Think Your Employee's Bluffing About Coming Back To Work? Be Prepared To Call, And To Show Your Cards.

By David Krol

David Krol

Kelley v. California Unemployment Insurance Appeals Board (Feb. 10, 2014, B244098) __ Cal.App.4th __, 2014 Cal. App. LEXIS 128, is a good example of what an employer should do – or rather, shouldn't do – when considering whether to terminate an employee who's scheduled to return to work after a leave of absence.

In April, 2010, Stephanie Kelley filed a complaint with California's Division of Fair Employment and Housing, alleging that her employer, Merle Norman Cosmetics ("Merle") was retaliating against her for reporting ongoing sexual harassment.  One month later, Kelley went on a stress leave.  Her physician cleared her to return to work as of November 15, 2010 – six months after her leave began. 

On November 13, two days before Kelley's scheduled return to work, Kelley's lawyer sent an e-mail to Merle's lawyer, asking for several things before Kelley's return: a written job description; a statement of goals and objectives; and a written confirmation of her client's job title, duties, pay, and benefits.  Also, even though Kelley had been out for nearly half a year, Kelley's counsel inquired about the status of Kelley's earlier request for vacation during the upcoming Christmas holiday period.  Less than 20 minutes later, Kelley's attorney sent another e-mail:  she wanted written confirmation that Kelley wouldn't be subject to retaliation for her complaints about sexual harassment.

Merle's counsel e-mailed the next day: Merle was willing to allow Kelley to return to work, but considered Kelley's requests to be "unreasonable under the circumstances."  Merle's counsel proposed that Kelley return to work on November 30, so that Merle could prepare for her return.  In a reply, Kelley's counsel offered a compromise start date of November 22.  In his reply on November 18, however, Merle's counsel sent an e-mail confirming that Merle was "unwilling to meet" Kelley's conditions for returning to work, and that Merle "considers Ms. Kelley's employment to be terminated as of today, November 18."  Merle's counsel sent that e-mail without ever asking whether Kelley would refuse to show up for work if she didn't receive the requested information.

Kelley filed for unemployment benefits, and several contradictory decisions followed:  the Employment Development Department denied her claim for benefits; an administrative law judge reversed that decision and found that she was entitled to benefits; the California Unemployment Insurance Appeals Board reversed that decision; the Board's decision was reversed yet again by a trial court; and the Court of Appeal finally affirmed the trial court's decision, deciding that Kelley was in fact entitled to unemployment benefits.

At issue on appeal was whether Kelley "constructively quit," by insisting on conditions that Merle had no obligation to satisfy, and thus making it impossible for Merle to take her back (which would disqualify Kelley from unemployment benefits), or whether Merle fired her.  In ultimately deciding that Kelley was fired, the Court of Appeal noted that Merle could have waited to see if Kelley reported to work after Merle declined to provide the requested information – and that Merle could have simply asked whether Kelley would report for work, even if Merle refused to.  "In short, even if the e-mails amounted to some form of pre-litigation poker, Merle … could not simply declare itself the winner – it had to call and see whether Kelley was bluffing."   

Were Kelley's requests really that burdensome?  Or was it that Merle didn't really want her back?  Either way, Merle needed to do more than unilaterally decide that the employment relationship was terminated.  And in light of Kelley's initial claim that Merle had retaliated against her for reporting sexual harassment, the Court of Appeal's determination that Kelley was fired doesn't bode well at all.

Kelley is therefore much more than a case about unemployment benefits:  it's a reminder that employers should explore all alternatives before terminating an employee who's about to return from a leave of absence.

Contact David Krol

 

Another Bad Employee Compensation Idea: Paying Exempt Employees By The Hour, With No Minimum Guarantees

By David Krol

David Krol

Is it a good idea to compensate an employee based solely on the number of hours worked, with no guaranteed minimum, if that employee would otherwise be exempt from overtime?  The answer is no.  Negri v. Koning & Associates (May 16, 2013, H037804), ___ Cal.App.4th ___.  That's because, to be exempt from overtime, employees must perform specified job functions in a particular manner and must also receive a "salary," not an indeterminate sum based solely on the amount of hours they work. 

 

Negri was an insurance claims adjuster at Koning & Associates who was paid $29 an hour with no minimum guarantee.  He worked for Koning for 66 weeks, and estimated that he worked approximately 20 hours a week as overtime.  When Negri sued Koning for overtime pay, Koning argued that Negri was exempt from overtime under a 2011 Supreme Court decision which held that, based on the job functions performed by an insurance claims adjuster, the adjuster was an exempt employee.  Applying that decision, the trial court found that Negri was exempt and therefore not entitled to overtime.  The Court of Appeal reversed. 

 

Under California Labor Code Section 515, to be exempt from overtime, an employee must perform specified duties in a particular manner and be paid “a monthly salary equivalent to no less than two times the state minimum wage for full-time employment.”  Even though Negri's job duties would have rendered him exempt, the Court of Appeal had little difficulty in concluding that Negri wasn’t exempt because he didn’t earn a "salary":  he wasn’t paid a predetermined amount based on the number of hours worked.  His employer therefore owed him overtime – a result which could have been avoided if Koning had paid Negri a guaranteed salary.

 

If you’re considering creative ways to pay your employees, you should consult with counsel beforehand.

 

Contact David Krol

Mixed Motive Terminations: After A California Supreme Court Ruling, An Employer's Potential Liability Is Still In the Mix

By David Krol

David Krol

California's Fair Employment and Housing Act prohibits an employer from taking an adverse employment action against a person because of the person's race, sex, disability, or other protected characteristic.  But what happens when an employer takes an adverse action against an employee which is motivated both by lawful and unlawful reasons – a so-called "mixed motive"?  This was the question confronting the California Supreme Court in Harris v. City of Santa Monica, which was decided on February 7, 2013.

