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New Employer Protections for Communications Regarding Sexual Harassment

September 17, 2018 By Israel Samuels LLP Leave a Comment

Signed into law this month was an amendment to Section 47 of the Civil Code that adds three types of communications regarding sexual harassment as “privileged” communications—meaning they cannot be used as a basis for defamation claim—unless they are made with malice (i.e., statements made with complete disregard for the truth or false accusations made out of spite, ill will, or hatred towards the alleged harasser).
Amended Section 47 specifically protects as privileged communications:

Reports of sexual harassment made by an employee to their employer based on credible evidence and without malice;
Communications made without malice regarding the sexual harassment allegations between the employer and “interested persons” (such as witnesses or victims); and
Non-malicious statements made to prospective employers as to whether a decision to rehire, or not, would be based on a determination that the former employee engaged in sexual harassment.

This is great news for employers as now they can report, investigate and discuss sexual harassment claims during an employee’s employment and may discuss it with that employee’s prospective employers that request a reference.
Despite this new law, it is in an employer’s best interest to discuss the matter with legal counsel before making any communication to anyone that relates to a claim or complaint of workplace sexual harassment.

The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.

New Written Mediation Disclosures from Your Attorney

September 10, 2018 By Israel Samuels LLP Leave a Comment

Often parties decide to attempt to mediate a resolution of their disputes. However, Mediation has consequences for the disputants.

Communications and writings made or prepared for the purposes of mediation are generally inadmissible in Court proceedings unless the participants to the mediation agree to disclosure of the communication, document or writing.

California law and public policy provide that all communications that take place in anticipation of and at mediation are confidential. Even after mediation ends, communications and writings protected by the statutes are to remain confidential.

The Legislature now requires attorneys, in writing, to explicitly disclose, and client to sign, a mandatory mediation disclosure form in order to further carry out the “strong legislative policy” underlying mediation confidentiality.

The disclosure form must be provided to the client as soon as reasonably possible before the client agrees to participate in the mediation or mediation consultation and the attorney must obtain a printed acknowledgment signed by that client stating that he or she has read and understands the confidentiality restrictions. If the attorney is retained after an individual agrees to participate in a mediation or mediation consultation, the attorney must comply with the printed disclosure and acknowledgment requirements as soon as reasonably possible after being retained. Failure of an attorney to comply with these disclosure requirements does not invalidate an agreement prepared in the course of, or pursuant to, a mediation. Confidentiality does not apply to communications, documents and writings related to an attorney’s compliance with the disclosure requirements and such communications, documents and writings may be used in an attorney disciplinary proceeding if the communication, document, or writing does not disclose anything said or done or any admission made in the course of the mediation.

In matters you and your opponents intend to mediate you should now receive the disclosure and acknowledgment form from your attorney.

To promote communication in mediation, California law generally makes mediation a confidential process. California’s mediation confidentiality laws are laid out in Sections 703.5 and 1115 to 1129, inclusive, of the Evidence Code. Those laws establish the confidentiality of mediation and limit the disclosure, admissibility, and a court’s consideration of communications, writings, and conduct in connection with a mediation. In general, those laws mean the following:

All communications, negotiations, or settlement offers in the course of a mediation must remain confidential.
Statements made and writings prepared in connection with a mediation are not admissible or subject to discovery or compelled disclosure in noncriminal proceedings.
A mediator’s report, opinion, recommendation, or finding about what occurred in a mediation may not be submitted to or considered by a court or another adjudicative body.
A mediator cannot testify in any subsequent civil proceeding about any communication or conduct occurring at, or in connection with, a mediation.

This means that all communications between you and your attorney made in preparation for a mediation, or during a mediation, are confidential and cannot be disclosed or used (except in extremely limited circumstances), even if you later decide to sue your attorney for malpractice because of something that happens during the mediation.

New Penalty for Failure to Provide Employees with Employment Records

September 4, 2018 By Israel Samuels LLP Leave a Comment

California Labor Code section 226, among other things, provides current and former employees, upon reasonable request to their employer, the right to inspect or copy records pertaining to their employment. Upon receipt of a request the employer must comply “as soon as practicable but no later than 21 days from the date of the request.”

Section 226 was amended on September 17, 2018, to codify penalties for violation of the requirement to maintain records and permit their inspection or copying by current and former employees “as soon as practicable but no later than 21 days from the date of the request.” Subpart (f) of 226 now explicitly authorizes an award of $750 to the current or former employee or to the Labor Commissioner.

