employment issues for startups
TRANSCRIPT
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Employment Issues for Startups: Managing Risks and Avoiding Pitfalls
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Wage and Hour
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Federal Exemption Changes Effective December 1, 2016• Under the FLSA’s executive, administrative and
professional exemptions, the new minimum salary required is $47,476 (up from $23,660).
• The total-annual-compensation threshold for the “highly compensated employee” exemption will increase from $100,000 to $134,004.
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Federal Exemption Changes Effective December 1, 2016• These amounts will now be “updated” every three years (meaning
that it will likely increase with each “update”), beginning on January 1, 2020. USDOL will announce these changes 150 days in advance.
• Employers will be able to satisfy up to 10% of this new thresholds through nondiscretionary bonuses and other incentive payments, including commissions, provided that the payments are made at least quarterly. This crediting will not be permitted as to the salaries paid to employees falling under the “highly compensated” exemption.
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What to do?
• Audit compensation status (and duties status) of all exempt employees.
• Re-classify employees who fall below DOL compensation threshold from exempt to non-exempt.
• Alternatively, increase compensation of exempt employees to meet DOL threshold.
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California Minimum Wage Increase
• California’s Minimum Wage increased to $10 per hour beginning January 1, 2016.
• What else does this affect?• Minimum salary for those white collar exemptions is now
$41,600 (until December 1, 2016; then federal minimum will apply).
• Tool rate is now $20 per hour.• Inside salespersons must earn at least $15.01 per hour to be
eligible for overtime exemption.
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Other Bay Area Minimum Wage Laws
Berkeley, CA Effective October 1, 2016 = $12.53
Emeryville, CA Effective July 1, 2016 = $13.00 to $14.82
Mountain View, CA Increase likely in 2017
Palo Alto, CA Increase likely in 2017Richmond, CA Increase likely in 2017Santa Clara, CA Increase likely in 2017
Sunnyvale, CA July 1, 2016 = $11.00
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The Private Attorney General Act
• Employees (well…their lawyers) bring claims on behalf of the State of California for penalties for non-compliance.
• The Attorneys recover their attorney’s fees, so they have a motivation to keep going, even if the clients aren’t that interested.
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Equal Pay Act
• Underlying premise of the law remains the same: pay should not be lower for one gender versus the other
• However, the comparison is no longer limited to the same “establishment” and new test is “substantially similar work”
• Comparison may be to employees at other facilities of the company, even in other states (but pay differentials based upon different costs of living are permissible)
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SB 358: Equal Pay Act
• Wage differentials may be justified where based on:• A seniority system• A merit system• A system that measures earnings based on quality or quantity of
production• A bona fide factor other than sex, such as education, training or
experience
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EEOC Guidelines and Mission
• October 17, 2016:
Specifically will be targeting gig economySpecifically will be targeting alternative or algorithmic
based hiring processes. Specifically will be targeting temporary workers, or
independent contractors from a discrimination angle.
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SB 358: “Freedom of Speech” REGARDING Wages• May not prohibit employees from:
• Disclosing their own wages,• Discussing the wages of others, or• Inquiring about wages of another employee.
• No obligation on part of employer or other employees to disclose wages.
• May not retaliate against employees for disclosing or discussing wages.
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Class Actions: Got an Arbitration Provision?
• Ninth Circuit says it doesn’t matter in Morris v. Ernst & Young; violation of National Labor Relations Act.
• The Second Circuit reached the opposite result interpreting the same agreement.
• California Supreme Court says yes in Iskanian.• Morris involved an employee who was required to sign class
waiver; a different result might apply if it were voluntary.
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So What is Next for Mandatory Class Waivers?
• The U.S. Supreme Court will likely have to decide the issue, but that may take two or more years.
• It is unclear whether California courts will enforce class waivers in the meantime.
• Employers with class waivers run the risk of an unfair labor practice charge before the NLRB.
• For employers who want to continue using class waivers, it may be worth having an “opt-out” provision for the class action waivers or generally non-mandatory arbitration agreements.
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Local Laws, Leaves, and Doing Business In California
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Where are the Paid Sick Leave Laws in CA?
