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Wrongful Termination

August 18, 2014 By Israel Samuels LLP Leave a Comment

California is an “at will” state, so you can terminate an employee at any time, for any reason or for no reason at all … right?

Wrong.

You can’t terminate someone for illegal reasons, for example, because of their race, gender, and about 15 other behaviors or characteristics which are not lawful grounds for termination.

But how does a court know your real reason for terminating an employee?

One of your managers can shoot his/her mouth off, as in the case we describe below, but there are plenty of other ways. For instance, suppose you ordinarily list the reason for termination and eligibility for rehire in the employee’s file. And then, with no other explanation to be found, you fail to include that information for one particular employee who is terminated, or enter clearly sham or unprovable info in the file. Departure from established practices at your firm might well constitute evidence of illegal discrimination.

As one employer discovered the hard way, firing a long-term employee with a history of positive performance reviews is an excellent way to get sued for age discrimination, wrongful termination and retaliation – especially if the decision to fire the employee is based on poorly documented performance issues.

Although a lower court ruled that the termination was nondiscriminatory, a court of appeal overturned the lower court’s decision because the employer could not quantify either the number of or the potential seriousness of the employee’s alleged mistakes or identify “anything like a quantitative standard to which plaintiff’s performance might be compared.” Cheal v. El Camino Hosp.

Carol Cheal worked in El Camino Hospital’s Nutrition Services Department as a Dietetic Technician (Diet Tech) from August 1987 until her discharge in October 2008 at age 61. She was responsible for preparing menus for patient meals, while adhering to hospital procedures intended to ensure that the correct foods reached the correct patients.

Up to and including her performance evaluation in August 2007, Cheal had always received the highest rating on her performance evaluations. In July 2007, the hospital hired Kim Bandelier to supervise all employees on the clinical side of nutritional services. This included Cheal, who was the oldest employee under Bandelier. By January 2008, Bandelier accused Cheal of numerous shortcomings impacting patient care.

On April 14, 2008, Bandelier gave Cheal a written warning for failure to conform to a hospital patient identification procedure. On June 3, Bandelier issued a second, “final” warning for failing to comply with the same procedure. On Monday, September 8, 2008, Bandelier accused Cheal of incorrectly preparing one or more patient menus.

On September 25, 2008, a hospital manager told Cheal that she was no longer considered competent to perform her duties as a Diet Tech, and that she could either take another position in the nutrition services department, accept a severance package or be discharged. About a week later, Cheal told the hospital that any further communication should go through her attorney.

The hospital terminated Cheal on October 10, 2008.

Cheal sued for age discrimination, wrongful termination and retaliation. The hospital asked the court to dismiss the case because Cheal failed to present any material facts to support her case. The hospital was able to prove Cheal made several mistakes between January and May 2008; thus, according to the lower court, termination was appropriate and nondiscriminatory. The trial court found that Cheal was unable to show competent performance and dismissed the case.

Cheal appealed, and a court of appeals took a closer look at the evidence presented.

Much of the hospital’s evidence suggested that the errors attributed to Cheal were unacceptably grave because they implicated patient safety. Yet, there was no effort on the part of the hospital to analyze the seriousness of the mistakes or how her performance errors compared to errors made by other employees. The appellate court found no attempt by the hospital to quantify either the number or potential seriousness of mistakes committed by other persons performing duties similar to Cheal’s, or to otherwise identify anything like a quantitative standard to which Cheal’s performance might be compared.

The only performance benchmark put forth by the hospital was a performance evaluation form, which suggests that errors of the type attributed to Cheal would be acceptable at a rate of “less than one per day.” The hospital presented no evidence that Cheal committed errors with anything approaching a daily or even weekly frequency. Using the hospital’s own performance benchmark, there was no support for the trial court’s finding that “several mistakes on menus” over a period of four or five months supports a
finding of unsatisfactory performance.

The hospital also presented evidence that Bandelier identified 19 distinct areas or incidents of unsatisfactory performance, 16 of which Bandelier labeled “coachings” of Cheal’s unsatisfactory performance. Cheal presented evidence that Bandelier’s assertions were not accurate: Bandelier’s notes were inconsistent with her statements; and the “coachings” were merely updates of information provided to all staff.

