Bonuses are discretionary or non-discretionary. This means that an employer has or does not have the discretion to award a bonus. This is based on the terms of the bonus program or specific arrangement between an employee and employer. Non-discretionary bonuses are those that have specific criteria for meeting objectives and once those objectives are met then the bonus is earned. With a discretionary bonus an employer has the option to award a person a bonus or not. Employers should be careful about how they award discretionary bonuses. They should avoid claims of discrimination or retaliation for not awarding a bonus to a particular person.
Contracts should be used to clarify and memorialize understanding between people and businesses in a transaction or arrangement. They are used in a multitude of areas, including employment, independent contracting, leases, real estate purchases, commercial transactions and so on. Contracts should be written to protect a person’s or business’ legal interests and objectives. Liability and business risks must be carefully considered to form the appropriate contract for a person’s or a business’ situation. For information about breach of contract, please see “Breach of Contract” under “Wage & Hour Law.”
Small and large contractors need to have adequate protection in their contracts against various liabilities from subcontractors, employees, owners, and other third parties. Of course, in addition to properly drafted agreements, contractors must have adequate insurance protection. Construction contracts often involve mechanics’ liens and this process should be followed for preservation of rights and protection.
This area of the law is expanding and getting more attention with social networks and the Internet. “Defamation is an invasion of the interest in reputation. The tort involves the intentional publication of a statement of fact that is false, unprivileged, and has a natural tendency to injure or which causes special damage.” (Smith v. Maldonado (1999) 72 Cal.App.4th 637, 645 [85 Cal.Rptr.2d 397].) Generally, when a person communicates (orally or in writing) a false factual statement to another person about a third person and that statement harms that third person’s reputation, profession, or occupation such a statement could constitute defamation if it is not a privileged statement.
The requirements for proving defamation vary depending on whether the plaintiff (person suing) is a public figure or a private figure, whether the subject matter of the defamatory statement is of public concern or not, whether the nature of the defamation is per se or per quod. “If [a] defamatory meaning would appear only to readers who might be able to recognize it through some knowledge of specific facts and/or circumstances, not discernible from the face of the publication, and which are not matters of common knowledge rationally attributable to all reasonable persons, then the libel cannot be libel per se but will be libel per quod.” (Palm Springs Tennis Club v. Rangel (1999) 73 Cal.App.4th 1, 5 [86 Cal.Rptr.2d 73], internal citation omitted.)
Damages recoverable for the plaintiff could include presumed damages, actual damages, and punitive damages. Plaintiffs can also be a company, corporation, or entity.
Discrimination and harassment can be extremely harmful to the victims and costly to the employer and the harassing employee. However, being treated worse than other employees may not necessarily be illegal and having a supervisor who is hostile toward an employee may not necessarily be illegal.
California’s Fair Employment and Housing Act defines discrimination as follows. This is not the complete text of the entire law defining discrimination.
CA Government Code §12940. “It shall be an unlawful employment practice, unless based upon a bona fide occupational qualification, or, except where based upon applicable security regulations established by the United States or the State of California:
(a) For an employer, because of the race, religious creed, color, national origin, ancestry, physical disability, mental disability, medical condition, marital status, sex, age, or sexual orientation of any person, to refuse to hire or employ the person or to refuse to select the person for a training program leading to employment, or to bar or to discharge the person from employment or from a training program leading to employment, or to discriminate against the person in compensation or in terms, conditions, or privileges of employment.”
Medical condition generally relates to cancer or genetic characteristic.
The most common type of illegal employment discrimination is called disparate treatment. It occurs when an employee is treated worse than other employees who are not in the same protected class. A protected class consists of the employees who have the same protected characteristic, such as race, religious creed, color, national origin, ancestry, marital status, sex, sexual orientation, and so on.
A less common form of illegal employment discrimination is called disparate impact. It occurs when an employer has a practice or policy that has a disproportionate adverse affect on people of a protected class.
Harassment and retaliation against an employee for reporting discrimination or harassment are also illegal. Please see more under “Harassment” and “Retaliation.”
Drug Use & Drug Testing
Employers have a legal obligation to provide a safe work environment. On the other hand, employees want the freedom to use alcohol, recreational drugs, and prescribed medication and their privacy protected as well.
Employees should avoid the use of legal or illegal drugs or alcohol if they cause substantial impairment at work and that impairment might endanger the employee or someone else, pose a risk of significant damage to the employer’s property, or substantially interfere with the employee’s job performance. Doing otherwise risks the health and safety of the intoxicated person and other people. It risks damage to property, and it also risks losing employment due to poor performance or bad conduct.