 

Harris was a probationary bus driver employed by the City of Santa Monica.  She claimed she was fired because she was pregnant, while Santa Monica claimed she had been fired for poor job performance -- she had gotten into two preventable accidents and came to work late twice.  After receiving an unfavorable employment evaluation, Harris alleged that, during a chance encounter with her supervisor, Reynoso, she told Reynoso that she was pregnant.  Seemingly displeased with that news, Reynoso's response was, "Well, what are you going to do?  How far along are you?"  Reynoso then asked Harris for a doctor's note, and on the same day she gave it to him, Reynoso received a list of probationary drivers who weren't meeting standards for continued employment – and Harris' name was on it.  She was fired two days later.

 

In employment cases where terminations don't involve "mixed motives," the California Supreme Court had previously adopted a three-stage burden shifting test.  Under that test, an employee has the initial burden of establishing that an employer took an adverse action based on a prohibited criterion.  If the employee meets that burden, then the burden shifts to the employer to establish that the adverse action was taken for a legitimate, nondiscriminatory reason.  If the employer meets its burden, then the burden shifts back to the employee to demonstrate that the employer's proffered reason was just a pretext.  As the Supreme Court noted in Harris, however, this burden-shifting test assumes that there is a single "true" reason for an adverse action, and in "mixed motive" terminations, there is no single "true" reason. 

 

The California Supreme Court therefore modified its burden-shifting test for "mixed motive" terminations, and now requires an employee to demonstrate that discrimination was a "substantial factor motivating the adverse employment action."  However, if an employer can establish that it would have taken the adverse employment action even apart from any unlawful reasons, then the employee can't be awarded money damages, back pay, or reinstatement.  Harris doesn't let employers completely off the hook, though, because an employee in these circumstances could still obtain declaratory or injunctive relief, and could still be eligible for attorneys' fees.  The California Supreme Court refused to rule these remedies out, because the Fair Employment and Housing Act is designed to prevent, deter, and redress unlawful discrimination in the workplace.

 

Contact David Krol

How Low Can You Go? A California Employer's Potential Liability For Salary Reductions

 By David Krol 

David Krol

The economy in California still hasn't fully recovered, and employers may be faced with the tough decision of reducing employee salaries.  There are two risks associated with salary reductions, however. 

First, the salary reduction cannot run afoul of minimum wage laws.  Under California law, employees who are in the professional, technical, clerical, mechanical, or similar occupations and who are exempt from overtime requirements must earn at least twice the minimum wage for  a 40-hour work week.  Cal. Code Regs., tit. 8, § 11040(1).  At the current minimum wage of $8 per hour, the minimum salary for such employees is $640 per week, or $33,280 per year.
 
Second, if the reduction is substantial enough, an employee will be found to have had “good cause” to leave the job so as to render the employer liable for unemployment compensation benefits.  How substantial does the reduction have to be?  According to a precedential decision issued by California's Unemployment Insurance Appeals Board ("CUIAB"), a reduction of over 20%, standing alone, is sufficient to constitute "good cause."   http://www.cuiab.ca.gov/Board/precedentDecisions/docs/pb124.doc 
 
If the reduction is less than 20%, other factors, such as the employee's other job prospects, will be considered to determine whether the employee’s best alternative was to stay on board at the reduced salary.  In one case, an employee was notified of an impending layoff, and was unable to find work elsewhere at a comparable salary.  He was then offered a downgraded position with the company, at an 11% salary reduction.  The CUIAB denied the employee's claim for unemployment benefits, holding that the reduction in pay didn't constitute a compelling reason for leaving work, because the other factors existing at the time weighed in favor of continued employment at the reduced salary. http://www.cuiab.ca.gov/Board/precedentDecisions/docs/pb88.doc 
 
The moral of the story is … before instituting any salary reductions, employers should communicate with their counsel.
 

Contact David Krol

Trivedi v. Curexo Technology: a warning about pre-dispute employment arbitration agreements

Posted by David Krol

Take a look at your pre-dispute employment arbitration agreements. Do they have standard prevailing party attorneys’ fees provisions and provisions which purport to allow the parties access to the courts for injunctive relief? If they do, and if the arbitration forum’s applicable rules have not been provided to the employees, these agreements may be unenforceable – rendering the employer liable for attorneys’ fees if the employer attempts to enforce such agreements. That was the result in Trivedi v. Curexo Technology Corporation (Sept. 28, 2010, RG09459748) ____ Cal.App.4th _____ (2010 WL 3760224).

In Trivedi, the Court of Appeal found that a pre-dispute employment arbitration provision was procedurally unconscionable, because it was prepared by the employer and was a mandatory part of the arbitration agreement, but the employer failed to provide the employee with a copy of the arbitration rules under which the employee would be bound.

The Court of Appeal also found that the clause was substantively unconscionable, because it did not limit the employer’s right to recover attorneys fees to instances where the employee’s claims were found to be “frivolous, unreasonable, without foundation, or brought in bad faith,” which is the standard under California case law, and because it was far more likely that the employer, not the employee, would seek to enforce an injunctive relief provision in court.

After refusing to enforce the provision, the Court of Appeal awarded costs and attorneys’ fees to the employee on appeal.

Pre-dispute employment arbitration agreements which purport to expand employers’ rights to attorneys’ fees, and which contain injunctive relief provisions, and which are executed without ensuring that the employees have received the rules of the applicable arbitration forum, may be unenforceable in light of this new decision.

Contact David Krol