California’s Commisioned Employee Exemption

California’s Commisioned Employee Exemption

In a 2014 ruling, the California Supreme Court said that employees must be paid premium wages for any overtime worked in pay periods not qualifying for the exemption. This decision significantly impacts employers with commissioned salespeople. After this ruling, employers must be sure their employees receive 1.5 times minimum wage in every bi-monthly paycheck. To better understand the implication of this ruling, let us first take a look at the case that forced the California Supreme Court to split from federal law on commissioned employee exemption compliance.

Peabody v. Time Warner Cable, Inc.

Susan Peabody worked for Time Warner Cable as a commissioned salesperson. She received approximately $9.61 per hour for her 40 hours per week. In addition to her wages, Peabody received her commission wages every other pay period. Time Warner did not pay Peabody overtime as a commissioned employee. If Time Warner did not exclude Peabody from overtime pay, she would have earned at least 1.5 time minimum wage and half of their compensation in commissions.

When Peabody filed a class action suit against Time Warner for not paying her 1.5 times minimum wage in all pay periods, Time Warner responded by saying Peabody’s “periodic commission payments brought her monthly earnings above that threshold.” While the US District Court and 9th Circuit Court of Appeals agreed with Time Warner and granted their summary judgment motion, they asked the CA Supreme Court to review the case.

Very unexpectedly, the CA Supreme Court reversed the federal court’s decision and ruled in favor of Peabody. The Supreme Court found that commissioned employee exemptions depend on each pay period, not monthly wages as Time Warner has calculated. They said each employee must be paid bi-monthly and each bi-monthly pay period must include compensation equal to no less than 1.5 times minimum wage. Federal law allows commissioned employees to be paid monthly and qualify for the exemption based upon monthly compensation, but the California Supreme Court deviated from this.

In light of this ruling, we recommend all employers take a careful look at their commission programs and consider whether their program is in need of modification. Employees must be paid on a bi-monthly basis and the commission pay must be adequately spread to ensure compliance with this decision.

Source referenced: JD Supra

Is it Time to Revise your Employee Handbook?

Is it Time to Revise your Employee Handbook?

We recently blogged about the importance of having an employee handbook. Not only is the handbook a way for employers to protect themselves against lawsuits, it is also a way for them to showcase themselves to potential employees. Richard F. Griffin, Jr., General Counsel of the National Labor Relations Board (NLRB), issued a report on common employee handbook provisions. In the previous blog post, we suggested writing a custom employee handbook, but taking suggesting from the NLRB is definitely recommended for all of our business client.

This report specifically restricted employers from issuing policies or rules that “inhibit employees from engaging in activities protected by the act, such as discussing wages, criticizing management, publicly communicating about working conditions and discussing unionization.” Many employers have confidentiality policies that may be well-intentioned, but can be seen by the NLRB as over-intrusive and illegal. Although the NLRB report was lengthy and detailed, there were some clear “DON’Ts” that emerged from the documents:

  • Do not prohibit employees from discussing “employee information.”
  • Do not prohibit disclosure of “another’s confidential information.”
  • Do not prohibit disclosure of “details about the employer.”
  • DO not prohibit disclosure of all categories of “non-public information.”

Some of the things listed above may not specifically prohibit employees from taking collective action or freely expressing themselves, but the NLRB is concerned about anything that may dissuade an employee from acting. However, the NLRB is also aware of the rights of employers and how most employers are concerned about doing their best to protect their businesses. Due to this, there are confidentiality provisions that the NLRB has deemed legal:

  • No unauthorized disclosure of “business ‘secrets’ or other confidential information.”
  • “Misuse or unauthorized disclosure of confidential information not otherwise available to persons or firms outside [the Employer] is cause for disciplinary action, including termination.”
  • “Do not disclose confidential financial data, or other non-public proprietary company information. Do not share confidential information regarding business partners, vendors or customers.”

One of the most important takeaways from the NLRB’s report is that employers have to be careful in what they imply with their words. There are some rules that are nested among others and may be seen as unnecessary or too prohibitive by an employee. However, the NLRB also understands an employer’s position. Therefore, an employers best bet is to steer clear of vague instructions in an employee handbook. We would recommend our business clients to stay up-to-date with the NLRB and update their employee handbooks accordingly.