Employers have a right to properly test for use of drugs with minimal invasiveness under certain circumstances, such as a condition for employment in a safety-sensitive position. Some employers test for drug use upon reasonable suspicion that an employee is substantially impaired at work in a safety-sensitive position. The typical drug test is a urinalysis.
Since drug testing issues can be challenging and involve various aspects of the law, including invasion of privacy, discrimination such as failure to accommodate a disabled employee, and negligence, an employer who suspects an employee is impaired at work or an employee who believes that their privacy rights will be violated through a drug test should discuss their situation with an attorney.
Ideally, an employer wants to create an environment that allows employees to be their best, to maximize their productivity and creativity. Employees want this as well. Sometimes employees do not perform their best. This can be for various reasons – they may be sick, affected by a disability or treatment of a physical or mental condition, they may have personal problems or problems at home affecting their performance, they may feel disrespected or unchallenged or overwhelmed at work, they may be harassed by a coworker, they may lack training for their position, they may lack the tools or information to perform their best, they may be worried about a sick or struggling family member or friend, and so on. The reasons can vary.
Employees may also have conduct issues. They may be harassing, discriminating against or hostile toward a coworker, be disruptive, be too dominant, or be disrespectful of coworkers, contractors, vendors, or customers, and so on. They may exhibit this conduct for a variety of reasons. Misconduct could stem from prior similar experiences, childhood experiences, or constitute defense against someone else’s adverse action toward them. Anger or hostility or withdrawal could be caused by excessive pressure by management to meet difficult deadlines or goals or by frustration with inability to obtain cooperation from a coworker, vendor, or customer.
Whether an employee is lacking in performance or has a conduct problem, there can be many explanations for their behavior. Some misconduct is illegal and could create liability for an employer and/or personal liability for an individual, such as harassment under California’s Fair Employment and Housing Act.
Steps should be taken to improve performance or conduct issues. Effort should be made to identify what constitutes proper performance and conduct and work toward that objective. Sometimes, a particular person is lacking training that can be provided. If a person is not a good fit for the job for reasons other than training such as a personality conflict, perhaps a different job within the organization would provide the necessary change for good productivity.
There are times when an employee requires a warning, especially if they have a serious conduct or performance issue. An employee may need to be put on a performance improvement plan where an employer identifies measurable goals to meet within a specific time and provides the tools, training, time, and environment necessary for the employee to improve. When an employee cannot meet the objectives, then unless there is a better fitting job for the employee, that employee’s employment typically ends and they can find a job with another employer that is better suited for them. Assuming an employee is “at-will” pursuant to California Labor Code §2922, sometimes a single incident of misconduct requires termination due to the high risk they pose to others, themselves, or property. (Under Labor Code §2922, at at-will employee can be let go or terminated at any time and for no reason.)
At times, managers or supervisors don’t work well with a particular employee. This may be a result of personality conflicts, misunderstanding, organizational politics, or other reasons. An employer may find that if the employee is a good performer, that it is more cost effective to relocate one of the employees within the organization than to terminate their employment. The transferred employee also benefits by retaining employment and being able to work in an environment more conducive to high productivity and work satisfaction.
An employer should be careful when disciplining an employee to avoid discrimination, harassment, or retaliation against an employee. Retaliation can include not just adverse action against an employee for reporting discrimination or harassment, but also for reporting any reasonably believed illegal conduct or practice.
Harassment can be illegal or not. Either way, it is wrong and harmful. Harassment under the federal Civil Rights Act and the California Fair Employment and Housing Act (“FEHA”) can cause liability for the employer. Under FEHA, the individual harasser can be held individually liable. (CA Gov. Code §12940(j) (3)) Harassment is illegal if it is based on race, religious creed, color, national origin, ancestry, physical disability, mental disability, medical condition, marital status, sex, age, or sexual orientation.
California’s Fair Employment and Housing Act specifically defines harassment.