Cheal also provided evidence that Bandelier “hunted down” Cheal’s errors on her own initiative, while leaving the errors of younger workers to be discovered and reported, if at all, by others. Cheal did concede to one error she made while she worked for Bandelier.

To make matters worse, Cheal presented a declaration from Bandelier’s friend, who stated: “One evening when I was at Ms. Bandelier’s house for dinner, she said to me, ‘We shouldn’t have lunch anymore or talk socially at work … People are starting
to notice I’m favoring the younger and pregnant ones.’” (ellipsis in original, italics added).

The appellate court concluded that since Cheal had a long history of satisfactory performance, a jury could find that Bandelier’s list of supposed deficiencies had more to do with Bandelier’s attitude toward Cheal than with Cheal’s actual performance. Cheal presented ample evidence that her performance was satisfactory, including the hospital’s own policies indicating that, at worst, she committed far fewer errors than might be anticipated, and deemed acceptable, in another person performing her duties.

The court held that the hospital cannot simply articulate a legitimate reason for terminating Cheal as a defense against a discrimination lawsuit. The hospital must be able to show that Cheal’s allegations cannot support her claim of discrimination.

Training supervisors on properly completing employee evaluations and performance reviews.
Ensuring employee counseling sessions are properly documented and include a witness to verbal conversations so accurate records are maintained.
If a new supervisor suddenly finds significant errors with a high performing long-term employee, you may need to look into it. Is there a health issue affecting the employee’s performance? Is the supervisor exhibiting a bias against the employee?
Make sure your supervisors and managers understand your policies and train them to implement the policies consistently.

It’s a tricky area to deal with. Unless your firm is large enough to warrant hiring a full-time trained and qualified human resources manager, consulting counsel is recommended before terminating a long-term employee.

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.

Flash! Workers’ Comp Rates: Huge Increase in 2015

August 11, 2014 By Israel Samuels LLP Leave a Comment

More bad news for business on the “cost front”…

On August 13, just as we were wrapping up this issue of Business Briefs, the Workers’ Compensation Insurance Rating Bureau voted to put in place for 2015 an average increase in workers’ comp pure premium rates of 6.7%. This was over the opposition of labor and business representatives on the governing committee who thought a 1% increase would be enough.

The Bureau is a private organization financially supported mostly by insurance carriers, whose representatives also hold a majority of the voting positions on the Bureau’s Governing Committee and do not need the public members support to file new rates.

To make matters worse, this published rate increase filing is based on the increase over the advisory pure rates approved last year for 2014, but when compared with the average rates that carriers currently have on file, the average increase is actually 11.5%.

What can you do to ameliorate the expected 2015 increase in workers’ comp rates? Start NOW to pay consistent attention to your workplace-safety programs. Lowering your experience rating is one of the easiest and best programs you can undertake, and are
win-win for both employees and the companies that employ them.

Temporary Disabilities

August 8, 2014 By Israel Samuels LLP Leave a Comment

When is a “temporary illness” a “protected disability”? In the past, employers have generally understood that temporary disabilities, such as a broken arm, did not qualify as protected disabilities.

But this is not always the case under the state Fair Employment and Housing Act (FEHA), which generally has a broad definition of what constitutes a disability, or under the 2008 amendments to the Americans with Disabilities Act (ADA) (the amendments are known as the “ADAAA”).

Although you may assume that a short-term ailment does not need accommodation, if the temporary disability limits a major life activity, the temporary disability may need to be treated just like more permanent disabilities. An impairment does not need to last a particular length of time to be considered substantially limiting under the ADAAA.

A recent federal case highlights this issue. In a case of first impression, the court held that “a sufficiently severe temporary disability” may be protected under the amendments to the ADA. Summers v.Altarum Institute Corp.

Carl Summers worked as a senior analyst for a government contractor, Altarum. His job required travel to a client office. On his way to the client’s office one day, Summers fell and hit both knees against a train platform. He fractured his left leg and tore the meniscus tendon in his left knee and also fractured his right ankle and ruptured a tendon in his right leg. He had two surgeries, involving plates and pins. His doctors instructed him not to put any weight on his left leg for six weeks and
estimated he would not be able to walk normally for seven months.