Source referenced: Labor Sphere


Are you using social media during the hiring process? Here’s what to watch out for.

The Statistics:

When speaking with our clients we find that the majority turn to social media when going through the hiring process. 43% of employers say social recruiting has led to higher quality candidates, leading them to believe hiring through social media is the way to go in the future. While social media can act as a great supplement to hiring, it can also act as a slippery slope to civil lawsuits if it is the only method used during the hiring process. A 2012 Social Recruiting survey and 2015 Recruiter Nation survey, both from Jobvite, indicate that 96% of employers use or anticipate using social media as a screening of future employees. Approximately 47% of employers turn to Twitter, 55% use Facebook, and an overwhelming 87% turn to LinkedIn for quick background information on potential employees. In fact, 56% of recruiters find candidates from social media sites and 73% of employers have successfully hired a candidate through social networks. However, how much information is too much information?


Why using social media in the hiring process is tricky business:

There are certain “potential employee” aspects which the law would rather an employer not know before conducting interviews. Specifics include, race, gender, religion, disabilities and sexual orientation. When going through personal social media sites, such information is often easy to find and view. Using this information at any time during the hiring process would violate many anti-discrimination laws. These laws include:

  • Title VII of the Civil Rights Act of 1964 (Title VII). This prohibits employment discrimination based on race, color, religion, sex, or national origin;
  • The Age Discrimination in Employment Act of 1967 (ADEA). This protects individuals who are 40 years of age or older; and
  • Title I and Title V of the Americans with Disabilities Act of 1990 (ADA). This prohibits employment discrimination against qualified individuals with disabilities in the private sector, and in state and local governments.

Here enters the tricky part. Even if an employer does not base his or her decision of hiring a certain individual on the information gained from social media sites, how can the employer prove this? If the individual who was turned down for the job learns that his or her social media site was viewed, he might claim that it was for this reason that he was not hired for the open job position. This claim will inevitably lead to a discrimination lawsuit.

How can hiring employers avoid discrimination lawsuits?

For starters, it is always best to wait until after an interview has taken place to look up a potential employee on social media sites. Even this however does not fully protect employers. So what does?

  • Using an outside screening company which might gather information from social media sites, or using an existing employee to gather social media information is acceptable, so long as the employee is not involved in the hiring process.
  • Only gather information pertaining to education, or experience. Do not gather or utilize any information which is protected under anti-discrimination laws.
  • Include an acknowledgement statement on job applications which allows the employer to access the potential employee’s social media site, for business purposes only.
  • Incorporate a social media process within company policy, explaining the do’s and don’ts of using social media during screening processes and be sure to indicate such a process is used only when determining applicants job qualifications and experience. Also be sure that existing employees are well trained on this matter according to the policy.
  • Always keep copies and records of what information and which sites were used during hiring so that it can be proved that only valid information, which does not violate anti-discrimination laws, were used during the hiring process.

By following these steps, you can help protect yourself and your business from unwanted discrimination lawsuits. The information on Social Media sites has grown at tremendous rates over the last ten years, and can be very tempting during the hiring process, but learning how to filter and organize such information can mean a lot of time and money saved both for you and your business.

Data referenced:

  1. 2012 Social Recruiting Survey
  2. 2015 Recruiter Nation Survey




Maternity Leave Law in California: Explained!

As client’s ponder how to integrate their existing sick ,personal and vacation leave policies into conformance with California’s impending mandate for accrual of sick time for all employees starting July 1 of this year, questions about maternity leave seem to run in tandem.

Thanks for south land lawyers Smith & Lo for this excellent primer on California Maternity Leave.  A great explanation of the basic California law.

Maternity Leave Law in California: Explained!.

Deducting vacation time for missed work is OK in California!

Employers can deduct exempt employee annual leave (vacation) time for missed portions of work days.

In the sometimes confused landscape of employee compensation rules, California’s Fourth District Court of Appeal recently clarified that Employer’s who require exempt employees to use their annual leave hours when they are absent from work for portions of a day do not violate state law.