• California• San Francisco• City of Los Angeles• City of San Diego• Oakland• Emeryville• Santa Monica (effective 1/1/17)
• Note: Long Beach and the City of Los Angeles also have laws applicable to hotel workers only.
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Who Is Covered? (California)
• Most employees who work 30 or more days within a year in California
• Includes part-time and temporary employees
• Limited exclusions for:• Probably not for you.
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Who Is Covered?
• San Francisco• Works within the geographic boundaries of the City of San Francisco,
including part-time and temporary employees• Oakland
• Performs at least two hours of work in a workweek in the City of Oakland
• Emeryville• Performs at least two hours of work during calendar week within
geographic boundaries of the City of Emeryville, including part-time and temporary employees
• Qualifies as an employee entitled to payment of a minimum wage from any employer under the California minimum wage law
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How Much Paid Sick Leave?Jurisdiction Annual Sick Leave Requirement/Total Accrual Cap
California 24 hours / 3 days for use48 hours / 6 days for total accrual cap
San Francisco 40 hours (small businesses)72 hours (all others)
Los Angeles 48 hours for use72 hours for total accrual cap
San Diego 40 hours for use80 hours for total accrual cap
Oakland 40 hours (small businesses)72 hours (all others)
Emeryville 48 hours (small businesses)72 hours (all others)
Santa Monica 2017: 32 hours (small businesses) 40 hours (others)
2018: 40 hours (small businesses) 72 hours (others)
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Front Load Available?Jurisdiction Annual Sick Leave Requirement/Cap Front-Load Available?
California 24 hours / 3 days for use48 hours / 6 days for total accrual cap
Yes, 24 hours
San Francisco 40 hours (small businesses)72 hours (all others)
Yes, starting Jan. 1, 2017
Los Angeles 48 hours for use72 hours for total accrual cap
Yes, 48 hours
San Diego 40 hours for use80 hours for total accrual cap
Yes, 40 hours
Oakland 40 hours (small businesses)72 hours (all others)
No
Emeryville 48 hours (small businesses)72 hours (all others)
Yes
Santa Monica 2017: 32 hours (small businesses) 40 hours (others)
2018: 40 hours (small businesses) 72 hours (others)
Yes
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When Can Employees Begin Using Paid Sick Leave?On the 90th Day of Employment• California• Los Angeles• San Diego• Santa Monica• Oakland• Emeryville
As Time Accrues• San Francisco
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Permissible Uses - California
• Diagnosis, care, or treatment of an existing health condition of, or preventive care for, an employee or an employee's family member.
• A child (regardless of age or dependency status), parent (incl. step-parents and parents-in-law), spouse, registered domestic partner, grandparent, grandchild, or sibling
• For an employee who is a victim of domestic violence, sexual assault or stalking to seek aid, medical attention, obtain services or counseling, or participate in safety planning
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Permissible Uses
• San Francisco• Effective 1/1/2017, purposes related to employee who is a victim of
domestic violence, sexual assault, or stalking• Effective 1/1/2017, purposes related to donating the employee’s bone
marrow or an organ of the employee to another person, or to care for family member donating bone marrow or organ to another person
• Oakland• Medical need of employee or employee’s family member
• Emeryville• Definition of “family member” to include a designated individual (if
employee has no spouse or registered domestic partner). In addition, may provide care for guide dog, signal dog, or service dog of the Employee, Employee’s family member, or the person designated by employee.
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And More…and more…and more…
• Accrual with varying time on and off the job• Verification of being sick or not• Strong anti-Retaliation Provisions
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The DLSE
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The DLSE
Agency with whom the Employee files a wage claim. Doesn’t need a lawyer, is fast, and
against Employers.
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The EEOC
Agency with whom the Employee files a discrimination claim, and they may or may not investigate it. Can lead to federal subpoenas,
and should be treated more like a police investigation. Lawyer up!
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My Employee Just Switched Genders! Now What?
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Laws Protecting Transgender EmployeesCalifornia Law Prohibits:
• Discrimination against transgender applicants or employees.
• Harassment of transgender employees.
• Application of dress codes to prohibit an employee from dressing or grooming consistent with his or her gender identity.
