2015 Cal-Peculiarities

imageBy John R. Giovannone

We feel your pain, and we have a prescription for you to consider: a non-accountable expense reimbursement plan.

First, let’s discuss your problem. If you have a salesforce, the force exists to sell stuff. So here’s an exercise:

  • First, think of your entire outside salesforce.
  • Then, mentally separate out those salespeople who are best at selling stuff.
  • With this most effective group in mind, ask yourself, what does each person need to maintain his or her success?

Many of you, if truth be told, have no idea. You just want your good salespeople to keep doing … whatever it is that they’re doing … because, well, it’s working.

Effective sales people come in all forms and use all manner of methods: some wine and dine; others live on the phone; others rely heavily on encyclopedic product knowledge; others employ advanced statistics and analytics; some value regular face time with customers; others blur the line between their business and social lives; some might superstitiously choose to meet customers only at a favorite coffee shop; still others have forged such reliable customer bonds that their book of business sells itself with minimal maintenance.

What’s clear is that not all effective sales people do the same things—or incur the same expenses. But the last thing you want is for your expense reimbursement policy to crimp sales by stifling effective sales activities.

The Labor Commissioner, discussed here, has recognized the futility in guessing why or how sales are made. Outside salespeople, by definition, tend to do their own thing out in field; they “set their own time, and they’re on the road, they call on their customers[, in fact,] rarely do you know what they are doing. . . .” DLSE Op. Ltr. (September 8, 1998).

And while we don’t know precisely how salespeople sell, we can tell whether they’re selling by looking at their bottom line. If it takes a $300 concert ticket to make a $100,000 sale, that’s typically an acceptable return on investment. The trite quote is that it takes money to make money. If the results justify the expenses, who can question the seller’s methods? F. Ross Johnson (as played by James Garner in Barbarians at the Gate) had his own reaction to the second-guessing of expenses: “Every penny you think I’m [umsneezing] away here, comes back to us dressed up like a nickel!”
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(Illustration) No HiringBy Carrie Price and Robert Milligan

In Golden v. California Emergency Physicians Medical Group, a divided Ninth Circuit panel held that a “no re-hire” provision in a settlement agreement could, under certain circumstances, constitute an unlawful restraint of trade under California law.

The Facts

Dr. Golden, a physician, agreed to settle his discrimination claim against his employer, California Emergency Physicians Medical Group (“CEP”). Their oral settlement agreement, later reduced to writing, had Dr. Golden “waive any and all rights to employment with CEP or at any facility that CEP may own or with which it may contract in the future.” The district court enforced the parties’ settlement over Dr. Golden’s objection that this “no-rehire” clause violated Section 16600 of California’s Business & Professions Code, which provides that a contract is void if it restrains anyone from engaging in a lawful profession.

The Appellate Court Decision

On appeal, Dr. Golden argued that the “no re-hire” clause was unlawful and that, because it constituted a material term of the settlement, the entire agreement was void, permitting Dr. Golden to pursue his discrimination lawsuit.

The Ninth Circuit panel determined that Dr. Golden might prevail on this argument, and remanded the case to the district court for further proceedings. The panel first found that the validity of the “no re-hire” clause was ripe for determination. The dispute was ripe not because CEP was currently seeking to enforce the “no re-hire” clause against Dr. Golden (it was not), but because Dr. Golden sought to have the settlement agreement voided after his former attorney attempted to enforce the agreement in order to collect attorney’s fees. The panel reasoned that “when a litigant resists his adversary’s attempt to enforce a contract against him, the dispute has already completely materialized.”

The Ninth Circuit panel next addressed the validity of the “no re-hire” clause. Historically, this type of clause, which commonly appears in settlement agreements, has not been viewed as a non-compete clause, in that a “no re-hire” clause does not keep a former employee from working for a competitor—just for the former employer. The Golden court, however, took a wider view of Section 16600, reasoning that it applies to any contractual provision that “ ‘restrain[s anyone] from engaging in a lawful profession, trade, or business of any kind’ … extend[ing] to any ‘restraint of a substantial character,’ no matter its form or scope.”

