Labor and Employment

Download: LAW ALERT – DOL Model Notices COBRA Susbidy Extension.pdf

On January 19, 2010, the Department of Labor (“DOL”) issued model notices to help plan administrators and employers comply with COBRA notice requirements as dictated by the American Recovery and Reinvestment Act (“ARRA”), as amended by the Department of Defense Appropriation Act, 2010 (“2010 DOD Act”).

There are three DOL model notices that plan administrators and employers can utilize: 1) the Updated General Notice; 2) the Premium Assistance Extension Notice; and 3) the Updated Alternative Notice. Below is a brief summary of the DOL’s explanation of the notice requirements in connection with the extended COBRA subsidy and which model notices should be used.

1. Updated General Notice

Plans subject to the Federal COBRA provisions must provide the Updated General Notice to all qualified beneficiaries (not just covered employees) who experienced a qualifying event at any time from September 1, 2008 through February 28, 2010, regardless of the type of qualifying event, and who have not yet been provided an election notice. This model notice includes updated information on the premium reduction as well as information required in a COBRA election notice.

2. Premium Assistance Extension Notice

Plan administrators must provide notice to certain individuals who have already been provided a COBRA election notice that did not include information regarding ARRA, as amended. The model Premium Assistance Extension Notice includes information about the changes made to the premium reduction provisions of ARRA by the 2010 DOD Act. Listed below are the affected individuals and the associated timing requirements.

· Individuals who were “assistance eligible individuals” as of October 31, 2009 (unless they are in a transition period – see below), and individuals who experienced a termination of employment on or after October 31, 2009 and lost health coverage (unless they were already provided a timely, Updated General Notice) must be provided notice of the changes made to the premium reduction provisions of ARRA by the 2010 DOD Act by February 17, 2010;

· Individuals who are in a “transition period” must be provided this notice within 60 days of the first day of the transition period. An individual’s “transition period” is the period that begins immediately after the end of the maximum number of months (generally nine) of premium reduction available under ARRA prior to its amendment. An individual is in a transition period only if the premium reduction provisions would continue to apply due to the extension from 9 to 15 months and they otherwise remain eligible for the premium reduction.

3. Updated Alternative Notice

Insurance issuers that provide group health insurance coverage must send the Updated Alternative Notice to persons who became eligible for continuation coverage under a State law. Continuation coverage requirements vary among States and issuers should modify the model notice as necessary to conform it to the applicable State law. Issuers may also find the model Premium Assistance Extension Notice or the updated model General Notice appropriate for use in certain situations.

The model notices can be obtained at the DOL website: www.dol.gov/ebsa/COBRAmodelnotice.html.

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Lizbeth “Beth” West is a shareholder in the Labor and Employment Law Section and Disputes, Trials & Appeals Section at Weintraub Genshlea Chediak. Beth’s practice focuses on counseling employers in all areas of employment law, and defending employers in state and federal court, as well as before administrative agencies. She has extensive experience in defending wage and hour claims, and complex whistle-blowing and retaliation claims. She also provides training services on various employment issues, such as sexual harassment and violence in the workplace. If you have any questions about this Legal Alert or other employment law related questions, please feel free to contact Beth West at (916) 558-6082. For additional articles on employment law issues, please visit Weintraub’s law blog at www.thelelawblog.com.

Download: Law Alert. COBRA Subsidy Extended.PDF

President Obama signed the “Fiscal Year 2010 Defense Appropriations Act” (“DAA”) on December 21, 2009. The DAA provides two important changes to the COBRA subsidy that was established under the “American Recovery and Reinvestment Act of 2009” (“ARRA”) earlier this year.

The COBRA subsidy provisions under the ARRA provide that eligible employees (those who are “involuntarily terminated” within the stated period) pay 35% of the premium costs and employers pay the other 65%. The employer can then file for a federal tax credit for the premium subsidy it pays.

The important changes made by the DAA are:

1. Employees who are involuntarily terminated at any time prior to February 28, 2010 (rather than December 31, 2009) may be eligible for the subsidy; and

2. The maximum period an eligible employee may receive the subsidy is fifteen (15) months rather than nine (9) months.

Employees who reached the end of the original nine (9) month period before the enactment of the DAA, have sixty (60) days from the enactment date to pay their portion of any missed premiums, or thirty (30) days after receipt of a notice of extension from the health plan administrator, whichever is later.