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Laws Protecting Transgender Employees
California Law Prohibits:
• Requiring an employee or applicant to disclose whether he or she is transgender.
• Rejecting an applicant for indicating a gender on the job application different from the applicant’s assigned sex at birth.
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Laws Protecting Transgender Employees
California Law Prohibits:
• Using a gender, name or pronoun to refer to or identify an employee other than the employee’s preferred gender, name or pronoun.
• You may, however, require proof of a court order changing name or other evidence of legal name change before changing employee’s name in payroll and benefits records.
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Which Restroom?
• You must allow employees to use restrooms, locker rooms and changing rooms that correspond to their gender identity or gender expression.
• You may not require transitioning employees to undergo or show proof of medical treatment in order to use facilities designed for use by a specific gender.
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Which Restroom?
• You may make a unisex restroom available for transgender employees to use but you may not require such use.
• Objections by other employees to a transgender employee’s use of gender-conforming restroom is not a basis for prohibiting such use.
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Which Restroom?
• Inappropriate conduct in a restroom by a transgender employee may be disciplined the same as if it were committed by a non-transgender employee.
• Anti-harassment policy applies to all
employees using restrooms, locker rooms and changing rooms.
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Religious Beliefs:
• You may not segregate or exclude a transgender employee because of a religious objection by co-workers or customers.
• This is consistent with the rules that employees may not impose their religious beliefs on others, and that “customer preference” will not justify discrimination.
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Transgender Employees – Best PracticesPolicies and Training:
• Ensure that policies against harassment and discrimination include gender identity and gender expression.
• Include gender identity and expression and gender transition issues in AB 1825 training.
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Transgender Employees – Best PracticesDealing with Gender-Transitioning Employee:
• Address employee by preferred name and pronoun and require that all employees do so.
• Change payroll and benefits information when proper documents are presented.
• Report gender change to health plan.
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Transgender Employees – Best PracticesDealing with Gender-Transitioning Employee:
• Meet with employee and determine how best to notify co-workers and customers (if applicable) of gender change; honor employee’s preference if feasible.
• Allow employee to use restroom/locker room that conforms with new gender.
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Transgender Employees – Best PracticesDealing with Gender-Transitioning Employee:
• If co-workers express religious objection to presence of, or restroom use by, transgender employee, explain that the company is not requiring anyone to change or abandon their religious beliefs but that it must provide a workplace that is inclusive and open to all employees without discrimination.
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Transgender Employees – Best PracticesDealing with Gender-Transitioning Employee:
• Hold transgender employees to the same performance and conduct standards as other employees.
• If transitioning process becomes a distraction for employee or co-workers, address conduct and performance as you would for other employees.
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Worker’s Comp. and More
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Workers’ Comp Leave: The Basics
• Employee who is unable to work as a result of industrial injury is entitled to leave of absence while recuperating.
• No time limit on leave; it lasts until the employee is medically able to return to work.
• Employee is paid disability benefits by WC carrier, not state disability.
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Workers’ Comp Leave: The Basics
• Labor Code sec. 132a prohibits discrimination against employees who file WC claims.
• You may “replace” an employee on WC leave but you may not terminate him/her as a matter of WC law until permanent and stationary and unable to return to old job.
• Disability discrimination laws apply too, though.
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What About FMLA/CFRA?
• Eligible employees may take up to 12 weeks of leave per year.
• Is employee eligible?• Employed for at least a year• Has worked at least 1,250 hours in last 12 months• Works at a location where employer employs 50 or
more employees in a 75 mile radius
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What About FMLA/CFRA?
• You may designate WC leave also as FMLA/CFRA leave.
• If you do not, employee could return from a long WC leave and then take a 12-week FMLA leave.
• Be sure to send FMLA/CFRA notification letter to employee.
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Can We Replace Employee After FMLA/CFRA Leave Expires?
• No. You must consider whether additional leave must be provided as a “reasonable accommodation” under the ADA and state law.
• Additional leave must be provided unless it would
be an “undue hardship.”
• You are not required to provide indefinite leave, though.
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Can We Terminate An Employee Who Is Declared Permanently Disabled?
• No. You must engage in the interactive process to determine whether the employee is qualified and medically able to perform another job that is vacant or will soon become vacant.
