Category: Labor and Employment

Zombie Employees

Post author By Mazzola Law Office P.C.
Post date July 29, 2013

Many California businesses use independent contractors. They do so for a handful of reasons, but one of the most common reasons is to save money. An independent contractor does not involve the same costs that an employee does, such as overtime, payroll taxes, vacation and sick time, and other benefits.

The perceived cost savings can come at a steep price for the employer in the form of an employee lawsuit for misclassification or a payroll audit by a governmental agency. The end result can be that an independent contractor is reclassified as an employee. This will cost the business owner significant amounts of money for unpaid overtime, payroll taxes, and other penalties, reaching backward in time three to four years.

Reclassification turns the independent contractor into an employee, retroactively, just like a zombie. And we all know how hard it is to kill zombies, especially ones that are due a lot of money.

Many of the large governmental agencies have cooperating agreements to share information with each other on employee misclassification. These agencies have been targeting employee misclassification since 2008 because their audits pay for themselves by bringing revenue into the agencies.

The IRS began a program that aims to audit 6,000 employers per year on the employment misclassification issue. Its projected haul is $7 billion over the next ten years.

On the federal level, the DOL and the IRS signed an agreement in 2011 to share information on misclassification issues they identify in their audits. Thus, an IRS audit is much more likely to follow an audit by the Department of Labor (DOL). California’s Secretary of Labor and the DOL signed a similar cooperative agreement in 2012.

California’s administrative agencies routinely share information with each other. A claim for unemployment benefits by a former independent contractor, which is not uncommon, will trigger an Employment Development Department (EDD) audit of the employer. Those results are now shared with the Division of Labor Standards Enforcement (DLSE).

Each agency has its own test for evaluating whether an employee or group of employees are independent contractors or employees. Their tests involve an evaluation of many factors to determine if the relationship is correctly classified as an independent contractor. A prior blog on some of those factors may be found through this link.

It is no surprise that the bias of the agencies is to find an employment relationship, not an independent contractor one. California has a presumption in its Labor Code in favor of finding the relationship to be one of employer – employee. It is then up to the employer to prove otherwise, if it can.

California recently enacted the Wage Theft Prevention Act (SB 459). It has enhanced penalties for misclassification, including per violation penalties of up to $15,000 per violation (a “violation” can occur each pay period). Further, an employer that has engaged in a pattern and practice of employee misclassification is also subject to a penalty of up to $20,000 per violation.

Under some circumstances, managers may now be held personally financially liable for their misclassification of independent contractors. This factor alone makes it all the more important for managers to really look at their independent contractors and seek legal advice on whether they are properly classified or not. The DOL estimates that one in three independent contractors are misclassified.

Simon Mazzola provides counseling and litigation service to business owners and managers in all aspects of California labor and employment matters.

This information is provided for informational purposes only and should not be construed as legal advice. It should not be acted upon without consulting a licensed California attorney about the facts, particular needs and questions of the person or entity considering these issues. Contact the Mazzola Law Office – P.C. for assistance.

Labor and Employment

Employment Law Changes for 2013 – Part 2

Post author By Mazzola Law Office P.C.
Post date January 7, 2013

There are a number of important changes in the law for 2013 affecting California employers. Part 1 discusses new laws for issues ranging from religious dress to commission payments. Part 2 covers issues ranging from whistleblower protection to information that must be provided to all new hires. The items discussed here are not a full list of all changes to the law this year, nor are the points referred to comprehensive of each law, given the nature of this summary. Unless otherwise noted, these laws take effect on January 1, 2013.

New Hire Information – AB 469 affects Labor Code § 2810.5 and requires employers to provide new hires with written information before work commences. Among other things, the employee must receive information specifying their rate of pay and how it is computed, the regular paydays, the legal name (and d.b.a. name) of the employer, the physical address of the employer’s main office or principal place of business, the employer’s telephone number and the contact information for their worker’s compensation carrier. When changes occur to this information, the employer must notify its employees in writing within seven calendar days. There are a few, limited exceptions to the requirement of providing this information.

Personnel Records – AB 2674 amends Labor Code § 1198.5 and expands an employee’s rights to inspect and copy his or her personnel file. At the employee’s request, the employer must provide the employee’s personnel file or make it available within 30 days, unless there is pending litigation related to those records. There are certain exceptions of records that do not need to be provided to the employee. Employers are required to maintain personnel records for at least three years after termination of employment. Employers need only respond to one request from a former employee per year.

Private Wage Agreements – AB 2103 pertains to Labor Code § 515 and abolishes the infrequent practice of an explicit mutual wage agreement where an employer and employee agree that the payment of a fixed salary to a non-exempt employee includes all regular and any overtime hours. As a result, now all non-exempt employees must be paid for all overtime hours worked, even if they previously agreed to accept a fixed salary.

Whistleblower Protection – AB 2492 expands and modifies Government Code §§ 12650 – 12654.5 relating to California’s False Claims Act. These changes increase the protections available to employees and contractors (among others) that act as whistleblowers. Penalties and recoveries include punitive damages, interest, double back pay, and reinstatement with the same seniority status. These provisions protect whistleblowers from retaliation and provide enhanced protection relating to when the employee engages in protected conduct.

Labor and Employment

Employment Law Changes for 2013 – Part 1

Post author By Mazzola Law Office P.C.
Post date January 4, 2013

Social Media – At the top of the list is a law affecting social media policies and practices. AB 1844 added Labor Code § 980 that prohibits employers from asking employees or job applicants for their social media passwords. There is an exception that allows employers to request passwords in conjunction with certain types of workplace investigations. The Labor Code does not prohibit employers from requiring employees to provide a password for access to an employer issued electronic device.