Conley v. Pacific Gas & Electric Co., 131 Cal. App. 4th 260 (2005), which held that California law does not prohibit an employer “from following the established federal policy permitting employers to deduct from exempt employees’ vacation leave, when available, on account of partial-day absences,” remains good law and is not limited to missed work time in excess of four hours or more in a single day.

The case is Rhea v. General Atomics – filed July 21, 2014, Fourth District, Div. One: D064517.PDF

Employers should consider whether their existing practices, and their existing Employee Policy Handbooks, comport with this and other nuances of California law.



Employment Arbitration Clauses Limiting Discovery are Allowed

I draft a lot of employment agreement for clients and always recommend some kind of ADR (Alternative Dispute Resolution) provision or separate agreement.  An Arbitration arrangement, for example, is many times preferable to public trial to resolve employment related disputes because it is faster, less expensive and more private than the public trial alternative. But drafting these ADR agreements or clauses can be tricky and we have many cases on the books that have stricken some or all of such provisions as invalid or illegal.

In a recent case from the Second District in California, the Court of Appeal has clarified the extent to which some of the details of these arrangments are deemed permissible,.

In Sanchez v. CarMax Auto Superstores California, LLC – the Court found that an arbitration agreement was not rendered substantively unconscionable by limitations on discovery, where the limitations were applicable to both parties, and employee failed to show that the limitations would prevent him from obtaining necessary evidence.  Additional provisions in the agreement requiring a written award, and that the proceedings remain confidential, and prohibiting consolidation of claims of different employees were all held not to be unconscionable – which means they were allowed.

Properly crafted ADR agreements in employment relationships can save both sides time and expenses if a dispute arises either during or after the employment.

Establish Clear Employee Hour Tracking Systems to Avoid Unpaid Overtime Claims.

Are your employees keeping “secret” time cards? Don’t be surprised!

I am amazed at the number of employee wage disputes I encounter for clients whose aggrieved employees claim unpaid overtime or claim compensation for legally required breaks they were entitled to take but either claim they were not permitted to take – or simply failed to take. And they show up with “secret” never disclosed before “records” sometimes going back several years. Surprised employers are dazed and confused!  Since when did their employees start submitting time cards for wages, but hide and hold back the not taken breaks and the unreported overtime pay?

When these claims are filed with the employee centric and unabashedly employee favorable California Labor Commissioner, employers can’t do much except get out their checkbooks.

Employer Protect Thyself.

I have long counseled clients to establish a clear and mandatory full time and breaks reporting system that demands employee disclosure of all these details in each pay period.  In addition to claiming hours, employees are required to certify that no other time has been worked and no other claims are existing but not disclosed.  The payroll reporting document becomes, essentially, a mini disclosure and release agreement, insuring that all the employee wage, hour and break claims are “on the table” at that time, or forever waived.

There is no judicial precedent to support this approach.  A recent decision from the Tenth Circuit Court of Appeals holds that employers can avoid liability under the Fair Labor Standards Act for unreported overtime pay, even if that time is undeniably worked by an employee, when the employee fails to use the employer’s time reporting system to record his or her exact working time.

In Brown v. ScriptPro LLC, employee Brown claimed he worked from home while he was out of the office.  He claimed that he was owed overtime pay for the 80 hours he had worked from home.  The employer did not deny that he had, in fact, worked overtime.  But the employee’s claim failed because he did not prove the amount of overtime he worked “by justifiable or reasonable inference.”  He did not enter his hours worked in ScriptPro’s timekeeping system, which was accessible to him from home.  He did not keep any other record of the hours he claimed he worked.  His employers company policy required him to record his working time accurately, and he had failed to do so.  The Court  held that “Under these circumstances, where the employee fails to notify the employer through the established overtime record-keeping system, the failure to pay overtime is not a FLSA violation.”