“CA Government Code §12940:
It shall be an unlawful employment practice, unless based upon a bona fide occupational qualification, or, except where based upon applicable security regulations established by the United States or the State of California:
(j) (1) For an employer, labor organization, employment agency, apprenticeship training program or any training program leading to employment, or any other person, because of race, religious creed, color, national origin, ancestry, physical disability, mental disability, medical condition, marital status, sex, age, or sexual orientation, to harass an employee, an applicant, or a person providing services pursuant to a contract. Harassment of an employee, an applicant, or a person providing services pursuant to a contract by an employee, other than an agent or supervisor, shall be unlawful if the entity, or its agents or supervisors, knows or should have known of this conduct and fails to take immediate and appropriate corrective action. An employer may also be responsible for the acts of nonemployees, with respect to sexual harassment of employees, applicants, or persons providing services pursuant to a contract in the workplace, where the employer, or its agents or supervisors, knows or should have known of the conduct and fails to take immediate and appropriate corrective action. In reviewing cases involving the acts of nonemployees, the extent of the employer’s control and any other legal responsibility which the employer may have with respect to the conduct of those nonemployees shall be considered. An entity shall take all reasonable steps to prevent harassment from occurring. Loss of tangible job benefits shall not be necessary in order to establish harassment.
(2) The provisions of this subdivision are declaratory of existing law, except for the new duties imposed on employers with regard to harassment.
(3) An employee of an entity subject to this subdivision is personally liable for any harassment prohibited by this section that is perpetrated by the employee, regardless of whether the employer or covered entity knows or should have known of the conduct and fails to take immediate and appropriate corrective action.”
“[H]arassment because of sex includes sexual harassment, gender harassment, and harassment based on pregnancy, childbirth, or related medical conditions.” Government Code section 12940(j)(4)(C)
To fully understand harassment and the scope of liability, one should read all of the relevant sections of FEHA, the federal Civil Rights Act, and related court decisions.
In addition to discrimination, harassment, and retaliation for reporting harassment or discrimination, sometimes bullying occurs in the workplace. Bullying could be illegal, depending on its severity, the nature of the bullying, and who is victimized. Subordinates are especially vulnerable to this misconduct, particularly in a declining economy when employees are concerned about job security and paying their bills. If they have no nest egg on which to live and no other employment options, they are forced to tolerate abusive conduct by their superiors. This can cause severe emotional distress and mental illness. Bullying will certainly impair an employee’s ability to perform their best regardless of whether the bully is a superior, coworker, or vendor/contractor.
Illegal sexual harassment typically comes in two forms, quid pro quo and hostile environment.
Generally, quid pro quo harassment generally occurs when a supervisor or agent of an employer makes unwanted sexual advances to another employee, a job applicant, or a contractor, or engages in unwanted verbal or physical conduct of a sexual nature; and job benefits are conditioned on acceptance of the harasser’s sexual advances or conduct, or employment decisions affecting the victim are made based on the victim’s acceptance or rejection of the sexual advances or conduct; the victim was harmed; and the harasser’s conduct was a substantial factor in causing the victim’s harm.
Hostile environment sexual (and other forms of) harassment generally occurs when the victim is subjected to unwanted harassing conduct by a supervisor, agent, or employee of a sexual nature (or because of the victim’s race, religious creed, color, national origin, ancestry, physical disability, mental disability, medical condition, marital status, sex, age, or sexual orientation), the harassment is severe or pervasive, a reasonable person in the victim’s circumstances would have considered the work environment hostile or abusive, the victim considered the work environment hostile or abusive, the victim is harmed, and the harassing conduct is a substantial factor in causing the harm.
Under FEHA, race, religious creed, color, national origin, ancestry, physical disability, mental disability, medical condition, marital status, sex, age, or sexual orientation “includes a perception that the person has any of those characteristics or that the person is associated with a person who has, or is perceived to have, any of those characteristics.” CA Government Code §12926(m) Harassment can also be found when the plaintiff (person suing) was not the target of the harassment.
The requirements for proving harassment and the affirmative defenses under the federal Civil Rights Act and FEHA are not identical. To fully understand harassment and the scope of liability, one should read all of the relevant sections of FEHA, the federal Civil Rights Act, and related court decisions.
California law requires that certain employers train managers and supervisors in prevention of sexual harassment. For purposes of this law, “employer” means any person regularly employing 50 or more persons or regularly receiving the services of 50 or more persons providing services pursuant to a contract, or any person acting as an agent of an employer, directly or indirectly, the state, or any political or civil subdivision of the state, and cities. This law was AB 1825 and has been codified at Government Code §12950.1.
Interference with a Contract or a Prospective Economic Advantage
Competing with another business is normal and accepted, so long as it is done legally. When someone knows of an existing contract and they intentionally disrupt the performance of that contract depriving one of the contractual parties of the benefits of the contract or causing the performance of the party’s obligations under the contract to be more costly or burdensome, such disruption could constitute interference with a contract. A primary difference between interference with a contract and interference with a prospective economic advantage is that in the later situation, a contract does not yet exist, but there is a likely prospect that a contract will be formed and the parties to the contract would benefit from that contract if the relationship was not disrupted.
