Transcript Goldstein, Kennedy & Petito
THE GOLDSTEIN LAW FIRM A PROFESSIONAL CORPORATION Est. 1977
“MAKING HARD EMPLOYMENT DECISIONS TO SURVIVE THE GREAT RECESSION AND PROSPER IN THE GREAT RECOVERY” COPYRIGHT 2009. ALL RIGHTS RESERVED
Mistakes Employers Make When Terminating or Laying Off Employees That Lead to Costly Lawsuits and How to Avoid Them
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DIFFERENCES BETWEEN TERMINATIONS AND LAYOFFS
Layoffs are for “lack of work or lack of funds.” Terminations are for “misconduct or poor performance.” Layoffs should never be used as a substitution for discipline.
Layoffs should never be used as a pretext to replace older, senior, and higher-paid employees with younger lower paid employees.
Layoffs imply “recall rights” when work and/or funds return.
HOW TO LEGALLY LAYOFF EMPLOYEES IN CALIFORNIA
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Permanent layoffs vs. temporary layoffs defined.
Permanent layoffs are for employment positions that you DO NOT anticipate returning within “a reasonable and foreseeable period of time.” Temporary layoffs are for employment positions that you DO anticipate returning in “a reasonable and foreseeable period of time.”
WHAT FACTORS CAN BE USED TO MINIMIZE OR INCREASE YOUR EXPOSURE TO LAWSUITS DUE TO LAYOFFS
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Seniority-Last Hired/First Fired-SAFE AND OBJECTIVE Job Function/Skill Levels-Who are the least valuable employees to the entire business operation?
Performance-Objective vs. Subjective Reviews of employee performance Discipline Records-Employees with worst records of discipline regardless of seniority USE OF FACTORS IN COMBINATION OR SINGULARLY that can affect exposure to lawsuits.
WHO DO YOU LAY-OFF?
1) 2) 3) Due to a significant decrease in revenue, you have been informed that you must trim your workforce. In deciding which employees to cut, you are faced with a decision of whether to lay-off Tim, an account manager, who has been with you for over 10 years, is over 40 years old, has no record of discipline, but who has had several recent performance issues. You are deciding whether to lay-off Tim or Martha, an account representative, who is 29, has been with the company for 4 years, has no record of discipline, and who has received positive work performance reviews from each of her supervisors, including Tim. You believe Martha performs the same or substantially similar work as Tim, but you can only afford to keep one of them. Also, Martha has a son who she takes care of and who is developmentally disabled.
Which one do you lay-off and which one do you keep? What factors would you use to make the decision?
How would you defend your decision from a lawsuit filed by the employee who was laid-off?
HOW TO LEGALLY ACCOMPLISH COSTS SAVINGS THROUGH LAYOFFS?
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You have been directed to save $500,000 a year in payroll costs without impairing the efficiency of your organization. The easiest way to accomplish this goal, is to layoff 10 employees who each earn $50,000 or more a year. What factors should you consider before making this decision?
What other information would you need to gather before making this decision?
What would be a better course of action to avoid lawsuits?
Federal WARN Act
1. Applies to private sector employers with 100 or more employees, excluding part time employees. 2. To deal with employers who have 100 employees, but who claim they are excluded as part-time employees, the law states that if employer has a 100 or more employees who perform 4000 hours or more per week the employer is covered by the Act.
Federal WARN Act (cont.)
3. 60 days notice to employees and each representative of employees, and various government agencies.
4. Mass layoff means: (1) is not the result of a plant closing and (2) results in an employment loss at a single site during a 30 day period for at least 33% of employees, and at least 50 employees or at least 500 employees(excluding part-time employees.
The WARN Act (cont.)
5. Plant Closing- permanent or temporary shut down of a single site of employment if the shut down results during any 30 day period in the loss of employment of 50 or more employee, excluding part-time employees.
Exceptions to WARN Act
A. The Faltering Company Exception B. The Business Circumstance Exception C. The Good Faith Exception
CONSEQUENCES OF VIOLATING WARN
A. Back pay and benefits for 60 days less any wages pay and benefits paid voluntarily as a part of a severance arrangement .
Use as the basis for a wrongful termination in violation of public policy lawsuit.
California’s Baby WARN Labor Code section 1400 et. seq.
All private sector employers with 75 or more employees are covered. ( No exclusion for part-time employees.) 60 days notice before ordering mass layoff, relocation, or termination to both employees and various government entities.
Layoff is defined as a separation from a position for lack of funds or lack of work.