It remains the employer’s obligation to maintain wage, time, break and work- related employment records. The failure to do so impairs the ability of the employer to defend wage and hour actions as the current or former employee’s testimony will likely be persuasive in the absence of such records. Now, in addition to the evidentiary litigation disadvantage that arises out of the failure to maintain such records, the employer will also face a fine. The fine itself may result in a complete loss of credibility for an employer in wage and hour litigation and may result in large judgments in favor of current and former employees.

If you are an employer who is unsure what employment records you must maintain and for how long, we recommend that you contact your labor attorney and make sure you comply with these maintenance and access requirements.

Inadvertent Errors Can Result in Big Waiting Time Penalty and Attorneys’ Fee Awards

August 27, 2018 By Israel Samuels LLP Leave a Comment

Here is what can happen when the numerical dollar number on your check is different from the written dollar number.

In Nishiki v. Danko Meredith, APC, the California Court of Appeals for the Third Appellate District, was confronted with a case where an employee resigned without notice and the employer presented a check for full payment of unused vacation time to the employee within the statutorily required 72 hour period, but, the check contained a clerical error. The check contained the correct numerical payment amount of $2,889.31. However, in writing, it was spelled out “Two thousand eight hundred and 31/100” or $89 less than the correct amount.

The former employee advised the employer of the discrepancy and that her bank would not cash the check due to the discrepancy. However, the employer refused to deliver a new check unless the former employee came into the office to exchange it for the inconsistent check.
Alternatively, the employer offered to send an additional check for $89.00. The former employee demanded the corrected check be sent to her and it was mailed to her – albeit 17 days after she resigned and 9 days after she reported the discrepancy to her former employer.

The former employee filed a claim with the California Labor Commissioner against the employer for waiting time penalties and attorneys’ fees. The hearing officer awarded waiting time penalties for 17 days – from the date of resignation until the former employer received the corrected check – in the sum of $4,250 which was based on the former employee’s $250 average daily wage.

The employer appealed to the Superior Court which found the former employee was entitled to the 17 days of waiting penalties and, upon motion for statutory attorneys’ fees, awarded the former employee the sum of $86,160 in fees.

The employer appealed from the judgment.

The Court of Appeals determined waiting time penalties were appropriate since the employer knew what it was doing and intended such actions and held that was all that was required to find the failure to pay to be willful in order to support a waiting time penalty award. It also held under California law when there is a discrepancy, words on the check prevail over numbers. It, thus, determined waiting time penalties only applied for nine days – from the date the former employee notified the employer of the error on the check until the employer sent the correct check to the former employee.

It also upheld the attorneys’ fee award; awarded additional attorneys’ fees to the former employee as the prevailing party on the appeal; and awarded the former employee costs on appeal.

Had the employer just sent a replacement check the same day it was notified of the error for the price of a postage stamp it could have totally avoid the waiting time penalties and attorneys’ fees awards. Instead, a clerical mistake will cost the employer approximately $100,000.00.

When an employee terminates his or her employment the employer must promptly pay the former employee all sums to which the employee is entitled and provide them to the employee within prescribed statutory periods. It is even more important to immediately provide all
sums to which the terminated employee is entitled at the time of the termination where the employer terminates the employee.

Always check with legal counsel before you terminate an employee and immediately upon receipt of an employee’s resignation. No employer wants to pay hundreds of thousands of dollars to a former employee when all they have to do is lick a postage stamp.

You Are Your Unlicensed Helper’s Employer

August 20, 2018 By Israel Samuels LLP Leave a Comment

Rules for employment of household help can be confusing and perplexing. It has not always been clear whether a worker is an employee or independent contractor when it comes to household help. The categorization has great significance should the worker be injured while on the job.

If the worker is an independent contractor, the employer is not liable for the independent contractor’s worker’s injuries merely because the worker was working on the job. If the worker is an employee of the employer, then the employer must have workers’ compensation insurance. If the employer does not have such insurance applicable to the injured employee, then the employer will be presumed negligent and be subject to an action by the worker for special and general damages and statutory penalties – recoveries that are likely excluded from coverage under homeowner’s and general liability insurance policies without an additional rider and premium.

So how does one know if he or she is hiring an employee or an independent contractor to provide household help? There was no hard and fast test to make that determination – until now.

On August 2, 2018, the California Court of Appeals for the Third Appellate District in Jones v. Sorenson decided an unlicensed worker who engages in work for which a license is required, is an employee, not an independent contractor, of the person or entity that hired him or her.