Employers should be aware there is increased scrutiny on how employers draft and enforce social media policies. Employers should be careful not to draft overly broad policies that might restrict concerted activity or punish legitimate off-the-clock activity by employees. Many employers are unaware that the Labor Code prohibits employers from taking action against employees for lawful conduct occurring during nonworking hours away from the employer’s premises. This is an important consideration in drafting and enforcing social media policies.

Businesses should develop reasonable policies that ensure the content created by their employees for the business are clearly the property of the business. Contact this office for assistance in developing appropriate social media policies.

Commissions – AB 2675 and AB 1396 affect Labor Code § 2751 regarding commissions paid to employees in California. It requires that employers have a written commission plan setting forth the method by which commissions are computed and paid. Employees must receive the plan and sign an acknowledgement of its receipt. This change repeals Labor Code § 2752.

Paycheck Stubs – AB 1744 and SB 1255 both affect Labor Code § 226, known as the paycheck stub statute. Labor Code § 226 requires that employers provide nine categories of information on their employees’ paychecks. SB 1255 provides that failure to include the required information can result in an aggregate $4,000 penalty per employee, plus attorney’s fees and costs. The law now presumes an employee suffers an injury when the information on the paycheck stub does not allow the employee to promptly and easily determine: the amount of gross or net wages that are due, the deductions, the employer’s name and address, the employee’s name and last four digits of the employee’s social security number.

AB 1744 adds a requirement to Labor Code § 2810.5 that temporary staffing agencies provide information on the paycheck stub identifying the legal entity for which the employee is working. The changes required by AB 1744 take effect July 1, 2013.

Religious Dress and Grooming – AB 1964 adds new items to the list of protected categories under Government Code § 12940. The meaning of “religion” has been expanded to include “religious dress” and “religious grooming practices” to the categories for which discrimination is prohibited and a reasonable accommodation is required. These amendments address religious clothing, including head and face coverings, religious artifacts and jewelry, and grooming practices such as the care or maintenance of hair in observance with one’s religious creed.

Breastfeeding – AB 2386 expands Government Code § 12926 protections under the Fair Employment and Housing Act for discrimination based on sex. Specifically, this incorporates “breastfeeding” and “medical conditions related to breastfeeding” to the definition of “sex” under the law. California employers were already required to provide certain reasonable accommodations to pregnant and breastfeeding mothers under the Labor Code. This bill clarifies existing law.

Labor and Employment

Kin Care – How an Employee May Use Sick Leave for Family Member Care

Post author By Mazzola Law Office P.C.
Post date March 11, 2011

Many employees and employers are surprised to learn there is a California statute allowing employees to use up to one-half of their annual sick leave for the care of an immediate family member. The statute, Labor Code § 233, is informally referred to as Kin Care because it applies to the care of an employee’s immediate family. Under Labor Code § 233, an employer must allow the employee to use sick leave to attend to his or her child, parent, spouse, or domestic partner. The amount of sick leave that can be used for this purpose is equal to the sick leave the employee earns in the six preceding months.

An employer violates this statute when it denies the employee the right to use his or her leave this way, terminates the employee, or discriminates against an employee that wants to or uses sick leave in this manner. When a violation is proven, the employee is entitled to reinstatement and actual damages, among other remedies.

The California Supreme Court took up the issue of Kin Care in McCarther v. Pacific Telesis Group in 2010. However, the major holding of that case is unlikely to affect most California employers. The employer in that matter had a sick leave policy that allowed for an indefinite number of paid sick days, in contrast to a traditional sick leave policy of a defined number of days per year. Because of that distinction, the employer did not violate the Kin Care provision of Labor Code § 233.

Labor and Employment

Victory for an Employer in an Award of FEHA Attorney’s Fees

Post author By Mazzola Law Office P.C.
Post date February 7, 2011

One of the major concerns in defending an employment lawsuit is the financial cost of doing so. Aside from the very real ‘business’ cost of having to focus management’s attention on the case, an employer must pay its own attorney to defend the company. The employer will also be liable for the employee’s statutory attorney’s fees if the employee obtains a judgment. The attorney’s fee statute is one-sided, favoring the employee. This often forces an employer to consider if it should settle a case with minimal damages to avoid its exposure to a larger award of attorney’s fees.

In a rare piece of good news for California employers, the California Supreme Court upheld a trial court’s decision that denied attorney’s fees under the Fair Employment and Housing Act (FEHA) to an employee, even though the employee prevailed in the lawsuit. The case of Chavez v. City of Los Angeles broke tradition with the practice under the FEHA that a prevailing employee automatically receives an attorney’s fees award.

The employee in Chavez v. City of Los Angeles was a police officer who claimed retaliation, among other things. The employee prevailed on that claim, but was awarded only $11,500 in damages. The employee’s attorney submitted an attorney’s fees requests of $870,000. The trial court denied that fee request in its entirely because the employee did not meet the $25,000 jurisdictional limit of the Unlimited Division of the Superior Court. The Court of Appeal reversed that decision, only to be reversed by the California Supreme Court.

When the Supreme Court reviewed the case, it agreed with the trial court. It held there was a sufficient basis to deny the employee any recovery of his attorney’s fees for not recovering at least the $25,000 jurisdictional limit. This result gives support to employers that face lawsuits of a frivolous or trivial nature. They now know the traditional rule of awarding the employee his or her attorney’s fees even for an insubstantial victory may not be the case in every circumstance.