CLE Seminar for In-House Counsel
Beverly Hills, CA
January 7, 2014

LABOR & EMPLOYMENT LAW:
What Keeps the GC Up At Night?...
OVERVIEW
This Program Will Cover
• Pre-Hire and New Hire Issues
• Wage and Hour Issues

• Classification as Employee or Co...
In each subject, we will:
• Discuss recent court decisions and statutes
• Focus primarily on California law, with
comparis...
I. PRE-HIRE AND
NEW HIRE ISSUES

4
Application Forms
• Recommend using application forms
• Easier to compare education and history

• Easier to spot gaps in ...
Background Checks

• Misconceptions about limits on references
• Calling often yields much information
• More than verifyi...
Offer Letters
• Position and rate of pay
• Employment terminable at will
• Reference to handbook
• Confidentiality require...
Employee Handbooks

• Avoids Need for Individual Agreements

• Gives Employer Flexibility to Modify
• Should Minimally Inc...
Nondisclosure & Confidentiality Agreements

• Broad but Business-Specific Definitions
• Protection During & After Employme...
II. WAGE & HOUR ISSUES

10
Exempt vs. Nonexempt

• NONEXEMPT Must Be:
•
•
•
•

Paid at least minimum wage
Paid overtime for 8 hrs/day and 40/wk
Provi...
Exempt Status is Difficult to Prove
• Law presume nonexempt status
• Employer must prove exemption:
• Professional Exempti...
Practice Tips for Overtime Issues

• Be wary of employees “hard workers”
• Require time records
• All hours worked are rep...
Meal Break Requirements

• Minimum 30 minutes “duty free”
• To be taken by the 5th hour of work
• Employee may waive if wo...
Practice Tips for Meal Breaks

• Have employees WRITE meal breaks on time records

• Have employees sign time sheets with ...
Rest Break Requirements

• Opportunity to take 10-minute break
• On PAID time – no clocking out
• For each 4-hours of work...
Practice Tips for Rest Breaks

• Have employees sign time sheets with
confirmation of rest breaks
• Have rest break policy...
III. CLASSIFICATION OF EMPLOYEES &
INDEPENDENT CONTRACTORS

18
Temptations to Call Employees "Contractors"

• No Workers’ Comp Insurance
• No Withholdings or Payroll Taxes
• No Overtime...
Most Workers are Actually Employees
• Legal risks for misclassification are enormous

• Potential costs outweigh short-ter...
No Uniform Test for Contractor Status

• California Common Law Test
• California “Borello” test for workers’ comp,
wage/ho...
Internal Audit Checklist
Ask whether the Contractor . . .
• Is a corporation or LLC?
• Has a business license in your loca...
When in Doubt, Treat Workers as Employees

• Legal risks of misclassifying
employees as independent
contractors are huge
•...
Practice Tips to Prove a Worker is a Contractor
• Form DE 542 via "iICR" to EDD
• IRS Form W-9 and Annual 1099s
• Executed...
For Contractors, be Careful to Avoid

• Using "employment" applications
• References to “Work for Hire”
• References to “e...
Key Terms for Contractor Agreements

• Use Principal/Contractor language
• Contractor shall notify you it becomes an "empl...
IV. REMOTE AND OFF-SITE
EMPLOYEE ISSUES

27
Key Policy Considerations for Remote Employees
• Selection of eligible job types
• Selection of eligible employees

• Hour...
Legal Considerations for Off-Site Workers
• Wage/hour compliance and time keeping
• Workers’ compensation issues

• Confid...
EEO Laws Relating to Remote Employees

• Discrimination laws – selection of eligible employees

• Retaliation – denial of ...
Best Practices for Remote Employees
• Written agreement for each employee
• Limited-time agreement with reevaluation

• Em...
V. EMPLOYEE PERFORMANCE
PROBLEMS & TERMINATION ISSUES

32
Job Descriptions and Expectations

• Have up-to-date, written job descriptions
• Use written job expectations
• Have emplo...
Dealing with Chronic Unacceptable Performance
Give written "notice" to employees:
• Problems have arisen with performance
...
Notice to Employees Should Avoid
• Offering your help (employee may assign
work to you and blame you for problems)
• Guess...
Investigate Sensitive Complaints

