Labor and Employment

By: Vida L. Thomas

Conducting workplace investigations is not easy.  The process is filled with land mines that can trip up even the most experienced investigator.  Although there are many mistakes I’ve seen investigators make, these are the three most common.

Trap #1: Failing To Define The Investigation’s Scope Before You Begin.

Investigations are tricky things, and can take many unexpected twists and turns.  The complaining employee often may make one allegation in his/her verbal complaint to a supervisor, an additional allegation in his/her written complaint, and more allegations to you in the interview.  That complainant, or one of the witnesses, may produce a “laundry list” of issues they wish you to look into.   Are you obligated to investigate every complaint raised by employees?  Doing so would certainly increase the time and cost of the investigation.

This is why, before you begin the investigation, it is important that you establish the investigation’s scope.  It is just as important to know what you are not investigating as what you are investigating.  What issues does the employee wish you to investigate?  On the other hand, what issues is the employer hiring you to investigate?  You may need to confer with the employer’s legal counsel for direction on which issues to look into.  If you don’t go through this sorting process at the beginning of the investigation, you run the risk of learning much later (possibly after you turn in your written report) that you did not investigate the matters the employer hired you to look into.

Trap #2: Reaching A Conclusion Too Soon (Also Known As “Confirmation Bias”).

It happens to the best of us: after talking to the complaining employee and a few of the percipient witnesses, a pretty clear picture begins to emerge.  You have a reliable hunch about what occurred but, of course, you’ll talk to the accused to get his/her side of the story.  The problem is, although you think you’re withholding judgment until after your interview with the accused, you’re already leaning toward a particular outcome.  And that predisposition may influence how you question, perceive and assess the accused.  That is the essence of “confirmation bias”: the tendency to interpret new evidence as confirmation of one’s existing beliefs or theories.  We all engage in confirmation bias to some extent; indeed, taking mental shortcuts in decision making is efficient and sometimes necessary.  When conducting a workplace investigation, however, confirmation bias can lead us to an incorrect conclusion.  Without realizing it, we may overlook or discount evidence that contradicts our early hunch or gut instinct.

How can you minimize confirmation bias?  Keep an open mind throughout the investigation.  Accept, review and weigh all of the evidence.  When you reach a conclusion, ask yourself: Did I come across any evidence that contradicts this conclusion?  If so, what is the reason for discounting that contradictory evidence?  Taking these steps will go a long way to help ensure that your conclusion is based on the evidence, not your preconceptions.

Trap #3: Failing To Follow Up.

Investigations are almost always conducted under a tight timeline.  You will feel under constant pressure to “wrap things up” quickly.  So what do you do if the witnesses contradict each other on a key issue, or if the respondent gives you information that undermines the complainant’s credibility or raises further questions that need to be answered?  With looming deadlines in mind, you may be tempted to simply leave these contradictions or unanswered questions unresolved in order to reach a conclusion sooner.

Remember, however, that you have a legal obligation to conduct a thorough investigation.  This means that you may need to conduct follow-up interviews with witnesses to see if you can clear up the contradiction.  Or you may need to follow-up with the complainant, to give him/her the opportunity to respond to the new information.  Follow-up interviews can be a very helpful tool.  They can give you a deeper understanding of the evidence, and strengthen your findings.

Improve Your Investigation Skills

Delve into these three investigation traps, and much more, in our upcoming training class.  Attorneys from Weintraub Tobin’s Workplace Investigations Unit (Vida Thomas and Beth West) will conduct a one-day, in-depth training on conducting effective workplace investigations on March 3, 2016.  For more details and the cost of this training session, please click here.

Training new employees is expensive.  That is particularly true when an employer offers to pay for an employee’s educational training.  The benefits of doing so include a more educated and well-trained workforce, as well as increased morale and employee loyalty.  The risk, of course, is that an employee may decide to take his or her employer-funded education and use it to find another job somewhere else.  Employers sometimes offset that risk by requiring the employee to sign an agreement to pay the employer back if he or she leaves for another job shortly after completing the education.  But what if the employee refuses to pay?  Is the repayment agreement enforceable?  Yes, according to a California Court of Appeal.