Mr. Brown chose not to enter any of the hours he allegedly worked from home in ScriptPro’s timekeeping system.  He did not keep any other record of any sort to document the hours worked. Id. Mr. Brown argues that ScriptPro is responsible for keeping accurate records and the employee cannot bear the burden of proving the precise amount of overtime worked.  But courts only relax the plaintiff’s burden to show the amount of overtime worked where the employer fails to keep accurate records.  It is undisputed that ScriptPro keeps accurate records, and employees can even access the timekeeping system from home. Mr. Brown easily could have entered his hours; in fact, he was required to do so. There was no failure by ScriptPro to keep accurate records, but there was a failure by Mr. Brown to comply with ScriptPro’s timekeeping system. Under these circumstances, where the employee fails to notify the employer through the established overtime record-keeping system, the failure to pay overtime is not a FLSA violation. (Citations omitted)

Employers are well advised to implement clear, reasonable and mandatory full hours tracking and recording obligations and an in house system to track all employee hours. 

Court Ruling Offers Mixed View of Boss’s Access to Facebook

“I’m the Boss.  What can I see?”

As I represent employers of many different industries and of all business sizes, I am frequently asked to keep clients up to date and informed on new policies and court rulings that might affect their rights to access employee social media.  Technology and Social Media Sites have become increasingly influential not only in our private lives but our work environments as well.  So what can the Boss access?

The answer is slowing evolving and though anything less than clear, privacy is a key theme in a recent case from a U.S. District Court, that makes a distinction between private and public usage of social media sites such as Facebook.

After paramedic, Deborah Ehling was suspended from her job at Monmouth Ocean Hospital Service Corp. (MONOC), for a Facebook post the corporation disapproved of, Deborah took the company to court. Deborah was being penalized for having criticized Washington D.C. paramedics about the manner in which they handled the fatal shooting at U.S. Holocaust Memorial Museum. Part of Ehling’s post read:

“I want to say 2 things to the DC medics. 1. WHAT WERE YOU THINKING? and 2. This was your opportunity to really make a difference! WTF!!!! And to the other guards….go to target practice.”

MONOC viewed this post as “a deliberate disregard for patient safety.”

Deborah’s Facebook posts were “private’ in that they were only posted to be available to her Facebook “friends”, not the public at large.  But the post was leaked to management by Tim Ronco. Ronco was Deborah’s  colleague and Facebook friend. He would snap screen shots of Deborah’s postings and without solicitation, he would send them over to management. After management received the snap shots they were sent to Stacy Quagliana, executive director of administration at MONOC.

Private Posts are Private – Sort of.

The court did rule that Deborah’s postings were private under the Stored Communications Act, and thus they were protected. However, authorized viewers of Deborah’s posts, including her Facebook friends, could share the postings with whomever they wished. Furthermore, Ronco was not obligated by any person or persons of authority to share such information. He did so freely and of his own will. Thus, the court ultimately ruled in favor of Monmouth Ocean Hospital Service Corp. Digital privacy lawyer, David Straite, eloquently stated, “The court said there’s no liability because she authorized the spy to see the posts.”

Because no information was coerced from Ronco, MONOC was not liable for invading Deborah’s privacy.

Liability in this case was “one step short of coercion.” Had MONOC consciously sought to invade Deborah’s privacy they would have been liable for lawyer fees and punitive damages.

The takeaways from this case are many, but include:

  • Employees – Don’t think your “private” Facebook “Friend’s Only” posts are private.  They are not.  Any friend authorized to read your post is free to republish your post.  The recipient is then free to act on that post.
  • Employers – You may read and act upon, but do not demand or take by coercion, your employees’ private Facebook posts.

Employee Policy Manual provisions – or employment agreement clauses – clearly delineating Social Media rights and duties may be helpful in providing clarification to both workers and bosses over what can and cannot be accessed and used in the world of Social Media.

Independent Contractor VS Employee: How much control is too much control?

A common and repeated inquiry from our clients involves whether, when and how to classify workers as independent contractors vs employees. The question is especially interesting to companies in many industries that utilize a network of sales professionals. Many of these businesses are highly regulated adding pressure on the company to ensure that their sales staffs transact business sales lawfully. A critical inquiry in these situations involves analyzing the degree of control the company exercises over its independent contractor personnel. Another important factor arises when the company sets minimum sales goals or quotas. The critical classification question is always “how much control is too much control to maintain independent contractor status?”