Mass Layoff is defined as a separation during any 30 day period of 50 or more employees at any industrial or commercial facility.
Termination is defined as the cessation or substantial cessation of industrial or commercial operations of any industrial or commercial facility.
The Consequences of Violating California’s Baby WARN Act
Back pay The value of costs of any employee benefit plan.
Civil action for damages, attorneys fee, and civil penalty of $500 for each day of the employer violates the Act No deduction for wages and benefits paid during last 60 day period employee works.
NLRB unfair labor practice charges and liabilities.
Public Sector Legal Requirements
Duty to Meet and Confer in Good Faith Prior to adopting lay off rules Duty to bargain over impact of layoffs before layoffs occur Layoff in accordance with Civil Service, Personnel Rules and MOUs Dealing with “vested job rights” and layoffs
Deciding Who To Select for Layoff
1. Personnel Policies 2. Assistance of Outside Counsel 3. Layoff and Recall Policies
TERMINATIONS: THE COMMON MISTAKES EMPLOYERS MAKE BEFORE FIRING A. Pre-Termination Mistakes 1. Summarily terminating an employee-acting too quickly.
2. Acting too slowly and appearing to condone the employee’s actions.
3. Failing to adequately investigate the termination.
4. Failing to adequately document the termination.
5. Failing to follow your own termination policies.
6. Failing to give the employee an opportunity for corrective action before termination, where appropriate.
TERMINATIONS: THE COMMON MISTAKES EMPLOYERS MAKE BEFORE FIRING 7. Failing to take action against other employees for the same offense.
8. Failing to consider alternatives to termination in appropriate cases.
9. Failing to give the employee the “real reason” for their termination or providing a false or misleading reason for their termination to a government agency, such as the Employment Development Department, EEOC, or DFEH.
10. Failing to fully consider the legal impact of laws barring discrimination based on race, sex, age, etc.
TERMINATIONS: THE COMMON MISTAKES EMPLOYERS MAKE BEFORE FIRING 11. Failing to consider the legal impact of the Federal and CA Family Medical Leave Act on the termination.
12. Failing to consider the legal impact of Pregnancy Disability Leave on the termination.
13. Failing to consider the legal impact of the Americans With Disabilities Act on the termination.
14. Failing to consider the legal impact of the Workers’ Compensation Laws on the termination.
15. Failing to have a witness present during the termination process.
16. Failing to accord dignity to the employee being terminated during and after the termination process
California Penal Codes: Extortion - Crime and Punishment C.P.C. § 518 Extortion is the obtaining of property from another, with his consent, or the obtaining of an official act of a public officer, induced by a wrongful use of force or fear, or under color of official right C.P.C. § 519 Fear used to extort; threats inducing 1. To do an unlawful injury to the person or property of the individual threatened or of a third person; or, 2. To accuse the individual threatened, or any relative of his, or member of his family, of any crime; or, 3. To expose or to impute to him or them any deformity, disgrace or crime, or, 4. To expose any secret affecting him or them.
C.P.C. § 520 Punishment – Every person who extorts any money or other property from another, under circumstances not amounting to robbery or carjacking, by means of force, or any threat, is subject to imprisonmen 2, 3 or 4 years.
TERMINATIONS: THE COMMON MISTAKES EMPLOYERS MAKE AFTER FIRING 1. Giving Severance without obtaining a properly drafted release. – Giving Severance to employees that engage in theft , dishonesty, or serious misconduct.
2. Giving Letters of Reference/Recommendation to terminated employees that praise positive qualities, but misrepresent their qualifications as an employee by failing to mention the problems that caused their termination.
3. Discussing the terminations with non-interested parties. – May lead to Defamation and Libel Claims
DEFENSES TO TERMINATIONS AND LAYOFFS
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Documentation, Documentation, Documentation 2.
Proper, timely, and thorough investigation of misconduct or employee complaints 3.
Clearly drafted and objective layoff/recall policies 4.
Clearly drafted and legally enforceable severance agreements 5.
Clearly drafted and legally enforceable pre-dispute arbitration agreements 6.
Assistance of Outside Counsel prior to deciding which employees to terminate or lay-off
GETTING RID OF DEADWOOD
Harvey, age 56, has been the sales manager for the Gordon Clothing Co. for the past 16 years and earns a $150,000 plus commissions and benefits. Due to the recession, sales have declined almost 50% over the past two years. The owners have hired a new president Gary, age 42. Harvey claims that the reason sales have declined is only due to the recession and not his own shortfalls as a salesperson. Gary has contacted several major customers who tell him that they have not seen Harvey in their stores or seen any new business proposals from Harvey for a number of years. Gary believes that Harvey is pure “deadwood” and must be replaced by “new blood” immediately if the company is to survive.