• Complaints or suggestions of workplace wrongdoing
should spark a prompt and thorough i...
Person Conducting the Investigation Should

• Be relatively objective and neutral

• Be experienced in HR law and investig...
Practice Tips for Making a Termination Decision
• Investigate allegations of misconduct
• Review personnel file
• Review p...
Termination Notice and Final Wages
• Termination/layoff – wages due immediately
• Resignation
• More than 72 hours notice:...
CONCLUSION
By considering these employment law tricks and traps,
you may avoid some employment law “nightmares”
. . . and ...
QUESTIONS

41
Labor & Employment Law:

Roberta J. Burnette
DENTONS US LLP
Los Angeles

© 2014 Dentons
Dentons is an international legal ...
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Labor and Employment: What Keeps the GC Up at Night?

  1. 1. CLE Seminar for In-House Counsel Beverly Hills, CA January 7, 2014 LABOR & EMPLOYMENT LAW: What Keeps the GC Up At Night? Roberta J. Burnette Counsel, Los Angeles Dentons US LLP 213 892 2852 roberta.burnette@dentons.com
  2. 2. OVERVIEW This Program Will Cover • Pre-Hire and New Hire Issues • Wage and Hour Issues • Classification as Employee or Contractor • Remote and Off-Site Employees Issues • Performance Problems & Termination 2
  3. 3. In each subject, we will: • Discuss recent court decisions and statutes • Focus primarily on California law, with comparisons to other states & federal law issues • Offer guidance and best practices to help you avoid employment "nightmares" 3
  4. 4. I. PRE-HIRE AND NEW HIRE ISSUES 4
  5. 5. Application Forms • Recommend using application forms • Easier to compare education and history • Easier to spot gaps in employment • Extracts more information than resume • May require applicant to sign agreement - All information truthful - No omissions - If hired, employment shall be at will 5
  6. 6. Background Checks • Misconceptions about limits on references • Calling often yields much information • More than verifying employment • Verify education, licensing, other claims • Be wary of using credit checks 6
  7. 7. Offer Letters • Position and rate of pay • Employment terminable at will • Reference to handbook • Confidentiality requirements for firm • Notice of exposure to sexual or offensive information • Other requirements (e.g., arbitration agreement, nondisclosure agreement, etc.) 7
  8. 8. Employee Handbooks • Avoids Need for Individual Agreements • Gives Employer Flexibility to Modify • Should Minimally Include: • • • • • Policy Prohibiting Unlawful Harassment Availability of Vacation/Leave Time Pay Day Notice At-Will Employment Employer’s Right to Modify Policies • Be sure to review and update routinely 8
  9. 9. Nondisclosure & Confidentiality Agreements • Broad but Business-Specific Definitions • Protection During & After Employment • Lawful Limits – No Solicit or Hire-Away • Required Notice of Disclosures • Approval for Disclosures • Return on Termination 9
  10. 10. II. WAGE & HOUR ISSUES 10
  11. 11. Exempt vs. Nonexempt • NONEXEMPT Must Be: • • • • Paid at least minimum wage Paid overtime for 8 hrs/day and 40/wk Provided meal periods Provided rest breaks • EXEMPT Employees: • • • • Are not regulated by most wage/hour laws Are not entitled to or paid for overtime Do not have deductions from wages for missed work Paid a flat salary at least twice the minimum wage 11
  12. 12. Exempt Status is Difficult to Prove • Law presume nonexempt status • Employer must prove exemption: • Professional Exemption • Executive/Managerial Exemption • Administrative Exemption • “Independent Judgment and Discretion” Requirement • Key: Employee’s Duties 50% or more of time 12
  13. 13. Practice Tips for Overtime Issues • Be wary of employees “hard workers” • Require time records • All hours worked are reported • Have employees sign that they accurately reported • Try to avoid relying on outside payroll service • Use questions on self-evaluations to elicit employee reports of their exempt work • Have “exempt” employees report actual time for your records (but do not deduct from pay for missed time) 13
  14. 14. Meal Break Requirements • Minimum 30 minutes “duty free” • To be taken by the 5th hour of work • Employee may waive if work day is less than 6 hours • No other waiver or consolidation • For shifts of 10+ hours, second meal is required • Work during break leads to penalty – must pay for the meal break plus one hour of pay for the day 14