The Case

USS-POSCO Industries v. Case involved the above scenario.  Floyd Case entered into a voluntary three-year, employer-sponsored educational program that would allow him to become a Maintenance Technical Engineer (MTE).  He signed an agreement with his employer, USS-POSCO, that he would repay a prorated portion of the education costs if he quit his job within 30 months of completing the program.  Sure enough, two months after he finished, he quit.  USS-POSCO asked him to pay back $28,000 of the $46,000 it spent on his educational training.  Case refused, so USS-POSCO sued to collect the money.  Case responded with a cross-complaint, claiming that his fingers were crossed when he signed the repayment agreement.  Well, not really, but he did try every other argument his lawyer could imagine.  He claimed the agreement was unenforceable for lack of consideration, that it was basically an unlawful non-compete agreement, and that it violated Labor Code provisions preventing employers from passing operating expenses on to employees and mandating that employers reimburse necessary employee expenses.  Yes, the kitchen-sink defense.

The trial court rejected Case’s arguments and granted summary judgment in USS-POSCO’s favor on both the complaint and cross-complaint.  The Court of Appeal affirmed both rulings. It denied his Labor Code claims because Case’s participation in the training program was voluntary, not mandatory, in that there were other alternatives to obtaining the promotion beyond entering the training program.  For example, Case could have taken a test in lieu of the training program.  The Court also rejected Case’s claim that the agreement was effectively a non-compete agreement because Case could and, in fact, did find another job.  Makes sense, right?  Finally, the court rejected the claim that the contract lacked consideration because Case obtained valuable training and wages in exchange for agreeing to repay if he left early.

The Takeaway

Chalk this one up as a win for employers.  Repayment agreements for employer-sponsored education programs are still enforceable.  Well, usually at least.  The Court of Appeal did distinguish this case from another line of cases, In re Acknowledgment Cases, in which the same Court denied the City of Los Angeles’ attempt to recover some employer-mandated training expenses from police officers who quit early.  The key distinctions were that L.A.’s program was both mandatory and specific to the job, whereas USS-POSCO’s program was voluntary and the training was transferable to other jobs.  So, here’s the takeaway: employers can require employees to pay back educational costs if the employee quits early, so long as the educational program was both voluntary and not specific to the employer’s operations.

I should also note that the case was only partially employer-friendly.  There was one other component of the case involving attorney’s fees, and it went the other way.  Labor Code section 218.5 used to provide that the prevailing party in a wage-and-hour lawsuit was entitled to fees.  That statute was amended in 2014 so that, now, employers can only recover fees when the employee brought the claims in bad faith.  The trial court granted USS-POSCO the fees because the case predated the amended version of section 218.5.  But the appellate court through the award out, holding that the statute is to be applied retroactively.   This means that employers must still show bad faith to get fees even if a lawsuit was filed prior to the 2014 amendment.  That’s a tough break for any employers who are still defending older wage-and-hour cases.

Employers who wish to offer to pay for employees’ educational training should consider such agreements to protect themselves in the event the employees seek other jobs.  Given the nuanced rule described above, employers should consult with their legal professional before drafting or implementing a repayment agreement.

In an effort to clarify the circumstances that may create a joint-employment relationship, the U.S. Department of Labor issued an Administrator’s Interpretation this week.  This Administrator’s Interpretation, which can be found at this link, analyzes joint employment under the Fair Labor Standards Act (“FLSA”) and the Migrant and Seasonal Agricultural Worker Protection Act.

Joint employment may occur under various circumstances; for example, where separate entities share employees, or where one entity uses a third-party management company, staffing agency or labor provider.  The National Labor Relations Board ruled last year that a franchisor may also be considered a joint employer of a franchisee’s employees in some circumstances.  According to the Administrator’s Interpretation, “the possibility that a worker is jointly employed by two or more employers has become more common in recent years.”

The question of whether one entity is the joint employer can be critical in cases where an employee files an administrative claim or a lawsuit alleging some type of unlawful employment practice; for instance, unpaid overtime in violation of the FLSA.  If joint employment is found in such a case, the employee may be able to obtain recovery from either or both of the joint employers; e.g., the entity that directed the work, or the staffing agency that dispatched the employee, or both.