GETTING RID OF DEADWOOD
1. What should the company do with Harvey?
2. If you decide to terminate Harvey, how do you protect the company from potential liability?
3. If you truly believe that removing Harvey and replacing him is a “game changer” for your company, should the legal considerations be an overriding factor?
AVOIDING THE PITFALLS THAT TRIGGER WAGE AND HOUR CLASS-ACTION LAWSUITS A. Failure to Properly Classify Employees Categories of Misclassifications: – Exempt vs. Non-Exempt – Employee vs. Independent Contractors – Salary vs. Hourly or Piece-Workers B. Failure to Properly Classify Employees C. Failure to Maintain Proper Time Records D. Failure to Provide Meal & Rest Periods E. Failure to Compensate Employees under Lab. Code Sec. 2802 for expenditures or losses.
HOW TO DETERMINE PROPER CLASSIFICATIONS
A. Perform Yearly Self-Audits of your workforce.
B. Provide Legal Counsel with the following: – Results of Self-Audits – Job Descriptions for all positions – Basis for your classifications – Actual job performed vs. job expectation – Do your independent contractors “truly meet the legal tests,” to be considered “real independent contractors” or are they just employees?
DEFENSES TO WAGE AND HOUR LAWSUITS: PROPER WORKPLACE POLICIES AND HANDBOOKS A. Develop workplace policies that define your reasonable expectations of the jobs to be filled and completed by employees.
B. Develop workplace policies that define the hours you expect the employees to work.
C. Develop workplace policy that defines the employees’ meal and break periods consistent with CA Wage Orders and Law. (See
Brinker pending before Cal. Sup. Crt.
) D. Develop workplace policies that require employees to immediately notify the employer in writing if they have failed to receive all payments due for each pay period.
DEFENSES CONTINUED:
E. Develop workplace policies regarding payment of Overtime – Private Sector – overtime, time and a half over 8 hours in a day or over 40 in a week.
-Public Sector – FLSA – over 40 hours in a week.
F. Develop workplace policies regarding limit of overtime to actual hours worked and not paid time, holidays, sick leave etc.
DEFENSES CONTINUED:
G. Develop workplace policies defining the workweek and work day to calculate entitlement to overtime.
H. Develop workplace policies that prohibits unauthorized overtime, without written authorization from a direct supervisor.
-But remember if you suffer or permit a person to work overtime, your rule will not protect you from being held liable.
I. Develop workplace policies that describes alternate work schedules and how they operate with regard to overtime, holiday pay and vacations.
J. Develop workplace policies to properly calculate the regular rate of pay for the purpose of calculating overtime. -including bonuses for productivity and performance in calculating regular rate of pay.
CLASS-ACTION
You receive a threat letter from an attorney from the law firm of Dewey, Cheatem , & Howe (“DCH”) who represents Robert Perry, a former assistant manager of your hotel in Los Angeles, which caters to individuals who require short and long-term housing. The attorneys have requested Robert’s payroll records for the past 3 years and his personnel file. DCH claims that all of your assistant managers have been misclassified as exempt employees even though their supervisory duties are only incidental to their routine job functions of filling out paperwork, responding to guest complaints, sitting at the front desk waiting for deliveries or to allow entrance of guests into the hotel, and on a routine basis filling in for other front desk employees. As you have approximately 60 assistant managers (between the day and evening shifts) for your hotels in California, DCH is willing to settle on a class-wide basis for $2.5 million dollars for all claims against you.
CLASS-ACTION
1) You believe that DCH has misrepresented the job duties performed by your assistant managers. How would you defend against DCH’s threat to your business operation?
2) What steps should you take to investigate?
3) How could you have avoided this problem in the first place?
CALIFORNIA LEGISLATURE 2009-2010 TERM
PROPOSED NEW LEGISATION 1.
AB 335 (Choice of Law/Forum Selection Clauses): This bill would make void and unenforceable any provision in an employment contract that requires an employee to agree to a forum other than California or to the laws of any state other than California, for the resolution of employment related disputes. STATUS VETOED 10/11/09 BY GOVERNER.