To support this broad interpretation, the Ninth Circuit panel majority cited Section 16600’s language, statutory context, and case law to reason that Section 16600 applies to any contractual limitation that restricts the ability to practice a vocation. See, e.g., Edwards v. Arthur Andersen LLP, 189 P.3d 285 (Cal. 2008); City of Oakland v. Hassey, 163 Cal. App. 4th 1447 (2008). The panel majority noted that both Edwards and Hassey focused on the text of the law—whether the contested clause restrained someone from engaging in a trade, business, or profession—and not specifically whether the clause prevented competition with the former employer. The panel majority concluded that a clause creating a restraint of “substantial character” that could limit an employee’s opportunity to engage in a chosen line of work would fall under Section 16600’s “considerable breadth.”

Significantly, the Ninth Circuit panel did not rule that the clause was actually void. Instead, the panel majority concluded that the district court would need to do more fact-finding to see if the clause actually created a restraint of a “substantial character” on Golden’s pursuit of his profession.

It also is significant that the Ninth Circuit panel majority—mindful that the California Supreme Court itself has not ruled on whether Section 16600 extends beyond traditional non-compete clauses in employment agreements—was merely predicting how it thought the California Supreme Court would rule.

A sharp dissent by Judge Kozinski expressed skepticism that the California Supreme Court would reach the same result as the panel majority, and argued that the settlement agreement should be enforced because the provision put no limits on Dr. Golden’s current ability to pursue his profession.

What Is the Golden Rule for California Employers?
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California State FlagBy Kristina Launey and Christina Jackson

Having reconvened this past Monday from Spring Recess, the California Legislature will return its attention to the employment-related bills that were introduced for this 2015-16 Legislative Session. These bills—covering topics including paid leave rights, hours of work, and payment of wages—will now be heard in committees, as their authors attempt to carry them through the process to the Governor’s desk for approval. While it is too early to tell which bills will make the cut, those that do will be sure to affect employers doing business in California.

The proposed bills we’re watching most carefully are:
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April the first, Fool's day, on table calendarBy our source in Sacramento

Emergency legislation promises to revitalize the California economy and place our state in the forefront of jurisdictions promoting economic growth and employment opportunity.

The California’s Open for Business—Really!—Act (“COBRA”), AB 666, effective April 1, works the following reforms in California employment law.

PAGA repeal. Article I of COBRA repeals the

(Illustration) ProfileBy Laura Maechtlen and Dana Howells

As of January 1, 2015, new California Labor Code section 2810.3 requires a “client employer” to share civil liability with “labor contractors” (aka payrolling, temporary staffing, or employee leasing agencies) for (1) payment of wages of the contract employees, and (2) failure to procure worker’s compensation coverage. Client employers will also have non-delegable responsibilities for worksite occupational health and safety.

What Does The New Law Provide?

  • No Shifting Of Liability, But Indemnity Allowed. Although a client employer cannot shift away all liability to a labor contractor for either wage payments or workers’ compensation, client employers may seek contractual indemnity against a labor contractor for liability that the labor contractor creates.
  • Workplace Safety Compliance Cannot Be Shifted. Client employers cannot contractually make the labor contractor solely responsible for workplace safety compliance.
  • 30-Day Notice Requirement Before Filing Civil Action. A worker or his or her representative must notify the client employer of specified violations at least 30 days before suing the client employer. Because of this notice provision, client employers may want to include language in contracts requiring a process in which the labor contractor must attempt to remedy any violation, before a civil action is filed, within the notification period. Client employers should also consider language that allows the client employer to step in and remedy during the notice period, while reserving its right to be reimbursed by the labor contractor.
  • No Retaliation. Neither the client employer nor the labor contractor can take action against a worker for providing the 30-day notice or for filing a claim or civil action.
  • Records Inspection. While the client employer’s records are subject to inspection by state enforcement agencies, the law also expressly “does not require the disclosure of information that is not otherwise required to be disclosed by employers upon request by a state enforcement agency or department.”
  • Exempt Employees Not Covered. The statute excludes from the definition of contracted “workers” those exempt under California’s executive, administrative, or professional exemptions (see Labor Code Section 515).

What Can Client Employers Do To Minimize Liability Under This New Law?

To try to protect against potential liability under the new law, client employers can:
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thumbnailBy Dana Peterson

Breaking News: New CFRA regulations will take effect July 1, 2015.