Summers contacted an Altarum human resources representative about working from home as he recovered. He also contacted his supervisors and his client seeking advice about how to return to work. Summers suggested that he take short-term disability for a few weeks and then start working part time remotely, gradually increasing his hours until he worked full time remotely.

Altarum never followed up on Summers’ request to discuss how he could begin to return to work. Instead, a month and a half after the accident, Altarum terminated Summers “in order to place another analyst in his role” at the client.

Summers sued, alleging that the employer unlawfully fired him because of his disability and failed to reasonably accommodate him. The trial court dismissed Summers’ lawsuit and held that a temporary condition, even up to a year, was not covered under the ADA. But the trial court relied on cases that were decided before the amendments to the ADA.

On appeal, the court held that a sufficiently severe temporary disability may constitute a disability and that Summers could proceed with his lawsuit. Summers alleged that his accident left him unable to walk for seven months and that without surgery, pain medication and physical therapy, he “likely” would not have been able to walk for far longer. The court found that the text and purpose of the ADAAA “make clear that such impairment can constitute a disability.”

The court noted that the ADAAA was intended by Congress to liberalize the ADA “in favor of broad coverage,” and Congress specifically directs courts to interpret the amended statute as broadly as possible.

The Equal Employment Opportunity Commission’s regulations also explicitly state that the “effects of an impairment lasting or expected to last fewer than six months can be substantially limiting” for purposes of proving a covered disability. The regulations use the example of an individual with a back impairment that results in a 20-pound lifting restriction that lasts for several months as being a covered disability under the ADAAA.

In California, the test for what constitutes a disability is already, in many respects, broader than the federal test. Under FEHA, an individual need only be “limited” in performing a major life activity, not “substantially limited” as required under
federal law. FEHA specifically states that definitions of physical and mental disabilities are to be broadly construed.

A mental or psychological disorder or condition limits a major life activity if it makes the achievement of a major life activity “difficult.” “Major life activities” under California regulations can include physical, mental, social and employment related activities.

State disability regulations exclude “mild conditions” from the definition of disability if these conditions do not limit a major life activity. These excluded conditions have little or no residual effects, such as the common cold; seasonal or common influenza; minor cuts, sprains, muscle aches, soreness, bruises, or abrasions; non-migraine headaches, and minor and non-chronic gastrointestinal disorders.” The determination will be made on a “case-by-case basis,” and it is risky for an employer to automatically assume a condition will be excluded.

Whichever law provides more protection, state or federal, will apply. California’s disability regulations also define “disability” as any matter covered by ADA or the ADAAA that offers broader protection than California law.

Both state and federal law, with the recent amendments, are clear: the standard is pre-disposed toward expansive coverage. The intent of the law is more focused on what types of reasonable accommodation will allow the employee to continue to work, rather than on whether the condition is covered.

So what should employers do?

If you have any questions on whether an impairment requires accommodation, consult legal counsel. This is a complicated area and employers should not make these decisions alone. A misstep can result in significant liability.
Look at the seriousness of the impairment, not the duration.
Consider whether the impairment affects the ability of the employee to perform a major life activity. Does it make an activity “difficult” due to pain, time expended, required treatments, etc.?
Don’t consider “mitigating measures,” such as pain medication or physical therapy, that limit or reduce an impairment’s symptoms. Mitigating measures are not to be considered in determining whether someone has a disability.
Err on the side of considering the impairment a disability and engaging in the interactive process to find a reasonable accommodation.
Don’t forget other obligations. Even if the impairment does not ultimately qualify as a “disability,” it may qualify as a “serious health condition” entitling the employee to time off under the federal Family and Medical Leave Act or the
California Family Rights Act.

One more set of rules and regulations for the small-business owner to be aware of.

Employee Expense Reimbursement

August 4, 2014 By Israel Samuels LLP Leave a Comment

In a recent ruling in the case entitled Cochran v Schwan’s Home Service, an appellate court reversed a trial court ruling and held that: “…when employees must use their personal cell phones for work-related calls, Labor Code section 2802 requires the employer to reimburse them. Whether the employees have cell phone plans with unlimited minutes or limited minutes, the reimbursement owed is a reasonable percentage of their cell phone bills.”