The Administrator’s Interpretation advises that “the possibility of joint employment should be regularly considered” to ensure compliance with the FLSA.  It “particularly” recommends taking such possibilities into consideration “where (1) the employee works for two employers who are associated or related in some way with respect to the employee; or (2) the employee’s employer is an intermediary or otherwise provides labor to another employer.”

Therefore, individuals or entities who are concerned that they may be considered a joint employer should review the Administrator’s Interpretation and consult legal counsel to discuss options to reduce their exposure to liability.

By: Melissa M. Whitehead

Effective January 1, 2016, California has increased its minimum wage from $9 per hour to $10 per hour. This is the second increase to the state minimum wage in the past year and a half. Remember, the obligation to pay minimum wage cannot be waived by any agreement, including collective bargaining agreements.

Employers must examine all pay practices that may be affected by the minimum wage increase – and there are almost certainly more practices that may be impacted than you may think! For example, in addition to increasing the pay of any employees being paid a minimum wage rate, employers should review the following pay practices, which may be affected by the minimum wage increase:

• Overtime rates of pay: Employees who work for minimum wage and perform work that qualifies for overtime wages must now be paid $15 per hour for time and one-half (previously $13.50 per hour) or $20 per hour for double-time (previously $18 per hour).
• Exempt/Nonexempt classifications: In California, exempt employees generally must (among other things) earn no less than twice the state minimum wage for a full time employee. This now means that employees must earn a salary of $41,600 per year (or $800 per week) to qualify as exempt employees (in addition to an examination of requirements).
• Meal and lodging credits: Most of California’s Wage Orders allow employers to credit meals and lodging furnished by the employer toward the employer’s minimum wage obligation. The new credit amounts for meals and lodging are listed on the official Minimum Wage Order (MW-2014).
• Commission issues: A commissioned employee can receive a sum of money that is intended as an advance, draw or guarantee against the employee’s expected commission earnings. In California, employers must pay these sums at least twice per month. If an employee receives a draw against commissions to be earned at a future date, the “draw” must be equal to at least the minimum wage and overtime due to the employee for each pay period (unless the employee is exempt).
• Notice requirements: Mandatory minimum wage postings, itemized wage statements, and wage notices will all be affected.
• Piece-Rate Employees: Piece-rate workers must receive at least minimum wage for each hour worked. Separate legislation effective January 1, 2016, requires payment of rest and recovery periods or other nonproductive time at a specified hourly rate. [NOTE: Employers with piece-rate employees are advised to consult with an experienced labor and employment attorney to review their piece-rate policies in light of recently enacted legislation, which imposes significant restrictions and obligations on piece-rate compensation policies.]
• Tools/Equipment: Employees whose wages are at least two times the minimum wage can be required to provide and maintain hand tools and equipment customarily required by the trade or craft in which they work.
• Subminimum wage: The subminimum wage for “learners” increased effective January 1, 2016, from $7.65 per hour to $8.50 per hour (85% of the state minimum wage).

This list is not intended to be all-inclusive, but is intended to alert employers the broad impact of the change in California’s minimum wage. This article does not address proposed changes to the federal minimum wage (expected to be decided in Spring 2016) or minimum wage raises in specific cities/counties. Because of the complexity of these issues, it is recommended that employers consult with experienced labor and employment counsel to ensure that all pay policies and practices are in compliance with the applicable minimum wage laws.

The year-end holidays tend to be a time when employers and employees are either winding down for the year or making one last big push to close the year strongly.  California employers should make time this week, though, to ensure they are ready for the new laws which will take effect in California this Friday – New Year’s Day – that will directly and immediately impact the workplace.

As a reminder, there are some notable employment-related laws which take effect January 1, 2016.  Click here to view a copy of those laws.  The list includes minimum wage hikes, other wage and hour amendments, expanded time off and sick leave, and expanded enforcement of state and local wage and hour laws conferred upon the Labor Commissioner.  For information on additional new laws and legislation, please see our previous blog titled: California Governor Signs a Bevy of Employment Laws, Vetoes a Few Others.

Companies should ensure that their pay practices, handbooks, job descriptions and records retention practices are compliant with the new laws and ensure that internal or third party payroll processors, supervisors, and human resources personnel are up to date, particularly regarding the new equal pay and leave laws and whistleblower, discrimination, and retaliation protections.  (The following is not an exhaustive list of the hundreds of new laws that take effect in 2016 and is only a summary of the laws listed.  Please consult your employment attorneys at Weintraub Tobin to answer questions and provide the details and nuances as applied to your company.)