  15. 15. Practice Tips for Meal Breaks • Have employees WRITE meal breaks on time records • Have employees sign time sheets with confirmation that meal breaks were taken • Do not allow employees to eat at desk or work area • Consider closing office or dept during meal break • Do not schedule staff meetings during meal breaks • Review time records and pay meal break penalties • Have meal break policy and write up violators 15
  16. 16. Rest Break Requirements • Opportunity to take 10-minute break • On PAID time – no clocking out • For each 4-hours of work (or major fraction thereof) • No shifting to beginning/end of shift or meal break • No aggregation of shorter breaks • Work during break leads to penalty – must pay one hour of pay • Additional time may be needed to accommodate disabilities or lactation 16
  17. 17. Practice Tips for Rest Breaks • Have employees sign time sheets with confirmation of rest breaks • Have rest break policy and write up violators • Consider establishing rest break schedule • Pay attention to employee complaints about heavy work scheduled or no breaks • Review time records and pay missed rest break penalties promptly 17
  18. 18. III. CLASSIFICATION OF EMPLOYEES & INDEPENDENT CONTRACTORS 18
  19. 19. Temptations to Call Employees "Contractors" • No Workers’ Comp Insurance • No Withholdings or Payroll Taxes • No Overtime, Meal breaks, etc. • No Unemployment Compensation • No “Prompt Payment” Requirement 19
  20. 20. Most Workers are Actually Employees • Legal risks for misclassification are enormous • Potential costs outweigh short-term savings • Gov't audits, stiff fines, damages, criminal charges • Penalties for willful violations • $5,000-$15,000 per violation • If pattern of violations, $10,000-$25,000 per violation • Penalties also apply to advisors such as counsel 20
  21. 21. No Uniform Test for Contractor Status • California Common Law Test • California “Borello” test for workers’ comp, wage/hour, and FEHA cases • Federal Common Law Test • Federal “Economic Realities” Test for Title VII cases • IRS “20-Factor” (now “3-Area”) Test 21
  22. 22. Internal Audit Checklist Ask whether the Contractor . . . • Is a corporation or LLC? • Has a business license in your locality? • Has a professional license? • Has own workplace separate from your company? • Uses own equipment and supplies • Hires and pays own employees as staff? • Makes less than 30% of income from you • Leaves when job finished, not continuous work 22
  23. 23. When in Doubt, Treat Workers as Employees • Legal risks of misclassifying employees as independent contractors are huge • But legal risks of misclassifying independent contractors as employees are generally minimal 23
  24. 24. Practice Tips to Prove a Worker is a Contractor • Form DE 542 via "iICR" to EDD • IRS Form W-9 and Annual 1099s • Executed contractor agreement • Copy of business and other licenses • Certificates of contractor’s insurance • Invoices on contractor's letterhead • Business card of contractor • Websites/ads/listings by contractor • List of some other customers of the contractor 24
  25. 25. For Contractors, be Careful to Avoid • Using "employment" applications • References to “Work for Hire” • References to “employer” or “employee" • Signing Employee Handbook (unless you have policies applicable to contractors) • Signing other employee documents, e.g., employee confidentiality agreement (have a separate agreement) • Printing business cards with your name • Listing on Employee Phone/e-mail Directory • Calling payments “paychecks” or withholding taxes 25
  26. 26. Key Terms for Contractor Agreements • Use Principal/Contractor language • Contractor shall notify you it becomes an "employee" • Contractor possesses all business & trade licenses • Contractor shall maintain own insurance • Contractor must invoice you to be paid • Contractor represents it works for others, not just you • Contractor maintains own office, computer, phone, etc. • If you provide office, it is only "secondary" space • Contract is for defined project 26
  27. 27. IV. REMOTE AND OFF-SITE EMPLOYEE ISSUES 27
  28. 28. Key Policy Considerations for Remote Employees • Selection of eligible job types • Selection of eligible employees • Hours and days of work • Computers and equipment • Insurance coverage • Agreement to return it upon request or termination • No personal use of equipment • Cancellation or modification of program • Workplace health, safety and ergonomics • Written agreement in place 28
  29. 29. Legal Considerations for Off-Site Workers • Wage/hour compliance and time keeping • Workers’ compensation issues • Confidentiality of information and records • Balancing employee rights of privacy • Right to inspect location and equipment • Employee handbook policies • • • • • Attendance and tardiness Dress code Drug and alcohol policy Reporting injuries or unsafe conditions Supervision and evaluation 29