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AB 1000 (Paid Sick Leave): This bill would require employers to provide paid sick leave of at least one hour for every 30 hours worked to all employees who work in California for 7 or more days in a calendar year. STATUS-IN COMMITTEE
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CALIFORNIA LEGISLATURE 2009-2010 TERM CONTINUED:
AB 353 (Statute of Limitations/Libel and Slander): This bill would extend the statute of limitations for a cause of action for libel or slander from one year to three years. STATUS-IN COMMITTEE AB 793 (Statute of Limitations/Claims Relating to Discriminatory Compensation): This bill would reject the U.S. Supreme Court’s decision in
Ledbetter v. Goodyear Tire & Rubber Co.
and instead provide that an employee’s cause of action accrues when any of the following occur: (1) a compensation decision or other practice is adopted; or (2) an individual becomes subject to a compensation decision or other practice, including each time when wages, benefits, or other compensation is paid.- STATUS-PASSED BY LEGISLATURE ON GOVERNOR’S DESK FOR SIGNING.
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2009-2010 LEGISLATIVE TERM
AB 515 (Lactation Accommodation): This bill would expand an employer’s existing obligation to provide a reasonable amount of break time to employees for lactation purposes, by requiring that employers provide a 20-minute paid rest period for lactation purposes during each four-hour work period, immediately preceding or following the employee’s rest period. These 20 minute paid rest periods for lactation purposes would be separate and in addition to the employer’s obligation to provide meal and rest periods to the employee.-STATUS-IN COMMITTEE
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2009-2010 LEGISLATIVE TERM
AB 527 (Falsified Payroll Records): The bill would allow a Labor Commissioner hearing a wage and hour case, the ability to presume that all payroll records relating to the claim and submitted by the employer in its defense are false and should be disregarded, if the Labor Commissioner finds that at least two payroll records submitted for any pay period relating to the claim have been intentionally falsified.- STATUS - VETOED 10/11/09 BY GOVERNER. AB 569 (Meal Periods/Exemptions): This bill would provide an exemption from California’s meal period requirements for construction employees and for commercial drivers in the transportation industry who are covered by a collective bargaining agreement containing meal period provisions.-STATUS-IN COMMITTEE.
2009-2010 LEGISLATIVE TERM
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AB 842 (CA WARN Act): This bill would extend the period of notice required for a qualifying layoff, from 60 days to 90 days, under the California WARN Act.-STATUS-IN COMMITTEE.
AB 943 (Consumer Credit Reports): This bill would prohibit employers from obtaining and utilizing consumer credit reports for employment purposes, except in limited circumstances such as where the information is substantially related and the employee is in a managerial position and/or the information is required to be disclosed to the employer under law. – STATUS-PASSED BY LEGISLATURE ON GOVERNOR’S DESK FOR SIGNING.
AB 1001 (FEHA Protection): This bill would add “familial status” as a protected class under FEHA, thereby protecting individuals from employment discrimination based on familiar status. “Familial status” is defined as having or providing care for a child, domestic partner, grandchild, grandparent, parent, parent-in law, sibling, or spouse.-STATUS IN COMMITTEE.
2009-2010 LEGISLATIVE TERM
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SBA 187 (Alternative Workweek Schedules): This bill would allow an individual employee to request an alternative workweek schedule of up to 10 hours per day, 40 hours per week with employer approval, without the requirement of overtime compensation for hours worked in excess of 8 hours per day.-STATUS-IN COMMITTEE 12.
AB 849 (CFRA Leave): This bill would expand leave rights under the California Family Rights Act by broadening the definition of “child” and “parent” and by adding additional categories of family members for whom an employee could take leave to care for a serious health condition.-STATUS-IN COMMITTEE
CALIFORNIA SUPREME COURT
Employers Right to investigate vs. Employees Rights to Privacy: -
Hernandez v. Hillsides, Inc.
(AUGUST 3, 2009)
FEDERAL LAW
1. CONGRESS
-Employee Free Choice Act (H.R. 1409 and SB 560) STATUS IN COMMITTEES -Lilly Ledbetter Fair Pay Act of 2009-STATUS-SIGNED INTO LAW BY PRESIDENT OBAMA ON 1/29/09
2. DEPARTMENT OF HOMELAND SECURITY (DHS)
FINAL RULE OF DHS-STATUS RESCIND “NO MATCH RULE” on November 6, 2009.
QUESTION AND ANSWER PERIOD
If you have further questions, comments, or problems that need to be addressed please contact: Charles H. Goldstein 310.553.4746
Also visit our website at www.gpfirm.com