December 12, 2008

RE: EMPLOYMENT UPDATE FOR 2009

Dear Friends, Clients and Colleagues:

Each year brings a new set of laws, regulations and scams. The number of new statutes, ordinances, regulations and case law continue to grow and impose an ever greater burden on businesses, especially small businesses and professional practices. Below is a brief review of some of the more important new laws that may impact your business or profession.

E-Verify

You may have heard about E-Verify, the computerized system by which an employer can match an employee’s identification with the federal government’s database of workers eligible for employment based on citizenship status. E-Verify is free to employers and, in the future, will be mandatory for all new hires. The system is reported to have about a 10% mistake factor. Because of the likelihood of mistake, you may want to delay signing-up for the E-Verify system.

Beginning summer of 2008, the Department of Homeland Security and Department of State are issuing “passport cards” which may be used to verify employment status.

Minimum Wage

California State minimum wage is not scheduled to rise in 2009 and will remain at $8.00. The Governator is also encouraging the introduction of other new laws to reduce the amount of wage and hour litigation, including litigation concerning meal and rest breaks violations that have plagued businesses. For the last eight years the courts have been terribly inconsistent on questions concerning an employer obligations to provide meal and rest breaks and how they may be implemented.

San Francisco minimum wage will go up to $9.79 per hour beginning January 1, 2009. Even if your office is located outside San Francisco, employees working within City limits must be paid this City specific minimum wage.

Computer Professionals: Labor Code Section 515.5 has been amended. If you employ professional computer oriented employees, effective 2009, the hourly amount they must be paid to be exempt from overtime is $36.00 per hour or an annual salary of $75,000.00. This amount will increase with the CPI January 2009. It is important to keep in mind that not all computer related employees qualify for the exemption under the duties test.

Meal and rest break compliance requirements remain unsettled in California since the Brinker case was granted review by the Supreme Court. To be safe, meal and rest breaks should be enforced and non-exempt employees must confirm, in writing, each day they take or don’t their breaks. It is essential that employees sign off on a notice confirming the company’s meal and rest break policy. It is the employer’s legal obligation to keep records on meal and rest breaks taken and these records should be kept in storage for a minimum of four years. Effective 2008, the statute of limitations concerning meal and rest break violations is four years. Not only are employers penalized for violating this component of the Labor Code, additional penalties can be added under Labor Code Section 203 which equal thirty days of wages for each affected employee.

Duty free meal breaks must be at least 30 minutes long and must be provided during the 5th hour of work, or before. Ten minute rest breaks should be made mandatory during the mid-morning and mid-afternoon. Though there is an exception to this rule for construction companies under very limited circumstances, the exception is so narrow it is best to follow the general rule.

The Brinker case also held that employers are liable for wages if they know or should know that employees are working off the clock. If you have employees who arrive at work early to avoid peak rush hour traffic and begin working before the regular workday or, if you have employees that run errands for the business before arriving at the office or after the official workday, this is compensable time.

The Starbucks case made it abundantly clear that business owners and employees holding a supervisory or management position may not take any portion of pooled tips even if they provide direct service to the patron.

Bradstreet vs. Wong confirmed the decision in Reynolds vs. Bement which held that officers and directors are not personally liable for corporate debts to employees for unpaid wages. Some of you might recall that prior to 2006 when the Reynolds case was decided, officers and directors were held liable.

What the court gives with one hand, it takes away with the other. This new case also opened the door for personal liability of the officers and directors. If the plaintiff/employee can pierce the corporate veil, the officers and directors may, in fact, be liable for unpaid wages.

What to do? Make certain you are following all mandatory corporate formalities so that your corporation cannot be pierced. This includes holding regular annual and special meetings, adhering to corporate bookkeeping requirements and otherwise following typical corporate formalities. If you haven’t held a corporate meeting in the last 12 months, it’s time to call my office.

In Lonicki vs. Sutter Health the court held that an employer cannot interfere with an employees outside employment, including employment with a competitor.

In Edwards vs. Arthur Anderson the court held that any non-compete signed by an employee is void as a matter of law. The court threw out the old defense of “narrow restriction”. However, trade secret agreements and confidentiality agreements remain enforceable provided they do not contain a non-compete component.

If your company provides computers, PDA’s, cell phones or other communication devises, check the company’s written privacy policy. If your company doesn’t have a privacy policy, now is the time to create one. In Quon v Arch Wireless Operating Company the court directed employers to be explicit regarding the scope of privacy extended to employees.

In the Quon case the court reversed a long line of cases that held that employees have no reasonable expectation of privacy with regard to the computers, cell phones and other electronic devises furnished by the employer. This is likely to be an area the court will explore again in the company years since more and more of our lives are spent using a variety of electronic devises that store conversations, text messages, emails and other forms of communication.

What to do? Make certain you have an explicit and comprehensive privacy policy signed by every employee.

The Americans With Disabilities Act or ADA has been revised and those revisions become effective January 1, 2009. The new law is titled the ADA Amendments Act. The provisions of the ADA have been greatly expanded in a variety of ways including a new more extensive list of covered disabilities. The new law excludes consideration of mitigating measures and expands the definition of “major life activity”.

What to do? Employers should be cautious of every decision to terminate, demote or taking any other adverse employment action against a covered employee. Most court watchers expect this newly expand law to generate a great deal of litigation in the coming years as the courts try to make sense of the greatly expanded provisions.

Family Leave has been expanded so that an eligible employee or spouse, son daughter, parent or next of kin of a covered service member is entitled to a total of 26 weeks of Family Medical Leave to care for the service member.

Scams:

Many of you continue to report the receipt of correspondence from companies offering to sell annual board of director meeting minutes to your company. The charges typically range from $100-200.00 for which you receive a fill in the blanks form, nothing more. These solicitations arrive in official looking envelopes that appear to come from the Secretary of State. Don’t fall for this expensive scam.

Because of the decision in Bradstreet vs. Wong referred to above, it is even more critical that your annual and special meeting minutes be done properly and that efforts be made to prevent anyone from piercing the corporate veil to attack you personally in litigation.

The above isn’t an exhaustive review of all the changes in the law that are of significance to your business and you can expect that as we wind through 2009, new cases will be decided and new laws passed by the state legislature and Congress that are of significance to your business or professional practice.

Best wishes for a healthy and happy new year.

Sincerely yours,

Steve

Image taken on 2006-04-09 15:29:34. Image Source. (Used with permission)