  30. 30. EEO Laws Relating to Remote Employees • Discrimination laws – selection of eligible employees • Retaliation – denial of requests or modifications • Harassment – limiting personal email, web site visits • ADA Reasonable Accommodation • different selection criteria issues • providing equipment • modifying work space 30
  31. 31. Best Practices for Remote Employees • Written agreement for each employee • Limited-time agreement with reevaluation • Employer may end arrangement at-will • May not use own computers or electronics • May only use employer equipment for work • Keep equipment and information secure • Must have a secure and separate work space • Must be available business hours (time limits) • Must accurately report all work hours 31
  32. 32. V. EMPLOYEE PERFORMANCE PROBLEMS & TERMINATION ISSUES 32
  33. 33. Job Descriptions and Expectations • Have up-to-date, written job descriptions • Use written job expectations • Have employees participate in updating their job descriptions and expectations • Clear descriptions and expectations make it easier to evaluate performance & show unsatisfactory performance 33
  34. 34. Dealing with Chronic Unacceptable Performance Give written "notice" to employees: • Problems have arisen with performance • Describe your expectations • Describe what employee has done (nonjudgmental, not exaggerated, and not angry) • Tell employee to improve or change performance to meet expectations described • Tell employee if s/he does not improve or change satisfactorily, it may lead to further corrective action, possibly termination • Direct employee to report back to you at specified times to discuss or assess progress 34
  35. 35. Notice to Employees Should Avoid • Offering your help (employee may assign work to you and blame you for problems) • Guessing about or stating underlying reasons for the unsatisfactory performance • “Beating up” with exaggerations (e.g.,“always late” or "fraudulent reports") • Inflammatory, judgmental or vague language (e.g., “horrible phone manners” or “awful performance”) • Stating you will follow up with the employee (place responsibility on employee to schedule follow up meetings) 35
  36. 36. Investigate Sensitive Complaints • Complaints or suggestions of workplace wrongdoing should spark a prompt and thorough investigation • Scope of investigation should be "appropriate" and depend on the alleged wrongdoing • Advantages of Investigations: • • • • Confirm that the employer takes allegations seriously Allow employer to take prompt effective action Tend to dissuade employees from suing Can be used as evidence to protect the employer 36
  37. 37. Person Conducting the Investigation Should • Be relatively objective and neutral • Be experienced in HR law and investigations • Conduct a thorough investigation without going overboard • Refrain from drawing premature conclusions during witness interviews • Have ability to make findings of fact and draw conclusions at end of investigation • Make a good expert witness in case of lawsuit • These tips apply to both in-house and outside investigators 37
  38. 38. Practice Tips for Making a Termination Decision • Investigate allegations of misconduct • Review personnel file • Review policies and procedures • Review documentation of performance problems • Review prior termination decisions • Explore employee’s potential claims • Remember confidentiality 38
  39. 39. Termination Notice and Final Wages • Termination/layoff – wages due immediately • Resignation • More than 72 hours notice: wages due immediately on separation • Less than 72 hours notice: wages due 72 hours after notice • All wages due, including: • Earned but unused vacation pay • Overtime pay • Reporting time pay (pay employee for day of termination) • Penalty for a mistake: up to 30 days of pay • Consider using separation agreements 39
  40. 40. CONCLUSION By considering these employment law tricks and traps, you may avoid some employment law “nightmares” . . . and sleep a little better at night 40
  41. 41. QUESTIONS 41
  42. 42. Labor & Employment Law: Roberta J. Burnette DENTONS US LLP Los Angeles © 2014 Dentons Dentons is an international legal practice providing client services worldwide through its member firms and affiliates. This publication is not designed to provide legal or other advice and you should not take, or refrain from taking, action based on its content. Please see dentons.com for Legal Notices.

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