The DAA requires that employers notify current and future COBRA beneficiaries of the new fifteen (15) month premium subsidy period within sixty (60) days from enactment (by February 17, 2010) unless an individual’s COBRA “qualifying event” occurs after December 19, 2009 in which case the notice must be sent pursuant to the general time requirements under COBRA. It also permits employers to offset future COBRA premiums or issue a refund check to beneficiaries who overpaid their COBRA premiums because they paid the entire amount without any subsidy.

The DAA also clarifies that an employee’s or beneficiary’s eligibility for COBRA need not occur before February 28, 2010 in order for the individual to be eligible for the subsidy. Rather, it is the COBRA “qualifying event” (“involuntary termination” of an employee) that must occur on or before February 28, 2010.

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Lizbeth “Beth” West is a shareholder in the Labor and Employment Law Section and Disputes, Trials & Appeals Section at Weintraub Genshlea Chediak. Beth’s practice focuses on counseling employers in all areas of employment law, and defending employers in state and federal court, as well as before administrative agencies. She has extensive experience in defending wage and hour claims, and complex whistle-blowing and retaliation claims. She also provides training services on various employment issues, such as sexual harassment and violence in the workplace. If you have any questions about this Legal Alert or other employment law related questions, please feel free to contact Beth West at (916) 558-6082. For additional articles on employment law issues, please visit Weintraub’s law blog at www.thelelawblog.com.

The sixty-five percent (65%) COBRA premium subsidy provided for in the American Recovery and Reinvestment Act of 2009 (ARRA) will come to an end on November 30, 2009 for some qualified beneficiaries.

By way of background, the ARRA created the COBRA subsidy for those qualified beneficiaries who were “involuntarily” terminated (including not just layoffs but also poor performance terminations) from their employment between September 1, 2008 and December 31, 2009, and provided for a 65% premium subsidy for up to nine (9) months. The first date of the subsidy under the ARRA was March 1, 2009. Therefore, for those qualified beneficiaries who received the subsidy as of March 1, 2009, their nine months expires November 30, 2009. Qualified beneficiaries who became eligible subsequent to March 1, 2009 will have the applicable nine month period following the beginning date of their subsidy payments.

What Should Employers and/or Plan Administrators Do?

Provide beneficiaries with sufficient notice prior to the expiration of their COBRA subsidy. The notice should advise them of the date the subsidy will expire and also provide them with the amount of COBRA premiums they will be responsible for during the remainder of the COBRA period in order for COBRA coverage to continue.

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Lizbeth “Beth” West is a shareholder in the Labor and Employment Law Section and Disputes, Trials & Appeals Section at Weintraub Genshlea Chediak. Beth’s practice focuses on counseling employers in all areas of employment law, and defending employers in state and federal court, as well as before administrative agencies. She has extensive experience in defending wage and hour claims, and complex whistle-blowing and retaliation claims. She also provides training services on various employment issues, such as sexual harassment and violence in the workplace. If you have any questions about this Legal Alert or other employment law related questions, please feel free to contact Beth West at (916) 558-6082. For additional articles on employment law issues, please visit Weintraub’s law blog at www.thelelawblog.com.

Download: EEOC Notice (including GINA).PDF

The Genetic Information Nondiscrimination Act (GINA) takes effect November 21, 2009. Among other things, GINA requires that employers post a notice informing employees that the employer does not discriminate on the basis of genetic information.

The following EEOC notices can be used to meet the posting obligation:

1. “Equal Employment Opportunity is THE LAW” (EEOC 9/02 and OFCCP 8/08 – EEOC-P/E-1 (Revised 11/09). A copy of the notice is attached or you can obtain a copy at the EEOC’s website: www.eeoc.gov/posterform.html.

2. “EEO is the Law Poster Supplement” (Mandatory Supplement to EEOC 9/02 and OFCCP 8/08). A copy of the notice is attached or you can obtain a copy at the EEOC’s website: www.eeoc.gov/posterform.html.

In addition to posting the notices by November 21st, employers should also do the following:

1. Update their EEO and anti-discrimination policies to include genetic information as another protected class.

2. Make sure their interview and hiring documentation (e.g. applications, questionnaires, testing materials) do not request information about an applicant’s genetic medical history.