Mandatory paid sick leave will not be the only new rule affecting California employers this summer. Also effective on July 1 are amendments to the California Family Rights Act (CFRA) regulations, just approved by the Office of Administrative Law. These regulations will more closely align the CFRA with the federal Family and Medical Leave Act (FMLA) regulations. This is welcome news to California employers who have grappled with the overlay of the FMLA regulations (amended in 2008) and the pre-2008 CFRA regulations (which did not incorporate the FMLA’s 2008 amended regulations.)  Nonetheless, some differences still exist between state and federal family and medical leave laws, including how the CFRA coordinates with state pregnancy disability leave laws.

Quick preview: The amended CFRA regulations include guidance on certain definitions (such as how to determine when businesses will be considered joint employers under CFRA), include changes to the mandatory poster requirement, and change what information employers must include on the certification form they make available to health care providers who are asked to certify leave for serious health conditions.

Coming soon: A complete analysis of the new amendments will follow shortly, so that you can be prepared when the amendments “go live” in July. We will also be hosting a webinar on the subject, which you will not want to miss!

Is California Poised to Be the First State to Outlaw Workplace Bullying? Or Will New York Beat Us to It? 

Following an amendment (AB 2053) to the Fair Employment and Housing Act (FEHA) that took effect January 1, 2015, California employers that are subject to the mandatory sexual harassment training requirement for supervisors must now include an additional training topic: prevention of “abusive conduct.” Read the text of the bill here.

Readers will recall that existing law (AB 1825, codified at Cal. Gov’t Code § 12950.1) requires employers with 50 or more employees to provide all California supervisory employees with at least two hours of effective interactive training on sexual harassment prevention. New supervisors must be trained within six months of being promoted or hired into a supervisory position and, thereafter, every two years.  The required training must include “information and practical guidance” regarding federal and state laws concerning sexual harassment, remedies available to victims of harassment, and practical examples to instruct the supervisors participating in the training. Now, in addition to the previously required topics, employers must include a segment aimed at the prevention of abusive conduct in the workplace.

What does that mean?
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(Illustration) Sick PayBy Kristina M Launey

The Labor Commissioner has issued a new and updated set of FAQs interpreting California’s new Paid Sick Leave Law (AB 1522 of 2014).

If you’ve been following along, you know that after passage of the new law last year, the Labor Commissioner issued a template Poster and Wage Theft Prevention Notice for employers to use and post, as well as a first set of FAQs.

The new FAQs obligate employers to inform existing employees of the new sick pay law and changes in policy via the Wage Theft Notice, provide guidance regarding when such notice must be given to existing employees, and provide guidance regarding sick leave eligibility for seasonal or break-in-service employees, as well as part-time and alternative work schedule employees.

Wage Theft Prevention Notices: Employees hired before January 1, 2015 must receive a new Notice that contains the new information regarding paid sick time under amended Labor Code section 2810.5, even if there is no change in employer policy.

Employers must give all employees (not just those hired after January 1, 2015) a new Wage Theft Prevention Notice, announcing any change to paid sick leave, within seven days of the actual change. Although the FAQs are silent on this point, note that Labor Code section 2810.5,  which requires Wage Theft Prevention Notices, applies only to non-exempt employees.

The “date of actual change” would depend on when the employer either establishes a paid sick program under the paid sick leave law or changes an existing paid leave program to comply with this law, but would be no later than July 1, 2015. Thus, the last date to provide notice of changes would be no later than July 8, 2015 (seven days after the July 1 sick leave entitlement effective date).

Employers who do not want to issue new Wage Theft Prevention Notices to all current employees may instead inform those employees of the change to paid sick leave by using an alternative method authorized by Labor Code section 2810.5(b)(1) or (b)(2) (e.g., giving notice of change in a pay stub or itemized wage statement). Employers who choose this route should take care to follow the requirements of these alternatives and keep records of having provided those employees with the notice.

Even employers whose existing policy satisfies the minimum requirements of the law must still provide notice—via the new Wage Theft Prevention Notice or an alternative method—regarding the new paid sick leave law. The notice must contain information about the new paid sick leave law and how the employer intends to meet its requirements for the particular employee. For example, a timely writing provided to each employee that refers to or summarizes the existing policy and contains the points of information specified in the revised Wage Theft Prevention Notice would comply with the individual notice requirement.
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ABC Soup

California legislators and regulators continue their efforts to expand employee protections, and the IRS permits a temporary subsidy for separating employees who want to sample the small business exchanges for health care.  Read on for highlights.

San Francisco Retail Workers Bill Of Rights Redux: The State Legislature Is Cooking Up Trouble Outside