The court also reversed the trial court’s order denying class certification to a class of 1,500 service managers working for the Defendant.

Let’s look at Labor Code §2802. The part relevant to this situation reads as follows: “An employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties, or of his or her obedience to the directions of the employer…”

Schwan’s Home Service’s primary defense was that many of its Service Managers had service plans which provided them with unlimited usage, so they incurred no extra cost to make calls on behalf of their employer. The court identified this as a “threshold question,” that is, as to whether reimbursement was required in such a circumstance.

The court quickly concluded that reimbursement is always required, otherwise the employer would receive a windfall.

This is an interesting case, now to be revisited by the trial court. It also may have sufficient impact that it eventually finds its way to the California Supreme Court.

A question that occurs to us: suppose a beach-front restaurant requires all waitstaff to wear sandals or shoes, rather than performing their services in bare feet. Does the employer have to pay for each employee’s partial use of their own shoes? There is clearly a cost, since each employee’s footwear will then wear out and need to be replaced sooner.

H-m-m-m, we lawyers sure now how to make something out of almost nothing, don’t we?

Liability for Contractor Legal Violations

July 28, 2014 By Israel Samuels LLP Leave a Comment

Another job-killing bill, if it is ever adopted, recently passed out of our legislature’s Senate Labor and Industrial Relations Committee, which will impose new liabilities on innocent businesses.

AB 1897 imposes liability on any contracting entity for the contractor’s wage-and-hour violations, lack of workers’ compensation coverage, and/or failure to remit employee contributions, despite the lack of any evidence that the contracting entity controlled the working conditions or wages of the contractor’s employees.

As a part of the Labor Code, any violation of AB 1897 will trigger a potential representative action under the Labor Code Private Attorney General Act (PAGA), Labor Code Section 2699, et seq., thereby expanding the threat of onerous litigation against any third party that utilizes contractors as a part of its usual course of business.

Final Paycheck for Terminated Employee

July 23, 2014 By Israel Samuels LLP Leave a Comment

Don’t Mail a Final Paycheck Unless the Employee Requests Payment That Way

Unless an employee specifically requests payment by mail, do not do so. Mailing the final paycheck without a request to do so could subject you to waiting time penalties. This applies even if the employee walks out in anger at being terminated, or specifically declines to accept it.

And if you have terminated an employee but can’t give him or her a check (because the termination was by phone), and mail a final check, and then the employee shows up to pick up the check after it has been mailed but before it is delivered, you would have to write a duplicate check and stop payment on the original, mailed check. In that case, the employee would be forced to wait for his/her wages beyond the legal deadline, which could subject you to waiting time penalties of one day of wages per day up to a maximum of 30 days.

However, if you have non-negotiated checks on your books that are made payable to employees whose employment has been terminated (i.e., because you are unable to locate the employee), and you have made all reasonable efforts to pay the wages, you may send the non-negotiated checks with an explanation of your efforts to contact the employee to the nearest office of the Labor Commissioner.

The basic rule you should follow is: offer the check for personal acceptance or pickup. Mail it only if the employee specifically requests that you do so. Be sure to document each attempt to contact the employee, including the number you called, whether you left a voice mail or spoke to someone, to whom you spoke, time and date, etc. If you send emails or letters, maintain copies of all communication to demonstrate the attempts you made to contact the former employee.

Maintain a copy of the check and the correspondence to the Labor Commissioner’s office in the employee’s payroll file for at least four years.

Paid Sick Leave

July 20, 2014 By Israel Samuels LLP Leave a Comment

Legislation requiring all employers, large and small, to provide all employees in California with paid sick leave passed the Senate Labor and Industrial Relations Committee in June. If you want to look up the actual text of the proposal, reference AB 1522 on the Legislature’s web site.

It’s a California Chamber of Commerce-opposed “job killer” bill that will increase the already-high costs of doing business in the state. The bill threatens employers with statutory penalties as well as litigation for alleged violations.

AB 1522 requires that all employers provide any employee who has worked in California for seven days with paid sick leave, at an accrual rate of one hour for every 30 hours worked. Any unused sick leave accrued in the preceding year could be carried over to the next year, which is a significant change in existing law.