Sorenson had hired a gardener to work on her property. The gardener sent Jones to do the work. Jones was injured when she fell from a ladder while trimming 15-foot tall trees. Jones sued Sorenson claiming Sorenson was liable as a matter of law since tree-trimming required a contractor’s license; she did not have, and the gardener who hired her did not have a license to do the work; and, therefore, Sorenson was the employer of both the gardener, and Jones, and liable to Jones under the doctrine of respondeat superior.

The trial court granted summary judgment in favor of Sorenson. It concluded that the terms “gardener” and “nursery person” as used in Business and Professions Code section 7026.11 were synonymous, and therefore, Sorenson could avoid tort liability because a person acting as a nursery person may trim trees 15 feet tall or higher without a contractor’s license, although a gardener legally cannot do so.

Jones appealed and the Appellate Court reversed. It disagreed with the trial court’s reading of the relevant statute, which distinguishes between a “gardener” and a “nursery person”; the latter referring to a licensed operator of a nursery, whereas a gardener does not require a license.

There was no evidence that the gardener Sorenson hired was also a nursery person. This meant Sorenson had not refuted the claim that she was the gardener’s (and therefore, also Jones’) employer, and potentially liable under a respondeat superior theory for the gardener’s alleged negligence.

The takeaway from Jones is that homeowners can minimize their exposure by hiring qualified licensed contractors to do the work. If the contractors are not licensed, or do not have a license for the work they are asked to perform, the hiring party will be held to be their employer and liable for injuries their workers sustain in the scope and course of performance of the work for which they were hired.

Before you hire someone to perform work on your property it is important to consult with legal counsel to assure the person is properly licensed to perform the work. Also, you should contact your insurer to consider obtaining a coverage rider that protects against claims by domestic employees. Your financial security could depend on it.

Landlords, Cannabis Businesses and Bankruptcy

August 13, 2018 By Israel Samuels LLP Leave a Comment

Can a landlord debtor obtain bankruptcy protection when it receives rent from a marijuana distribution-related business? The question has been of great concern to bankruptcy lawyers since California began to permit the sale and use of cannabis since it is still a crime under Federal Law.

In In re Olson, the bankruptcy court, on its own motion, characterized as “illegal proceeds” under Federal law, the rent the debtor continued to collect from a marijuana dispensary tenant with whom the debtor was involved in ongoing litigation that precipitated the filing of the debtor’s bankruptcy petition. It, thus, dismissed the debtor’s bankruptcy case.

The debtor claimed the Court had abused its discretion by dismissing the case and appealed to the Bankruptcy Appellate Panel for the Ninth Circuit. The Panel sided with the debtor. However, it did so because the bankruptcy court failed to articulate its legal basis for dismissing the case “with clarity and precision” and never made factual findings to support its conclusion that the debtor had violated the Controlled Substances Act by accepting rent from the dispensary. The bankruptcy court never found that the debtor acted in bad faith; that the rents were to be used to fund a bankruptcy Chapter 13 plan; or that the trustee would be administering the proceeds of an illegal business.

Landlords need to engage in additional due diligence and act with greater prudence when leasing property to businesses that dispense cannabis. In re Olson does not mean a landlord will be entitled to bankruptcy protection even if it receives income from a marijuana distribution business. Rather, it demonstrates the possibility that landlords can lose their right to file for bankruptcy protection if they lease to marijuana distribution businesses. The same considerations are applicable to any debtor seeking bankruptcy protection who is directly or indirectly involved in the cannabis industry.

Many of the issues attendant to Federal Law marijuana prohibitions that contradict or affect the State’s legal cannabis businesses can be avoided or ameliorated by proper legal planning and organization. If you are directly or indirectly involved in the legal cannabis industry, or merely accept rent from a cannabis-related business, it is imperative that you seek legal counsel before you use the Courts to enforce or interpret your rights.

California’s Prior Salary Inquiry Prohibition May Be Unconstitutional

August 6, 2018 By Israel Samuels LLP Leave a Comment

Legal scholars now believe recently enacted California laws that prohibit employers from inquiring about an employment candidate’s prior salary history may be unconstitutional.

This April, the United States District Court for the Eastern District of Pennsylvania in Chamber of Commerce for Greater Philadelphia v. City of Philadelphia held that Philadelphia Ordinances that made it illegal for employers inquire of prospective employees about their wage history or to rely on wage history “at any stage in the employment process” to determine an employee’s salary, violated the First Amendment’s “free speech” clause.