• You must attempt to accommodate restrictions.
• You may not have a “100%” healed” policy.
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Do We Have to Continue Paying for Insurance for Employee On A Long Leave?
• It depends. You must continue paying insurance for FMLA/CFRA period, if eligible.
• Look at policy language re coverage of
employees on leaves; if coverage is limited to FMLA leave, consider a COBRA notice.
• ACA may require that you continue insurance, however.
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If We Replace the Employee on Leave With a Temp Who We Like Better, Can We Keep the Temp
Instead?
• No. This will guarantee that you will be sued.
• Unless you can show that the employee is on an indefinite leave or that holding the job open would be an undue hardship, you must keep the job open until the employee returns.
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If We Have A Layoff, Can We Include Employees On WC Leave?
• It depends. If they would have been laid off had they not been on WC leave, then layoff is OK.
• Using a layoff/reduction in force to get rid of employees on workers’ comp will get you sued.
• Deciding you really did not need an employee who went out on leave will get you sued.
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Summary: Employees on WC Leave Are Covered By Three Sets of Laws
• Workers’ comp leave law.
• FMLA/CFRA.
• Disability discrimination laws (ADA & FEHA).
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Retaliation
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Retaliation
An examination of behavior after the allegation
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Retaliation
There are three essential elements of a retaliation claim:
1) protected activity -- opposition to discrimination or participation in the statutory complaint process;
2) adverse action; 3) causal connection between the protected activity
and the adverse action.
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Retaliation
Worker finds out a male peer makes more than she does for the same job. She asks her manager for a raise so they are at the same level.
Or:
Worker finds out a male peer makes more than she does for the same job. She does not ask her manager for a raise, instead, she says that under the
Equal Pay Act she feels entitled to a raise under the act, and that the company would violate the law if they don’t give it to her.
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Retaliation
Opposition to perceived discrimination does not serve as license for the employee to
neglect job duties.
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Retaliation
1. Suspicious timing;2. comparative evidence of a similarly situated employee; 3. falsity of the employer's reason for the adverse action4. Witness Statements, and other Evidence
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Avoiding Pitfalls
Layoffs and RIFs
Termination for poor performance without analysis of similar treatment
Usage of non-objective criteria
Any decision by anyone interested in the outcome of an underlying complaint.
Hierarchies that include the complainer the individuals involved in the complaint.
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ALL OF THESE HAPPEN TO STARTUPS
Layoffs and RIFs
Termination for poor performance without analysis of similar treatment
Usage of non-objective criteria
Any decision by anyone interested in the outcome of an underlying complaint.
Hierarchies that include the complainer the individuals involved in the complaint.
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ALL OF THESE HAPPEN TO STARTUPS
“I don’t get mad, I get even.”Hierarchical structureChannels of advancement“Get in line” mentalityComplaint and grievance openness vs. repression.Egos
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The Adverse Action
There’s a right way, and a wrong way. The Wrong way is a pitfall, and litigation generator. You can only be sued by employees in our field, and employees sue when they are disgruntled. Employees get disgruntled through adverse employment action: Discipline, poor write-ups, demotions, etc.
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The Adverse Action
So which will the lawyer recommend?
Be complete and include everything
Or
Be careful and keep out the bad things
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The Adverse Action
Avoid vague languageUse facts not labelsE.g., “Insubordination” or “Bad Attitude” are vague
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The Adverse Action
Be truthful!Don’t sugarcoat it Don’t say it was a downsizing if it wasn’tDon’t say anything you wouldn’t testify to in court
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The Real World
Unlimited Vacation Policy: We don't need to track medical leaves
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The Real World
I got a DLSE Complaint, I can handle it myself, and if things go south, I’ll get a lawyer then!
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The Real World
Everyone's an Exempt Employee: We don't need to track hours
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The Real World
I don’t need a written contract with the other founders, we know our roles. Except stock, we have a written agreement about stock, so we are fine there.
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The Real World
They're Independent Contractors: We don't need to worry about their complaints
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The Real World
It’s not working out with the new guy. We flew him and his family up here from Southern California for this job, but he knew it was probationary, so its fine that we let him go. He doesn’t fit the culture.
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Questions