3. Review all policies and procedures that involve medical information (e.g. pre-hire screening, worker’s compensation, FMLA and other medical leaves of absence) to be sure they properly provide for the security and confidentiality of an applicant’s or employee’s (or employee’s family member’s) medical information including any genetic information.

4. Make sure all supervisory or management-level employees who have the responsibility of working with applicants or employees in connection with any of the policies referred to in number 3 immediately above, have been properly trained: a) not to improperly inquire about genetic medical history of an applicant or employee (or employee’s family member); and b) if they become aware of such information, to keep it confidential.

The employment lawyers at Weintraub Genshlea Chediak regularly draft effective employment policies and provide management training on a variety of employment law subjects. They would be happy to assist employers in the review and update of their policies to comply with GINA.

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Lizbeth “Beth” West is a shareholder in the Labor and Employment Law Section and Disputes, Trials & Appeals Section at Weintraub Genshlea Chediak. Beth’s practice focuses on counseling employers in all areas of employment law, and defending employers in state and federal court, as well as before administrative agencies. She has extensive experience in defending wage and hour claims, and complex whistle-blowing and retaliation claims. She also provides training services on various employment issues, such as sexual harassment and violence in the workplace. If you have any questions about this Legal Alert or other employment law related questions, please feel free to contact Beth West at (916) 558-6082. For additional articles on employment law issues, please visit Weintraub’s law blog at www.thelelawblog.com.

Download: Law Alert.pdf

On October 28, 2009, President Obama signed into law the National Defense Authorization Act for Fiscal Year 2010 (H.R. 2647). The new law is expansive with over 500 pages of text. Section 565 of the Act makes significant changes to the military leave entitlements under the Family and Medical Leave Act (FMLA) which went into effect earlier this year. Below is a summary of some of the changes made:

Qualifying Exigency Leave.
Currently, if an employee has a family member (e.g. spouse, son, daughter, step-son, or step-daughter) serving in the National Guard or Reserves (not active duty military) and such family member is called to active duty, the employee may be eligible for up to 12 weeks of “qualifying exigency” leave if time off is needed to address qualifying exigencies arising out of the fact that the family member has been called to active duty. Examples of qualifying exigencies for which an eligible employee may take leave to attend to include: military events and related activities, childcare and related activities, financial and legal activities, counseling, rest and recuperation (up to 5 days of leave to spend time with a military family member on short term leave from deployment), post-deployment activities for a period of 90 days following termination of military family members active duty status, and other events agreed upon by the employer and employee.

New Law: Under HR 2647, those employees with a family member in any regular component of the Armed Forces (not just the National Guard or Reserves) are eligible for Qualified Exigency leave. The new law also removes the requirement that this sort of leave can only be taken to support a contingency operation. Rather, it is available “because of any qualifying exigency arising out of the fact that the spouse, or a son, daughter, or parent of the employee is on covered active duty (or has been notified of an impending call or order to covered activity duty) in the Armed Forces.”

Military Caregiver Leave.
Currently, if an employee has a covered family member in the armed services (e.g. spouse, son, daughter, step-son, step-daughter, parent, step-parent, or “next of kin” which is defined by the regulations as either the person designated by the service member or the nearest blood relative) who is undergoing medical treatment, recuperation, or therapy or is otherwise in outpatient status, or on the temporary disability list for a serious injury or illness incurred in the line of duty on active duty, the employee may be eligible for up to 26 weeks of military “service member care” leave if time off is needed to care for the covered family member.

New Law: Under HR 2647, the definition of “covered servicemember” does not just apply to active members of the Armed Forces (including National Guard and Reserves), but has been extended to veterans who were members of the Armed Forces (including the National Guard or Reserves) at any point in time within five (5) years preceding the date on which the veteran undergoes medical treatment, recuperation, or therapy. The new law also extends the definition of “serious health condition” for active duty covered servicemembers to include any injury or illness that “existed before the beginning of the member’s active duty and was aggravated by service in line of duty on active duty in the Armed Forces.” In the case of veteran covered servicemembers, a “serious health condition” includes any injury or illness that “was incurred by the member in the line of duty on active duty in the Armed Forces (or existed before the beginning of the member’s active duty and was aggravated by service in line of duty on active duty in the Armed Forces) and that manifested itself before or after the member became a veteran.”