The Ninth Circuit recently held that during an EEOC investigation, employers can be forced to produce “pedigree information” (i.e., name, telephone number, address, and Social Security number) of their employees or employment applicants. The decision broadens the scope of information that the EEOC can obtain during its investigations and gives the EEOC further grounds to investigate beyond what is arguably “necessary” to make a determination on an EEOC charge.

The Underlying Action

In the underlying Arizona District Court case, EEOC v. McLane Company, Inc., Case No. 13-15126, 2015 U.S. App. LEXIS 187702, a McLane employee, Damiana Ochoa, filed a charge of gender discrimination. After taking maternity leave, Ochoa attempted to return to work but was eventually terminated based on her failure to pass a physical capability strength test multiple times. The EEOC conducted an investigation into the discrimination charge, requesting information regarding the strength test and information on employees who had taken the test. McLane produced the requested information except for employee pedigree information and the grounds for its decisions to terminate employees who had taken the test, refusing based on relevance and privacy. In response, the EEOC filed a subpoena enforcement action to compel McLane’s compliance with the subpoena. The district court, however, refused to enforce the subpoena agreeing with McLane that the pedigree information was irrelevant and unnecessary to issue a determination on the underlying charge.

The Ninth Circuit’s Ruling

In reversing the district court’s ruling, the Ninth Circuit held that the pedigree information and information regarding the reasons for terminating other employees who had taken the test was relevant to the EEOC’s investigation. It remanded to the trial court to determine whether the information sought would be unduly burdensome, even though McLane had not made that argument in opposition to the subpoena. In its ruling, the Ninth Circuit held that the “governing standard [was] not ‘necessity’; it [was] relevance” and that the “relevance standard in this context [swept] more broadly than it would at trial [and] encompass[ed] virtually any material that might cast light on the allegations against the employer.” For reasons that are unclear, the Ninth Circuit did not give much weight to McLane’s privacy objections, although Judge Milan D. Smith wrote a separate concurring opinion expressing concerns over the privacy issues and the government’s loose treatment of the information which exposed the employees to identity theft. It remains to be determined to what extent privacy or overburdensome objections can be used to successfully oppose such a broad interpretation of relevance in the context of EEOC investigations.

Takeaway

The Ninth Circuit’s opinion will likely embolden future EEOC investigations. Employers should continue to object and oppose overburdensome and otherwise objectionable requests for information. Despite the court’s ruling, employers remain obligated to protect their employees’ privacy rights and should not readily disclose such information based on this ruling.

California’s prohibition on non-competition agreements is less than absolute.  For example, non-compete agreements may be enforced against partners or sellers of businesses.  Additionally, in SingerLewak LLP v. Andrew Gantman (2015) 241 Cal.App.4th 610, a California Appellate Court affirmed an arbitration award that would be considered by most to be a misapplication of California’s non-competition law.

The underlying dispute arises from provision within a partnership agreement that imposed a cost on a departing partner (Gantman) who serviced clients of the firm after his departure.  At arbitration, the former partner argued that:

1. The provision was not enforceable under California law because it was a restraint on competition;
2. The exception to the general prohibition of restraints on competition for agreements by partners did not apply because he was not a partner; and
3. The provision was invalid because it did not contain a geographical restriction.

The arbiter disagreed and enforced the provision.  The arbitrator concluded that Gantman was a partner for the purposes of Business and Professions Code section 16602 and that the provision was not a covenant not to compete but a provision allowing competition with the imposition of a cost on the departing partner.  SingerLewak filed a petition to confirm the arbitration award.  Gantman opposed and filed a petition to vacate the award.  The trial court vacated the arbitration award after it concluded that de novo review of the evidence was required and that the provision was invalid and unenforceable because it did not contain any geographical restrictions.

The Appellate Court concluded that the general rule prohibiting review of an arbitration award applied and that the arbitrator’s award should be been affirmed.  The Appellate court reasoned that judicial review of an arbitration award is only appropriate when the decision violates a party’s unwaivable statutory rights or the explicit legislative expression of public policy.  The court held that while section 16600 evidences a settled legislative policy in favor of open competition and employee mobility, there is no absolute public policy against the enforcement of a covenant not to compete entered into by partners.  As such, although the arbitrator may have erred in interpreting or applying section 16602, the decision did not violate an explicit legislative expression of public policy.  Accordingly, the Appellate Court reversed the trial court’s order which had vacated an arbitration award.

