dynamex decisionBy now,  the California Dynamex decision (Dynamex Opertions West Inc. v. Superior Court) has been thoroughly discussed and analyzed in many publications and legal seminars.  However, here is the big picture that both workers and especially employers should keep in mind, as it will help them understand what’s behind this significant ruling, and avoid liability and significant expenses associated with employee misclassification.

Through the Dynamex decision, California’s highest court sought to address common abuses of workers’ rights that became pretty much an epidemic in this new “gig” economy, where employers would classify workers as contractors under the guise of outsourcing or telecommuting.  Companies would argue that since a worker is free to perform him duties from anywhere and at the time of his choosing, he should be classified as a contractor. The California Supreme Court, however, made it clear that a worker should be classified as an employee even if he has flexibility in work hours and work location, contrary to what many employers have gotten used to believing. The Court has articulate a new “ABC” test for determining whether a worker can be classified as a contractor that has been the law since. This three-factor test states that in order to be properly classified as a contractor, all of the following criteria has to be met:

(A) that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact; and

criminal background checks californiaAs of January 1, 2018, a new law in California adding Government Section 12952 to California Fair Employment and Housing Act went into effect. This new law states that it’s is unlawful for employers with five or more employees to include on any application for employment any question that seeks the disclosure of an applicant’s conviction history, inquire into or consider the conviction history of an applicant until that applicant has received a conditional offer. Employer also shall not consider, distribute, or disseminate information about any of the following while conducting a conviction history background check in connection with any application for employment: arrest not resulting in conviction, referral to or participation in pre-trial or post-trial diversion program, or convictions that have been sealed, dismissed, expunged, or legally eradicated pursuant to law.

This new law should help thousands of job applicants with prior criminal history get their foot in the door, as it prohibits any consideration of criminal history until after a conditional employment offer has been made. Further, once an offer has been made and a criminal background check is allowed, the employer cannot simply rescind the job offer because of that criminal history. The law imposes additional requirements on an employer to conduct an individualized assessment about whether a job applicant’s conviction history would negatively impact his ability to perform his job duties. AB 1008 requires that employer assess the following in making that decision: the nature and gravity of the offense, the time passed since the offense or conduct and completion of the sentence, and the nature of the job held or sought.

If the employer ultimately decides to deny employment to the candidate based on the above assessment, then it must provide the applicant with a written notification of the decision. That notification must include notice of the disqualifying conviction, a copy of the conviction history report, and an explanation of an applicant’s right to respond before the decision not to hire is final. If the job applicant decides to dispute the conviction history and notifies the employer in writing of the same, the employer must provide at least five additional days to the applicant to do so, and must consider any additional evidence provided by the applicant in making its final hiring decision.

deliver driver employee contractorOn April 30, 2018, the California Supreme Court issued its unanimous ruling in Dynamex Operations West, Inc., v Superior Court, making it even harder for companies to classify workers as independent contractors (rather than employees). The previous standard used for classifying workers as employees or independent contractors had been in place since 1989 and was based upon a multifactor test that considered, among other factors, the worker’s skill, the method of payment by the hirer, existence of contractor agreement between the parties, and the nature of the business to determine the level of control exercised over the worker and respectively – whether sufficient control took place for employee-employer relationship to exist.  Thus, companies such as Dynamex had classified their delivery drivers as independent contractors, arguing that their drivers had significant control over their own working conditions by being able to set their own hours and drive for multiple companies.

The new standard adopted by the Supreme Court requires hirers to establish three factors in order to properly classify a worker as an independent contractor – and in the process greatly expands the definition of “employee” under California law:

A.  The worker is free from the control and direction of the hirer in connection with the performance of the work, both under contract for the performance of such work and in fact; and

Like many others, I anticipate that age discrimination is the “future” of employment litigation as many employers, especially in San Francisco Bay Area are so eager to higher younger worker and get rid of the older ones or even “better” – avoiding hiring them in the first place. Often, age discrimination is disguised as a layoff due to alleged workforce reduction or restructuring. In the video, I talk about several common signs that a lay-off may be actually be a wrongful termination due to age discrimination.

piece-rate employee in CaliforniaEffective January 1, 2016, employees compensated on a piece base basis have an additional important right  – to be paid for their meal an rest breaks separately and in addition to any piece rate compensation they are otherwise entitled to. This law is codified in Labor Code 226.2.

What is Piece-Rate Compensation?

Per Labor Code 226.2 defines piece rate compensation as work paid for according to the number of units turned out. Here are some of the common examples of piece-rate plans:  automobile mechanics paid a “book rate” per job; nurses paid on the basis of the number of procedures performed; carpet layers paid by the yard of carpet laid; technicians paid by the number of telephones installed; factory workers paid by the widget competed; and carpenters paid by the linear foot on framing jobs. A piece-rate plan may include a group of employee who share in the wage earned for completing the task of making the product. This law does not apply to employees who work on a commission basis.

New Parent Leave ActUntil now, the main law in California that afforded parents to take time off for babying bonding, adoption or foster care placement has been California Family Rights Act (CFRA / Government Code 12945.2). That protection, however, only applied to employers of 50 or more employees within a 75 mile radius to provide up to 12 workweeks of job protected leave.