What Should Employers Do?
1. Review and update FMLA policies and administration documents to be sure that they accurately reflect the new HR 2647 definitions and requirements.
2. Train those charged with administering FMLA leave requests and leaves with the new HR 2647 requirements.
3. Keep an eye out for new guidelines and publications from the Department of Labor on the new HR 2647 requirements.

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Lizbeth “Beth” West is a shareholder in the Labor and Employment Law Section and Disputes, Trials & Appeals Section at Weintraub Genshlea Chediak. Beth’s practice focuses on counseling employers in all areas of employment law, and defending employers in state and federal court, as well as before administrative agencies. She has extensive experience in defending wage and hour claims, and complex whistle-blowing and retaliation claims. She also provides training services on various employment issues, such as sexual harassment and violence in the workplace. If you have any questions about this Legal Alert or other employment law related questions, please feel free to contact Beth West at (916) 558-6082. For additional articles on employment law issues, please visit Weintraub’s law blog at www.thelelawblog.com.

The FTC issued a news release on October 30, 2009 advising that at the request of Members of Congress, the Federal Trade Commission is delaying enforcement of the “Red Flags” Rule until June 1, 2010, for financial institutions and creditors subject to enforcement by the FTC.

The Rule was promulgated under the Fair and Accurate Credit Transactions Act, in which Congress directed the Commission and other agencies to develop regulations requiring “creditors” and “financial institutions” to address the risk of identity theft. The resulting Red Flags Rule requires all such entities that have “covered accounts” to develop and implement written identity theft prevention programs to help identify, detect, and respond to patterns, practices, or specific activities – known as “red flags” – that could indicate identity theft.

A copy of the news release is available at http://www.ftc.gov/opa/2009/10/redflags.shtm

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Lizbeth “Beth” West is a shareholder in the Labor and Employment Law Section and Disputes, Trials & Appeals Section at Weintraub Genshlea Chediak. Beth’s practice focuses on counseling employers in all areas of employment law, and defending employers in state and federal court, as well as before administrative agencies. She has extensive experience in defending wage and hour claims, and complex whistle-blowing and retaliation claims. She also provides training services on various employment issues, such as sexual harassment and violence in the workplace. If you have any questions about this Legal Alert or other employment law related questions, please feel free to contact Beth West at (916) 558-6082. For additional articles on employment law issues, please visit Weintraub’s law blog at www.thelelawblog.com.

Download: 1055962.pdf

In LVRC Holdings, LLC v. Brekka, et. al. (9/15/09), the Ninth Circuit Court of Appeals upheld the trial court’s summary judgment for defendants finding that defendant, Brekka, was “authorized” to use LVRC’s computers while he was employed, and that he did not access the computers “without authorization” under the Federal Computer Fraud and Abuse Act (CFAA) when he emailed documents to himself and his wife prior to leaving LVRC.

Factual Background.

Brekka was hired by LVRC in April 2003 to oversee a number of aspects of its residential treatment facility in Nevada. His duties included internet marketing programs and interacting with LVRC’s website consultant, LOAD, Inc. At the time he was hired, he owned and operated two other consulting businesses himself which were also in the addiction rehabilitation services. While he worked for LVRC, Brekka commuted between Florida where he resided and one of his businesses was located, and Nevada. He was assigned a computer at LVRC but while commuting back and forth between Florida and Nevada, he would email documents he obtained or created at LVRC to his personal computer. There was no written policy at LVRC regarding the emailing of LVRC documents to personal computers.

In June 2003, Brekka asked a LOAD administrator, Nick Jones, for a log-in for LVRC’s website and it was provided. With this log-in, Brekka could gain access to information about LVRC’s website. In August 2003, Brekka and LVRC entered into discussions regarding the possibility of Brekka purchasing an ownership interest in the company. He emailed a number of LVRC documents to his personal email account and his wife’s personal email account. They included a LVRC financial statement, its marketing budget, admissions reports for patients at the facility, among other things. After discussions between LVRC and Brekka broke down in mid-September 2003, Brekka quit. He left his LVRC computer at the company and it still contained the email in which LOAD had sent him the log-in information. After he left, another employee or consultant of LVRC deleted that email with the log-in information. During a routine monitor of the website on November 19, 2004, a LOAD administrator noticed that someone was logged into the LVRC website using the log-in and password given to Brekka back in June 2003. The log-in and password were then deactivated and LVRC filed a report with the FBI alleging that Brekka had been unlawfully logging into LVRC’s website.