A recent case that addressed these questions in the insurance industry may provide guidance for other businesses that wish to use independent contractor sales force. In Beaumont-Jacques v. Farmers Group, Inc., 2013 Cal. App. LEXIS 546 (Cal. App. 2d Dist. June 12, 2013), a District Manager claimed she was misclassified as an independent contractor because Farmers controlled the “manner and means” by which she achieved required sales results. The court disagreed, finding that this manager was properly classified as an independent contractor. In its decision, the court referred to a California Supreme Court case, McDonald v. Shell Oil Co. (1955) 44 Cal.2d 785, which held that “the owner may retain a broad general power of supervision and control as to the results of the work so as to insure satisfactory performance of the independent contractor . . .” Specifically, a company can retain the right to inspect, the right to make suggestions or recommendations as to details of the work, and the right to prescribe alterations or deviations in the work and still maintain an independent contractor classification.

Some reasons the Court relied on in finding the manager as an independent contractor, include: she exercised discretion by training and motivating other agents; she set her own daily working hours and vacation days; she usually set the time for her arrival and departure at her office; she set lunch and break times; she hired and supervised her office staff; she paid her own expenses, (e.g. marketing, office rent, office supplies and telephone service) and she deducted those expenses on her personal tax returns by filing a Schedule C; she listed herself as self-employed on her tax returns; she had signed an agreement with Farmers that established an independent contractor relationship and expressed that she was not an employee. The court rejected the manager’s argument that the “at-will” nature of her employment supported for her claim of employee status because she voluntarily resigned (therefore Farmers had not asserted or relied on the at-will clause); and, the right to terminate the agreement was given to both the manager and the company. Of interest, the court noted that even though Farmers had input about the quality and direction of the manager’s efforts, Farmers did not have control over the details of how the manager performed those efforts. While classification cases are always dependent on the specific facts of each case, the court found a sufficient level of freedom and autonomy in the manager’s conduct of the daily details of her activity such that she was properly classified by the company as an independent contractor, not an employee.

Proper classification of independent contractors is important for any business because misclassification can result in claims for unpaid overtime, wrongful termination, unemployment benefits, and subject a hiring company to other state and federal employment law claims. Misclassified plaintiffs will frequently claim various benefits and protections made available to employees under the California Labor Code and Federal labor statutes. The potential penalties for misclassification can be costly and severe. Hiring companies must take special care to avoid the assertion of too great a level of control over the day-to-day tasks and performance of their independent contractors.

Public Disclosure of Private Facts:

Public Disclosure of Private Facts: California Court of Appeal Holds that Spoken Words Can Support a Privacy Based Tort Claim.

An employee’s right to protect his or her personal information has become strengthened by a recent California Appeal Court case. In Ingat v. Yum! Brands, Inc., the California Court of Appeal (March 18th, 2013, Case No. G046343) has held that the privacy-based tort of public disclosure of private facts does not have to be predicated on the disclosure being in written form; an oral disclosure is sufficient to support the claim.

In the case, an employee alleged damage based on her employer’s verbal disclosure of a bi-polar disorder. The case was dismissed because the disclosure was not in writing. The dismissal was overturned.

The Court noted that the requirement that disclosures must be written to support the claim of Public Disclosure of Private Facts stems back to the 1931 case of Melvin v. Reid, and then observed that “the concentration on written publications in cases cited in Melvin appears to be simply an accident of the kinds of privacy violations prevalent at the time,” and not based on any fundamental policy that required the disclosure must be in writing. With the advent of subsequent new technologies such as television, radio, visual broadcasts via the internet, etc., disclosures can easily take not written form and the California Court of Appeal felt that any notion that the disclosure had to be written to support a claim no longer applies.

The Court stated: “[w]e conclude that limiting liability for public disclosure of private facts to those recorded in writing is contrary to the tort’s purpose, which has been since its inception to allow a person to control the kind of information about himself available to the public-in essence, to define his public persona.”

Clients who are employers now need to be specially aware that in the course of their ongoing diligence insuring the privacy of employee information, a risk of verbal disclosure must not be considered and managed.