The elements of the tort of interference with a contract are “(1) a valid contract between plaintiff and a third party; (2) defendant’s knowledge of this contract; (3) defendant’s intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage.” (Pacific Gas & Electric Co. v. Bear Stearns & Co. (1990) 50 Cal.3d 1118, 1126 [270 Cal.Rptr. 1, 791 P.2d 587], internal citations omitted.) See also the case of Buckaloo v. Johnson (1975) 14 Cal.3d 815 which explains the tort in the context of a real estate transaction. Interference can come in various forms, including through defamation or inducing litigation.
Intentional Infliction of Emotional Distress
“A cause of action [lawsuit] for intentional infliction of emotional distress exists when there is ‘(1) extreme and outrageous conduct by the defendant with the intention of causing, or reckless disregard of the probability of causing, emotional distress; (2) the plaintiff’s suffering severe or extreme emotional distress; and (3) actual and proximate causation of the emotional distress by the defendant’s outrageous conduct.’ A defendant’s conduct is ‘outrageous’ when it is so ‘extreme as to exceed all bounds of that usually tolerated in a civilized community.’ And the defendant’s conduct must be ‘intended to inflict injury or engaged in with the realization that injury will result.’ ” (Hughes v. Pair (2009) 46 Cal.4th 1035, 1050-1051 [95 Cal.Rptr.3d 636, 209 P.3d 963])
In employment, a supervisor can cause severe emotional distress to a subordinate by yelling at an employee and terminating them, or by graphic threats of physical harm, or by other outrageous conduct. However, depending on the facts of the situation, emotional distress may be covered by Workers’ Compensation law and therefore deny an employee with a viable or successful lawsuit. If the outrageous conduct is connected with another illegal act like sexual harassment or discrimination, the victim may succeed with a claim for intentional infliction of emotional distress.
Labor Code Violations – Other than Wage Issues
The following are a few Labor Code sections that are more commonly violated than others.
§970 – Fraud in Inducement to Relocate. An employer can be liable if it knowingly induces someone to relocate to accept employment based on false statements about the compensation, the nature of the job, or other aspects of the job which induce the new employee to relocate for the job. This wrongdoing can be costly to an employer both criminally and civilly. As noted in the code below, a successful employee plaintiff can recover double damages (the loss they suffered).
970. “No person, or agent or officer thereof, directly or indirectly, shall influence, persuade, or engage any person to change from one place to another in this State or from any place outside to any place within the State, or from any place within the State to any place outside, for the purpose of working in any branch of labor, through or by means of knowingly false representations, whether spoken, written, or advertised in printed form, concerning either:
(a) The kind, character, or existence of such work;
(b) The length of time such work will last, or the compensation therefor;
(c) The sanitary or housing conditions relating to or surrounding the work;
(d) The existence or nonexistence of any strike, lockout, or other labor dispute affecting it and pending between the proposed employer and the persons then or last engaged in the performance of the labor for which the employee is sought.”
971. “Any person, or agent or officer thereof, who violates Section 970 is guilty of a misdemeanor punishable by a fine of not less than fifty dollars ($50) nor more than one thousand dollars ($1,000) or imprisonment for not more than six months or both.”
972. “In addition to such criminal penalty, any person, or agent or officer thereof who violates any provision of Section 970 is liable to the party aggrieved, in a civil action, for double damages resulting from such misrepresentations.”
§1050 – Preventing or Attempting to Prevent a Former Employee from Obtaining Employment by Misrepresentation. An employer can be liable for misrepresenting facts about a former employee in an attempt to prevent the former employee from obtaining new employment. A lawsuit for violation of this code section often includes a claim (cause of action) for defamation. This is a costly violation for an employer, as it could owe triple damages, pursuant to §1054. Here are some of the related code sections.
1050. “Any person, or agent or officer thereof, who, after having discharged an employee from the service of such person or after an employee has voluntarily left such service, by any misrepresentation prevents or attempts to prevent the former employee from obtaining employment, is guilty of a misdemeanor.”
1053. “Nothing in this chapter shall prevent an employer or an agent, employee, superintendent or manager thereof from furnishing, upon special request therefor, a truthful statement concerning the reason for the discharge of an employee or why an employee voluntarily left the service of the employer. If such statement furnishes any mark, sign, or other means conveying information different from that expressed by words therein, such fact, or the fact that such statement or other means of furnishing information was given without a special request therefor is prima facie evidence of a violation of sections 1050 to 1053.”