The Case.

LVRC filed a civil lawsuit claiming that Brekka committed two of the crimes established by the CFAA: 1) that he intentionally accessed a computer without authorization or exceeded his authorized access; and 2) that he obtained information from a protected computer (and the conduct involved an interstate or foreign communication). (18 U.S.C. §§ 1030(a)(2) and (a)(4).) LVRC alleged that Brekka violated these sections of the CFAA when he emailed LVRC documents to himself in September 2003 and when he continued to access the website after he left LVRC.

The CFAA prohibits a number of different computer crimes, the majority of which involve accessing computers without authorization or in excess of authorization, and then taking specified forbidden actions, ranging from obtaining information to damaging a computer or computer data. (18 U.S.C. § 1030(a)(1)-(7).) While violation of the CFAA carries with it criminal penalties, section 1030(g) of the statute provides for a civil private right of action by persons injured by the crimes.[1]

The trial court granted Brekka’s summary judgment motion holding that LVRC had failed to establish a violation of section 1030(a)(2) or (a)(4). The trial court found that “It is undisputed that when Brekka was employed by Plaintiff that he had authority and authorization to access the documents and emails that were found on his home computer and laptop.” There was no evidence that Bekka accessed an LVRC computer or any of the documents on the computer “without authorization.” Brekka had “authorization” to access the LVRC computers for purposes of sections 1030(a)(2) and (a)(4) because he was employed by LVRC at the time he emailed documents to himself and his wife, and there was no evidence that he had agreed to keep the emailed documents confidential or to return or destroy those documents upon the conclusion of his employment. Also, the trial court found that LVRC had failed to put forth any evidence that Brekka logged into the LVRC website after leaving LVRC’s employ.

The Ninth Circuit found that while the CFAA does not define “authorization,” based on the fundamental canon of statutory construction, the word is to be given its ordinary and common meaning. Therefore, it held that “an employer gives an employee ‘authorization’ to access a company computer when the employer gives the employee permission to use it.” According to the court, because LVRC permitted Brekka to use the company computer, he did not act “without authorization.” Further, the court found that Brekka did not “exceed authorized access.” This phrase was defined by Congress to mean “access a computer with authorization and to use such access to obtain or alter information in the computer that the accesser is not entitled so to obtain or alter.” (18 U.S.C. § 1030(e)(6).) According to the Court, based on this definition, an individual who is authorized to use a computer for certain purposes but goes beyond those limitations is considered by the CFAA as someone who has “exceeded authorized access.” On the other hand, a person who uses a computer “without authorization” has no rights, limited or otherwise, to access the computer in question. In this case, the court found that there was no dispute that Brekka had permission to access the computer without limitation and he was still employed by LVRC when he emailed the documents to himself and his wife. The Court affirmed the trial court’s summary judgment finding that Brekka did not access LVRC’s computer without authorization.

The Court also affirmed the trial court’s summary judgment that Brekka did not violate CFAA by logging onto the website after he left LVRC because LVRC did not meet its burden of producing evidence that a genuine issue of material fact existed in this regard.

Note to Employers.

This case review addresses solely the CFAA. LVRC and other employers often have other legal remedies available if a departing employee misappropriates its confidential and proprietary information or fails to return its property.

However, it is important that employers have clear and concise Electronic Use Policies and Confidentiality & Proprietary Information Policies in place. These policies can help to protect against an employee’s improper use of the company’s electronic media (e.g. computers, telephones, and remote communication devices) and the improper access to, and disclosure of, the company’s confidential and proprietary information. The employment lawyers at WGC regularly draft such policies and would be happy to assist employers in the review and/or drafting of such policies.

Lizbeth “Beth” West is a shareholder in the Labor and Employment Law Section and Disputes, Trials & Appeals Section at Weintraub Genshlea Chediak. Beth’s practice focuses on counseling employers in all areas of employment law, and defending employers in state and federal court, as well as before administrative agencies. She has extensive experience in defending wage and hour claims, and complex whistle-blowing and retaliation claims. She also provides training services on various employment issues, such as sexual harassment and violence in the workplace. If you have any questions about this Legal Alert or other employment law related questions, please feel free to contact Beth West at (916) 558-6082. For additional articles on employment law issues, please visit Weintraub’s law blog at www.thelelawblog.com.

