You Be the Judge

Employee Loans

Your company has loaned an employee $2,000 for personal use. When he was laid off, the company deducted the balance due ($1,000) on the loan from his final paycheck.


This is not legal. Under California law, an employee must be paid all wages final wages "without abatement or reduction." By illegally deducting the loan balance from the final pay, at a minimum the employer will be exposed to Department of Labor Waiting Time Penalties of up to 6 weeks wages.

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In the Courts...


Restaurant Owner fined for overtime and back wages

Alphonse Silvestri, owner of the now-closed San Rafael restaurant, Seafood Peddler, thought he could get away with paying below federal minimum wage and failing to pay overtime wages (among a number of other infractions). 

He was wrong.  

In October, the US District Court returned a verdict against Silverstri, to the tune of $185,000. Read Richard Halstead's article in the IJ for the whole, messy story. 

While Silvestri appears to have been aware of his violations--he even threatened employees if they took action--it's possible to unintentionally violatate wage and hour laws, through a lack of understanding or carefuly oversight. Don't let this happen to you.  If you have question, consult an employment law attorney, because mistakes can be very costly. Ask Mr. Silverstri.


Pregnancy Disability Leave Capped at 4 Months? Think Again.

A recent California Court of Appeal case has held that an employee disabled by pregnancy may be entitled to additional leave time past the 4 months provided by the Pregnancy Disability Leave Act (“PDL”).  The court reasoned that under the provisions of the Fair Employment & Housing Act (“FEHA”), the employee was entitled to “reasonable accommodation” for complications of pregnancy as a medical condition or disability, in addition to PDL. 

Thus, a pregnant employee is not limited to 4 months of pregnancy leave if additional leave time would allow her to return to work after giving birth, so long as the additional leave doesn’t impose a hardship on the employer.  The court also commented that while an employer must provided PDL regardless of any hardship, leave under FEHA is only available if it does not cause such a hardship. 

Lesson: Whenever an employee takes a mandated leave of absence (PDL, CFRA, etc.) for personal medical reasons, the employer always needs to consider whether additional leave time might be required under the disability leave laws. 

NOTE: This case is not yet final and could be appealed to the California Supreme Court.  However, employers would be wise to follow its dictates unless/until the time for appeal to the Supreme Court has expired.


Victory in Workers Comp Classification Dispute

Do you dispute your worker’s compensation audit premiums or the classification assigned to your employees?  Such disputes are common—but are rarely resolved in favor of the employer. 

There is cause for hope, however.  Dolores recently prevailed in a client’s workers compensation classification dispute.  The change in classification would have caused a 4 or 5 fold increase of the employer’s premiums—forever

By researching and vigorously arguing the broader legal (not just administrative) issues involved, Dolores was able to convince the Workers Compensation Insurance Rating Bureau to reverse their classification decision, thus saving the client literally hundreds of thousands of dollars over the years.


New Employment Laws for 2012

It's important to keep current with the continually evolving field of employment law. Here's a preview of some upcoming changes in employment law for next year.

Commissioned Employees: All employers must provide a written Commission Agreement to commissioned employees setting forth the terms of the commission.  The employee must also be provided with a copy of the agreement.  (Effective January 1, 2013) 

Independent Contractors: Be extremely careful in classifying any workers as “independent contractors.”  An employer who knowingly misclassifies an employee is subject to fines of up to $25,000 per occurrence, plus attorney’s fees. The term “knowingly” might also mean that the employer “should have known,” so be extremely careful when using independent contractors, especially if you have or have had an employee performing similar work.  

Consumer Credit Reports: If you have been obtaining Consumer Credit Reports on all new employees, you will have to change your procedures.  The new law restricts the use of such reports to certain enumerated positions.  In particular, it does not allow for the use of CCR’s for employees who do not routinely handle at least $10,000 in cash or those who merely have access to expensive equipment. 

Pay Notice: Employers must provide new hires with the following pay information: 

  1. Pay rate and basis (e.g. hourly, etc.) AND the overtime rate 
  2. Any deduction for meals or lodging
  3. The regular payday
  4. The name of the employer AND any dba ("doing business as") names
  5. The physical address and phone number of the firm's main office, and the mailing address (if different)
  6. The name, address, and phone number of the firm's Workman's Compensation carrier

Employers must notify employees of any changes to this information within 7 days unless reflected directly on the wage statement.

Paid Medical Insurance During Pregnancy Disability Leave:  If your company provides group health insurance, you are required to pay the employer’s portion of the premiums for up to 16 weeks for an employee disabled by pregnancy or childbirth.  Previously,  only employers with 50 or more employees had to provide coverage, and for only the 12 weeks of Family Medical/California Family Rights Act Leave.  This requirement applies to all employers, regardless of the number of employees or the length of service of the pregnant employee.


The Office Romeo

The Situation: The Plaintiff, a supervisor, was accused of sexual harassment by having sex with female subordinates.  The employer conducted extensive interviews of the accusers and other witnesses and concluded that the women subordinates had, in fact, been sexually harassed.  The employer then fired the supervisor.

The supervisor subsequently sued the employer for wrongful termination on the grounds  that the sexual relations with the subordinates were consensual and therefore did not constitute sexual harassment.  At the trial, the supervisor proved that the women had conspired against him by claiming sexual harassment in retaliation for his “two timing” them. 

Because the supervisor had not committed sexual harassment, the jury concluded that he was wrongfully terminated and awarded him $1.78 million in damages. The employer appealed.

Result: The California Supreme Court held that the employer was NOT liable to the supervisor because the company had used “good faith” in reaching its decision to terminate.  Here, the employer had conducted an extensive investigation into the allegations and had well-articulated reasons for reaching its conclusion that harassment had occurred.

 Lessons learned: There are several:

  1. Non-Fraternization Policy: This lawsuit probably would not have been filed if the employer had had a Non-Fraternization Policy in its Employee Handbook requiring that supervisors refrain from socializing with subordinates and/or that both parties inform management if they became involved in an intimate relationship.
  2. Investigate: Once an allegation of harassment is made, the employer MUST thoroughly investigate by interviewing witnesses and fairly evaluate the evidence.  Because the employer did so, it escaped liability to the supervisor.
  3. Handbook: Even though the employer prevailed, the costs of litigation, trial, and appeal were undoubtedly in the $100,000’s—and are NOT recoverable from the supervisor.  This case is a study in how a well-considered Employee Handbook can protect an employer against litigation.  Updating and expanding an Employee Handbook can literally save an employer hundreds of thousands of dollars.

Case cited: Cotran v. Rollins Hudig Hall International (1998)