The full implications of the decision are unknown, but as of October 21, 2015, the California Supreme Court has ordered the decision published.   Businesses and employees using arbitration should ensure that they aggressively present arguments during the arbitration because it is unlikely they will have chance for review if they cannot meet this burden.

On October 14, 2015, the California Second District Court of Appeal held in Sharif v. Mehusa, Inc.  that both the employee and the employer can be deemed “prevailing party” for purposes of recovering attorneys’ fees under the Labor Code.  Plaintiff, Mahta Sharif, brought an action against her former employer, Mehusa, Inc., for unpaid overtime (Lab. Code, § 1194), unpaid wages (Lab. Code, § 201), and violation of California’s Equal Pay Act (Lab. Code, § 1197.5).  She prevailed on her Equal Pay Act claim with the jury awarding her $26,300. Mehusa prevailed on Plaintiff’s overtime and wage claims.  Plaintiff filed a cost memorandum and was awarded her costs. She also filed a motion for attorney fees in the amount of $280,432 under Labor Code section 1197.5(g) as the prevailing party on her Equal Pay Act claim. Plaintiff’s attorney fees request consisted of a lodestar amount of $140,216 and a multiplier of two.  Mehusa filed a motion for attorney fees and costs under Labor Code section 218.5 in the amount of $36,982.24 as the prevailing party on Plaintiff’s wage claims.  Mehusa estimated that 75% of defense counsel’s time was spent defending against Plaintiff’s unsuccessful wage claims.

The trial court ruled that Labor Code section 218.5 is a two-way fee shifting statute that requires the award of reasonable attorney fees and costs to the prevailing party on wage claims.  Relying on Aleman v. AirTouch Cellular (2012) 209 Cal.App.4th 556, 582-583, the trial court further ruled that when there are multiple claims asserted in an action, to be a “prevailing party” under section 218.5, a defendant need not prevail on all of the claims, but only on those claims to which section 218.5 applies.  Thus, after determining that only $35,054 of her attorney’s fee request was related to her successful Equal Pay Act claim, the trial court awarded Plaintiff $35,054 for her attorney’s fees under Labor Code section 1197.5. The trial court also awarded Defendant $31,334.81 under Labor Code section 218.5 for its attorney fees in connection with Plaintiff’s unsuccessful wage claims, and then offset the awards for a net award to Plaintiff of $3,709.19.

Plaintiff appealed contending that she was the sole prevailing party on a “practical level” and as that term is defined in California Code of Civil Procedure section 1032(a)(4). Accordingly, Plaintiff argued that the trial court erred in awarding Mehusa its attorney fees and costs. In affirming the trial court’s decision, the Appellate Court held that a net monetary award to a party does not determine the prevailing party when there are two fee shifting statutes involved in one action.  Instead the court explained, when there are two fee shifting statutes in separate causes of action [as there were in this case – Labor Code sections 1197.5 and 218.5], there can be a prevailing party for one cause of action and a different prevailing party for the other cause of action.

By: The Labor and Employment Group 

Sunday, October 11, 2015 was the deadline for the Governor to act on bills that were passed by the legislature.

There were two bills the Governor rejected that are seen as key victories for employers.  They are:

AB 465 was vetoed. This bill sought to bar mandatory employment arbitration agreements.  This would have caused lawsuits to increase and would have driven up litigation costs for California’s employers.  In vetoing AB 465, Brown correctly called the bill “a far-reaching approach that has been consistently struck down in other states” for conflicts with federal law.

Brown also vetoed SB 406, an unwise expansion of the state’s unpaid family leave policy. SB 406 sought to expand the pool of workers who can take up to 12 weeks off to care for grandparents, grandchildren, siblings and parents-in-law.  The Governor indicated this proposal also would conflict with federal law and would potentially require employers to provide up to 24 weeks of family leave in a year.  What are we France?!?

Not all news was good news.  Watch this blog for updates and further discussion about the Governor’s actions on this year’s legislative agenda.