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[1] Section 1030(g) provides in part that “Any person who suffers damages or loss by reason of a violation of this section may maintain a civil action against the violator to obtain compensatory damages and injunctive relief or other equitable relief.”

In the recent case of Gross v. FBL Financial Services, Inc., the United States Supreme Court held that a plaintiff must prove that his/her age was the “but for” cause of the adverse employment action they claim was discriminatory (e.g. demotion). Plaintiff was 54 years old when his employer reassigned him from his position as a claims administration director to a claims project coordinator. Many of his responsibilities in the director position were transferred to one of his subordinates who was in her early 40’s. Although Plaintiff’s compensation was not reduced, he believed that his transfer to the coordinator position was a demotion and filed an age discrimination claim under the federal Age Discrimination in Employment Act (ADEA).

When instructing the jury, the trial court utilized the “mixed motive” instruction. The court told that jury that Plaintiff only needed to show that his age was a “motivating factor,” among other factors, in order for him to state his case and then the burden would shift to the employer who would have to prove that it would have “demoted” Plaintiff regardless of his age. Based on the mixed motive instruction, the jury returned an award in Plaintiff’s favor. The employer appealed and the appellate court reversed the trial court finding that the Plaintiff must show “direct evidence” that age was a reason for the demotion before the court could provide a mixed motive instruction.

The case went before the Supreme Court on the sole issue of whether an ADEA plaintiff must present direct evidence of discrimination in order to receive a mixed motive jury instruction. However, in reviewing this issue, the Court actually decided that the mixed motive theory does not apply to the ADEA at all. It’s decision was based on the distinction it made between Title VII which permits the use of the mixed motive theory and the ADEA. The Court reviewed a previous decision, Price Waterhouse v. Hopkins, in which the court found that under Title VII, a plaintiff must first prove that discrimination was a “motivating” or “substantial” factor in the employer’s action, after which the burden of persuasion shifts to the employer to show that it would have taken the same action regardless of the impermissible discriminatory consideration. Congress amended Title VII after Price Waterhouse to adopt its reasoning and clarify that a plaintiff need only prove that the discriminatory factor was a “motivating” factor not the “but for” cause of the decision.

The Court found that not only is the language of the ADEA and Title VII different, but also that Congress did not amend the ADEA when it amended Title VII to adopt the Price Waterhouse reasoning. Thus, the Court held that under the ADEA, a Plaintiff must prove that ‘but for” his or her age, the employer would not have taken the claimed discriminatory action.

Lizbeth “Beth” West is a shareholder in the Labor and Employment Law Section and Disputes, Trials & Appeals Section at Weintraub Genshlea Chediak. Beth’s practice focuses on counseling employers in all areas of employment law, and defending employers in state and federal court, as well as before administrative agencies. She has extensive experience in defending wage and hour claims, and complex whistle-blowing and retaliation claims. She also provides training services on various employment issues, such as sexual harassment and violence in the workplace. If you have any questions about this Legal Alert or other employment law related questions, please feel free to contact Beth West at (916) 558-6082. For additional articles on employment law issues, please visit Weintraub’s law blog at www.thelelawblog.com.

Download: Can an Employee Release a Wage Claim.pdf

Labor Code section 206.5 provides that “an employer shall not require the execution of a release of a claim or right on account of wages due, or to become due, or made as an advance on wages to be earned, unless payment of those wages has been made. A release required or executed in violation of the provisions of this section shall be null and void as between the employer and the employee.” The section also provides that requiring such a release could constitute a misdemeanor.

Based on this section, for years employers have either been unable to obtain a release from an employee for any wage claim, or have obtained such releases without any guarantee that they are enforceable.

Recently however, the Court of Appeal in Watkins v. Wachovia Corporation provided some clarification on when a release of a wage claim may be valid. In Watkins, the Plaintiff was employed by Wachovia as a sales assistant. She assisted stockbrokers with client contact and other duties. After the federal Department of Labor investigated a separate Wachovia branch office and determined that the sales assistants had been improperly classified as exempt employees, Plaintiff joined in a class action against Wachovia claiming unpaid overtime. Wachovia brought summary judgment claiming that when Plaintiff’s employment was ended, she signed a release of all claims, known or unknown, specifically including wage claims, in exchange for severance pay. Plaintiff conceded that she signed the release but argued that it was unenforceable as to her overtime claim based on Labor Code section 206.5’s prohibition on such releases. Wachovia responded that section 206.5 does not prohibit releases of claims subject to a “bona fide dispute.” The trial court agreed and granted the summary judgment. Plaintiff appealed and the trial court’s decision was affirmed.