Titled the New Parent Leave Act, State Bill (SB 63) / section 12945.6, which went into effect as of January 1, 2018, requires employers within 2o to 49 employees within a 75 mile radius to provide up to 12 workweeks of job protected leave for an employee to bond with a new child within one year of the child’s birth, adoption or foster care placement. As with CFRA and FMLA, an employee will need t have worked more than 12 months and at least 1250 hours for the employer during preceding 12 month period to qualify for leave under New Parent Leave Act. Like with CFRA, employers must guarantee reinstatement. This law also authorized an employee to use accrued vacation pay, paid sick time, other accrued paid time off, or other paid or unpaid time off negotiated with the employer during parental leave. Employers must also maintain and pay for an eligible employee’s medical coverage under a group health plan for the duration of parental leave.

This new law has similar anti-discrimination provisions to those found in CFRA and FMLA. The New Parent Leave Act prohibits employers from refusing to hire, discharging, suspending, or discriminating against an individual for either exercising the right to parental leave or for testifying about his or another employee’s parental leave in an investigation or legal proceeding, or for interfering with, restraining, or denying any rights provided by this law.

recruiter antitrust violations There are two main hiring and recruiting practices that companies and their HR professional and recruiters should avoid, because they are prohibited by law and lead to severe penalties, including fines and even criminal prosecution, enforced by Department of Justice:

1. Agreements Not To Recruit Certain Employees 

An HR professional should avoid entering into agreements regarding terms of employment with other companies that compete to hire the same employees. It does not matter whether the agreement is formal or informal, written or oral, or even spoken or unspoken. This is because anti-trust violation can often be established through evidence of discussions and hiring patterns of companies.

racial harassment caseOn October 24, 2017, an Orange County jury returned a verdict in the amount of $176 for a mechanic who sued his employer for racial harassment, racial discrimination, and disability discrimination. The defendant in that case was a heavy equipment rental company. They hired a plaintiff to perform maintenance on their machines. After walking off the job, Plaintiff claimed that may of the conversations, text messages and e-mails between him and the defendants were racially offensive and created a hostile work environment. The manager (Caucasian) claimed that he developed a friendship with the plaintiff (African American) and their allegedly offensive exchanges were jokes that the plaintiff never complained about or said were bothersome to him in anyway. The jury was not convince and found for the plaintiff on the racial harassment claim, in large part because of the extensive use of “N” word in those exchange. However, the jury also found that plaintiff was not an employee but an independent contractor and found for the employer on the remaining claims of racial and disability discrimination.

This case is a reminder of a significant difference between harassment and discrimination claims. A discrimination claim can only be made by an employee, while a harassment claim can be made by any worker, whether he or she is an employee or an independent contractor. Evidence of racial slur in a written form, i.e. e-mails, text messages, and social media messages is one of the most compelling types of evidence to prove a harassment case. Both employers and employee should be aware that what might be an innocent joke at one point, can be used a powerful evidence in the future, and proving that it was a joke might be an uphill battle, especially when it comes to racially charged comments.

bonus california lawMany employers, especially in the tech / start-up world often fire an employee right before his bonus or commissions in order to avoid paying that bonus. Of course this is more likely to happen if the bonus due is significant. If there is sufficient evidence that avoiding to pay bonus was the reason or one of the reasons for termination, this can support a claim for wrongful termination in violation of public policy. This type of claim is particularly strong if (1) the employee to be terminated was a high performer (2) he was terminated for a petty reason and/or (3) the company didn’t follow its normal disciplinary, investigation and termination procedures that are in place; and (4) the termination took place right before the bonus would have been due or paid.

Many employers do not realize that bonuses earned (as opposed to discretionary bonuses) are to be treated as wages as per California Labor Code Section 200. Neisendorf v. Levi Strauss 13 & Co. (2006) 143 Cal.App.4th 509. It is also established that an employer cannot terminate an employee and refuse to pay that employee the bonus he or she earned simply because the involuntarily terminated employee was not employed on the date bonuses were paid. McCollum v. Xcare.net, Inc.,212 F.Supp.2d 1142 (N.D. Cal 2002) (employee was terminated two weeks before she would have been entitled to $75,000 in commissions); Ellis v. McKinnon Broadcasting Co. (1993) 18 Cal.App.4th 1796. 

Many comp plans provide employers with discretionary power to forfeit a bonus otherwise due. California law is clear, however, that “where a contract confers one party with discretionary power affecting the rights of the other, a duty is imposed to exercise that discretion in good faith and in accordance with fair dealing.” Locke v. Warner Brothers, Inc., 57 Cal.App.4th 354 (1997).  Therefore, if one party exercises its discretionary authority in bad faith for the purpose of frustrating the other party’s legitimate expectations, it has breached the implied covenant. Commercial Union Assurance Cos. v. Safeway Stores, Inc., 26 Cal.3d 912 (1980). In other words, an employer must have a good reason for bonuses forfeiture, if so allowed by the comp plan, and it can’t just be any reason.