen applicants or current employees. The use of the credit reports in other occupations generally is prohibited.

Employer Contract Requirements (AB 1396)

AB 1396 requires an employer that enters into an employment contract involving commission payments for services to be rendered within California to put the contract in writing and specify the method by which the commissions are to be computed and paid. The employer must give a signed copy of the contract to every employee who is a party thereto and obtain a signed receipt for the contract from each employee. The law also repeals existing law making an employer that violates this requirement liable in a civil action for triple damages.

Genetic Information (SB 559)

SB 559 amends the California Fair Employment and Housing Act (FEHA) to prohibit discrimination on the basis of genetic information.

Gender Expression (AB 887)

AB 887 amends California FEHA to clarify that prohibited discrimination in employment and housing on the basis of sex or gender includes discrimination on the basis of a person’s gender identity and gender expression. The law defines gender expression as meaning a person’s gender-related appearance and behavior, whether or not stereotypically associated with the person’s assigned sex at birth.

While many of these provisions may not apply to your particular business, all employers would be wise to review these new laws in greater detail and update employee handbooks and personnel policies to ensure compliance with these new regulations.