1054. “In addition to and apart from the criminal penalty provided any person or agent or officer thereof, who violates any provision of sections 1050 to 1052, inclusive, is liable to the party aggrieved, in a civil action, for treble damages. Such civil action may be brought by such aggrieved person or his assigns, or successors in interest, without first establishing any criminal liability under this article.”
§1102.5 – Whistle blowing. This is a general whistle blowing statute. If an employee reasonably believes that an illegal act has occurred at work, they report this act to a law enforcement agency or government, the employer learns of the employee’s report, and then the employer takes adverse action against the employee, such as a demotion or termination, the employer’s adverse action may be illegal. This law covers a variety of situations as shown below.
This code section in part states:
1102.5. “(a) An employer may not make, adopt, or enforce any rule, regulation, or policy preventing an employee from disclosing information to a government or law enforcement agency, where the employee has reasonable cause to believe that the information discloses a violation of state or federal statute, or a violation or noncompliance with a state or federal rule or regulation.
(b) An employer may not retaliate against an employee for disclosing information to a government or law enforcement agency, where the employee has reasonable cause to believe that the information discloses a violation of state or federal statute, or a violation or noncompliance with a state or federal rule or regulation.
(c) An employer may not retaliate against an employee for refusing to participate in an activity that would result in a violation of state or federal statute, or a violation or noncompliance with a state or federal rule or regulation.
(d) An employer may not retaliate against an employee for having exercised his or her rights under subdivision (a), (b), or (c) in any former employment.
(e) A report made by an employee of a government agency to his or her employer is a disclosure of information to a government or law enforcement agency pursuant to subdivisions (a) and (b).”
In addition to this general whistle blowing statute, some industries, professions, or areas of the law have their own specific whistle blowing statutes that are different than Labor Code §1102.5.
§2802 – Reimbursement for Business Expenses. This code section requires employers to reimburse employees for legitimate business expenses that they incur on behalf of their employer when performing their job and provides a limited indemnification (protection) for the employee against losses incurred in performing their job. The code is below.
2802. “(a) An employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties, or of his or her obedience to the directions of the employer, even though unlawful, unless the employee, at the time of obeying the directions, believed them to be unlawful.
(b) All awards made by a court or by the Division of Labor Standards Enforcement for reimbursement of necessary expenditures under this section shall carry interest at the same rate as judgments in civil actions. Interest shall accrue from the date on which the employee incurred the necessary expenditure or loss.
(c) For purposes of this section, the term “necessary expenditures or losses” shall include all reasonable costs, including, but not limited to, attorney’s fees incurred by the employee enforcing the rights granted by this section.”
§6310 – Health & Safety Whistle Blowing under CA OSHA. This code generally prohibits an employer from taking adverse action against an employee who complains, testifies; or initiates a proceeding about employee safety or health; or participates in a safety committee established pursuant to §6401.7. The code is below.
6310. “(a) No person shall discharge or in any manner discriminate against any employee because the employee has done any of the following:
(1) Made any oral or written complaint to the division, other governmental agencies having statutory responsibility for or assisting the division with reference to employee safety or health, his or her employer, or his or her representative.
(2) Instituted or caused to be instituted any proceeding under or relating to his or her rights or has testified or is about to testify in the proceeding or because of the exercise by the employee on behalf of himself, herself, or others of any rights afforded him or her.
(3) Participated in an occupational health and safety committee established pursuant to Section 6401.7.
(b) Any employee who is discharged, threatened with discharge, demoted, suspended, or in any other manner discriminated against in the terms and conditions of employment by his or her employer because the employee has made a bona fide oral or written complaint to the division, other governmental agencies having statutory responsibility for or assisting the division with reference to employee safety or health, his or her employer, or his or her representative, of unsafe working conditions, or work practices, in his or her employment or place of employment, or has participated in an employer-employee occupational health and safety committee, shall be entitled to reinstatement and reimbursement for lost wages and work benefits caused by the acts of the employer. Any employer who willfully refuses to rehire, promote, or otherwise restore an employee or former employee who has been determined to be eligible for rehiring or promotion by a grievance procedure, arbitration, or hearing authorized by law, is guilty of a misdemeanor.”
Layoffs, Reductions in Force, At-will Employment
Generally, most employees are “at will” as defined by Labor Code §2922. This means that an employer or an employee can end the employment relationship at any time without any prior notice and for any lawful reason. Unlawful reasons can include, but are not limited to, discrimination, retaliation for whistle blowing, retaliation for reporting discrimination or harassment, and sometimes illegal constructive discharge.