While many employers voluntarily offer sick leave for full-time employees, expanding this to a mandate on all employees to temporary, seasonal, and part-time employees will create a huge burden on employers.

On July 1, many employers in California already will be facing a significant cost increase due to the $1 increase in minimum wage that will take effect. This $1 increase is in addition to the other cumulative costs employers are already facing, including increased taxes under Proposition 30, increased workers’ compensation rates, loss of federal unemployment insurance credit, increased energy costs, and increased costs associated with the implementation of the Affordable Care Act.

California employers cannot absorb all of these costs and be forced to provide paid sick leave as well, without cutting other costs, such as labor. Accordingly, AB 1522 will have an impact on jobs as well as future growth.

Two studies of similar paid sick leave laws enacted in other areas have shown that businesses hire fewer people, lay off employees and provide fewer raises in order to comply with these financially burdensome laws.

Suspension of an Exempt Employee

July 13, 2014 By Israel Samuels LLP Leave a Comment

Can an employer suspend an exempt employee without pay for disciplinary reasons?

Perhaps! Or: “It depends”, if you want us to use technical legal language.

If an employer suspends an exempt employee for less than a full workweek, the employee must be paid for the time, for the purpose of maintaining the employee’s exempt status.

Both the U.S. Department of Labor and the Labor Commissioner allow an exempt employee to be off a full workweek without pay.

Even if the suspension is for a full workweek, the Labor Commissioner raises the caveat that if such a suspension, without pay, reduces the employee’s monthly salary to an amount less than the statutory minimum, the exemption could be lost.

Employers also should be aware that if the exempt employee works part of the day, he or she must be paid for the whole day. Employers can fill in the missed part of the partial day, however, from available sick leave or vacation banks.

So, if circumstances arise where you feel you must suspend an exempt employee while an investigation of their conduct is undertaken, it may be prudent to make it “paid suspension”, to avoid such problems. It’s like buying insurance: pay a small amount now, in order to protect against the possibility of a substantially larger cost later.

Investing in Another Business

July 7, 2014 By Israel Samuels LLP Leave a Comment

Have you ever been invited to invest in a friend’s business? Perhaps it’s a “startup,” or even an established and successful business poised for more growth, if only some additional working capital can be made available.

Such investments can be very rewarding, but it’s important to be very careful about the terms and conditions associated with such an investment.

Are your interests better served by an equity investment (greater risk, but opportunity for greater return) or a loan (less risk and opportunity for security, but limitations on return)?
Are you in a position to require a personal guarantee from the business owner?
Do you want to have input into, or some control over, operating practices and decisions? Warning: if you’re not careful, this may expose you to personal liability in some circumstances.
What kind of reporting and feedback do you want on business operations?
If the business doesn’t perform as expected, what remedies should be available to salvage what you can?
Are you being presented with a “take it or leave it” deal, or is there reasonable opportunity for you to investigate and negotiate equitable terms?
What do you know about the person offering you such an opportunity? What can you learn about their background and experience, which will help you evaluate their credibility, integrity and capability, all of which bear on the risk you will be exposed to?
Can you afford to lose your entire investment?

Such investments should generally be made only if you have competent and experienced advisors with whom you can consult, and who can assist you in evaluations of the opportunity, the risks, and the detailed terms of the investment. At a minimum, your legal counsel and accountant should be involved, as well as an advisor familiar with the market in which the target business investment operates, especially if it involves a new or developing market.

Remember that old adage: an ounce of prevention is worth a pound of cure!

Compliance Alert: Act Now!

July 1, 2014 By Israel Samuels LLP Leave a Comment

If you are not displaying the required employment notice poster that includes the $9.00 state minimum wage effective July 1, 2014, act now.

Mandatory changes to required Workers’ Compensation and Paid Family Leave pamphlets also take effect on that date. By law, employers must post and hand out the most current employment notices, even if you only have one employee in California. Not informing employees of their rights in the workplace can result in costly lawsuits and fines, especially for small businesses where the costs of defense can be punitive.

Please contact Karen or Eric at our Walnut Creek office if you need assistance acquiring these mandatory posters.