Based on the court’s decision, a release of a wage claim is valid if: 1) there is a “bona fide dispute” regarding whether or not wages are owed; 2) the employer has paid all of the undisputed wages without regard to whether the employee signs the release; and 3) the employee receives something of value in exchange for releasing the right to sue for the additional (disputed) wages.

When does a “bona fide dispute” exist?

A bona fide dispute exists when the employee and the employer have a reasonable factual basis for taking a position contrary to the other side’s position. In this case, the court found that a bona fide dispute existed when Plaintiff signed the release. She claimed she worked overtime hours for which she was not paid. In the litigation, she submitted a declaration indicating that she had been told to work off the clock if she had not finished her work within her scheduled 8 hour workday. She also submitted separate time sheets she had kept while working for Wachovia that showed the overtime she had worked. Finally, she testified that she had complained to management about not being paid overtime and that one manager had told her that her brokers would have to compensate her for any overtime which they did not.

The court held that when Plaintiff signed the release of all claims at the time of her termination, a “bona fide dispute” existed because: 1) she received all wages Wachovia conceded were due based on the timesheets she submitted; 2) she believed she possessed a claim for further overtime; and 3) she voluntarily elected to receive enhanced severance benefits in exchange for releasing her claims against Wachovia. Therefore, the court ruled that the release of the wage claim was enforceable.

Lizbeth “Beth” West is a shareholder in the Labor and Employment Law Section and Disputes, Trials & Appeals Section at Weintraub Genshlea Chediak. Beth’s practice focuses on counseling employers in all areas of employment law, and defending employers in state and federal court, as well as before administrative agencies. She has extensive experience in defending wage and hour claims, and complex whistle-blowing and retaliation claims. She also provides training services on various employment issues, such as sexual harassment and violence in the workplace. If you have any questions about this Legal Alert or other employment law related questions, please feel free to contact Beth West at (916) 558-6082. For additional articles on employment law issues, please visit Weintraub’s law blog at www.thelelawblog.com.

Download: Employee Has No Right to Post-Termination Commissions.pdf

In Nein v. HostPro, Inc., a Court of Appeal held that the language of the employee’s employment agreement precluded him from recovering commissions following his termination of employment. Plaintiff worked as a sales representative for HostPro for a period of 2 years. He signed an employment agreement that expressly provided that Plaintiff would be eligible for commission pay “so long as [he] remains employed with the Company as a Sales Representative.”

Plaintiff was terminated in December 2001. In January 2002, HostPro and a potential customer who Plaintiff had approached and negotiated with prior to his termination, completed the transaction. Plaintiff sued claiming he was entitled to commissions on the transaction. HostPro moved for summary judgment arguing that based on the terms of the employment agreement, it had no duty to pay Plaintiff commissions. The trial court granted summary judgment and Plaintiff appealed. The Court of Appeal agreed. It said that the employment agreement was “susceptible to only one interpretation – that once plaintiff ceased to be employed by defendant, he would no longer be eligible for commission pay.”

CAUTIONARY NOTE: Despite the ruling in HostPro, employers should be careful when drafting commission plans and consult with their employment counsel since there are other cases which have interpreted similar language as punitive and resulting in a forfeiture of commissions when the sales was ultimately consummated based on the efforts of the employee prior to termination.

Lizbeth “Beth” West is a shareholder in the Labor and Employment Law Section and Disputes, Trials & Appeals Section at Weintraub Genshlea Chediak. Beth’s practice focuses on counseling employers in all areas of employment law, and defending employers in state and federal court, as well as before administrative agencies. She has extensive experience in defending wage and hour claims, and complex whistle-blowing and retaliation claims. She also provides training services on various employment issues, such as sexual harassment and violence in the workplace. If you have any questions about this Legal Alert or other employment law related questions, please feel free to contact Beth West at (916) 558-6082. For additional articles on employment law issues, please visit Weintraub’s law blog at www.thelelawblog.com.