Massachusetts and California have similar statutes to the Philadelphia Ordinance as do some municipalities, such as San Francisco and New York City. Based on the opinion in the Chamber of Commerce for Greater Philadelphia v. City of Philadelphia case, employers in these jurisdictions may now have a complete defense if they are sued for having asked prohibited past salary history questions or have used such information in setting salaries. However, if you are an employer, before you even ask the past salary history question, check with your legal counsel. You simply do not want to be the California employer that becomes the California test case.

Are You Rich? Considering Divorce? Do It Now!

July 23, 2018 By Israel Samuels LLP Leave a Comment

A change in the federal tax law will eliminate a tax break for alimony payments that are finalized after December 31, 2018. Thus, if you are wealthy, and considering divorce, you better act quickly.

Americans who finalize or modify divorce agreements in 2019 or later will no longer be able to deduct alimony payments from their taxes. Agreements signed before the end of the year still qualify for the annual deduction. This has large financial implications for couples where one partner earns substantially more per year than the other. Many financial planners and divorce attorneys are counseling clients to make their decision this year since waiting to divorce after the end of year could increase taxes on alimony equal to 15 to 20 years of support and will shift the tax burden for the last years of a person’s working life.

Until 2019 those paying alimony to a former spouse can deduct the payments from their taxes, and, in many cases, this provides the wealthy with a potentially generous tax break. Starting in 2019 that will no longer be the case.

Even though time may be of the essence to take advantage of the deductibility of alimony payments, there are many other issues that arise when a couple contemplates divorce, especially if either one of them or both are business owners or they have dependents. Consult not only with a qualified family lawyer, but also check in with your business legal counsel and your accountant.

If You Mock Me Your Employer May Be Liable

July 16, 2018 By Israel Samuels LLP Leave a Comment

California employers must timely respond to, and thoroughly investigate, workplace complaints of harassment, discrimination or retaliation based on protected categories to avoid legal exposure. On July 9, 2018, the California Court of Appeals in Caldera v. Department of Corrections and Rehabilitation, found an employer liable when an employee was mocking a person for having a stutter on more than five, but less than fifteen, occasions over a two-year period from 2006 to 2008. Plaintiff sued his employer after allegedly he was subject to jokes over a two-year period of time. The jury awarded plaintiff $500,000. The trial court, found the jury award excessive, granted a new trial as to damages and both parties appealed.

The Court of Appeal reversed the trial court’s decision to overturn the verdict and reinstated the $500,000 damage award. The Appellate Court opined, since two of the mocking incidents took place in front of several other employees and supervisors, and a psychologist testified that the mocking caused plaintiff to experience psychological disorders, a “totality of the circumstances” analysis indicated that the harassing conduct was severe. Although plaintiff and his witnesses could not remember exactly how many times plaintiff was mocked or when exactly he was subject to any mocking, the Appellate Court determined the employer’s culture supported the jury’s finding that the harassing conduct was pervasive.

Employers must be proactive when confronted with employee workplace behavior and concerns. California jurors and courts simply do not tolerate harassing conduct even when specifically linked to specific individuals who engage in occasional mocking of an employee’s disability. Immediate action must be taken and must include a thorough workplace investigation. Whenever such a concern first arises and comes to the employer’s attention the employer should immediately contact legal counsel as the investigation, as well as the conduct, can give rise to liability.

Proposed Legislation To Make It Easier For Small Employers To Offer 401(k) Plans

July 9, 2018 By Israel Samuels LLP Leave a Comment

Many small businesses do not offer access to a 401(k) plan since administration of such plans can be costly for small business owners. Right now there is a bipartisan effort in Congress to make 401(k) plans easier to use in the event of an emergency, simpler to convert to income in retirement and more accessible.

To achieve these goals Congress is looking at eliminating some of the restrictions for multiple-employer plans. Until now, multiple-employer plans were only allowed when companies were affiliated, such as through an industry organization or union. The proposal making its way through Congress would open these plans to small businesses who band together to offer employees a retirement account. By allowing multiple employers to create a plan there should be a decrease in the cost per employer. Such multiple-employer plans also permit employers to shift responsibility as a fiduciary to a third-party.

Congress hopes these changes will provide plan access to contract and temporary workers who usually lack access to 401(k) retirement plans. Multiple-employer plans would also allow greater portability for employees. Employees who move to another company within the multiple-employer plan group do not have to hassle rolling over their 401(k)’s.

If your business does not presently offer a 401(k) plan, there are other types of retirement plans employers can implement, such as SIMPLE and SEPs, although they have their own eligibility rules. Soon small business employers may have another tool for retirement planning.

If you are an employer and want to offer retirement plan options to your employees consult with your legal counsel to help decide which option is best for you and your business.