In some circumstances when a company has a mass layoff or a plant closure, employers need to follow certain provisions in federal and state law, including advance notice to employees about the mass layoff or plant closure. These laws are known as the WARN Acts, which stands for “Worker Adjustment and Retraining Notification Act.”
The Federal WARN Act covers employers with 100 or more employees, excluding part-time employees, or 100 or more employees including part-time employees if all the employees work at least 4,000 hours per week, excluding overtime. Generally, employers covered by the Federal WARN Act are required to provide 60 days advance notice to its employees of a mass layoff or plant closing, as those terms are defined in the law. There are several exceptions to the warning requirement.
California’s WARN Act (AB 2957) was signed by Governor Gray Davis in September 2002. California’s law covers employers with 75 or more employees working in a single facility. A 60- day advance notice is also required under California’s law. California also has exceptions to the law.
Employers should be careful about their notices anytime a layoff or reduction in force is involved to insure that they comply with the federal Older Workers’ Benefit Protection Act, which is part of the Age Discrimination in Employment Act. They should also avoid the appearance of discrimination based on age or another basis, discriminatory disparate impact, and Employee Retirement Income Security Act (“ERISA”) violations.
Medical Leaves of Absence
An employer can allow employees to have more time off for sick leave or medical leaves than the law requires but they are not required to.
The federal Family and Medical Leave Act (“FMLA”) and the California Family Rights Act (“CFRA”) generally allow an employee who has worked for an employer which has at least 50 employees in a 75 mile radius of the location where the employee works and who has worked for their employer for at least a year and worked at least 1,250 hours in the last year, to have up to 12 weeks off of work in a 12 month period for –
1) their own serious health condition or injury,
2) the serious health condition of a spouse, son, daughter or parent,
3) the birth of a son or daughter or to care for such child, or
4) the placement of a son or daughter with the employee for adoption or foster care.
The FMLA includes pregnancy, childbirth or related medical conditions as part of an employee’s “serious health condition” but CFRA does not.
Special provisions under the FMLA apply to service members of the military.
Also, an occupational injury may entitle an employee to more than 12 weeks of medical leave under California’s Workers’ Compensation law.
The Fair Employment and Housing Act(“FEHA”) and the Americans with Disabilities Act (“ADA”) have been interpreted to require an employer to provide time off of work as a form of accommodation for a disability so long as the time off does not create an undue hardship for an employer. The amount of time allowed off depends on the type of job held, the size and nature of the business, and possibly other factors to determine if an employer would suffer an undue hardship for a particular absence. The length of the medical leave could exceed the 12 weeks allowed under the FMLA or CFRA. The employers subject to the Fair Employment and Housing Act must have at least five employees but there is no minimum tenure or work time that an employee must work to be entitled to a disability leave under FEHA.
Make-up Time. California Labor Code §513 allows non-exempt employees to take time off without loss under a makeup time arrangement and protects the employer from paying overtime. If an employee has a personal obligation and submits a written request for time off of work and works the hours that were missed for the personal obligation in the same workweek, then the employee can work those missed hours and the employer does not need to pay overtime to the employee unless the hours worked on the day that the makeup time is worked exceed 11 hours or 40 hours in that workweek.
Many businesses, especially in Silicon Valley, are very protective of their trade secrets and confidential information. They often have new employees sign agreements requiring that the employee not disclose, use, or misappropriate any trade secret or confidential information during or after their employment. However, for these agreements to be legal in California, they generally cannot preclude an employee from working for a competitor. However, there are exceptions to the general rule.
In California, Business & Professions Code §16600, et seq., generally permits employees to work for an employer that competes with their prior employer so long as the employee does not misappropriate, disclose or use trade secrets belonging to their former employer.
Business & Professions Code §16600 provides: “Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.”
There are a few exceptions to this general rule and special laws pertaining to partnerships, limited liability companies, certain corporations, the publication industry, telephone answering service and employment agencies.
Additionally, please note that use of a company’s confidential information, which may not be a trade secret, could be a violation of the Unfair Competition Law (Business & Professions Code §17200) since generally, everything an employee acquires by virtue of his or her employment belongs to the employer (Labor Code §2860).
Non-Solicitation of Employees Agreements
Generally, a company can form an enforceable agreement with an employee that restricts the employee from soliciting the company’s employees away from the company. One year after an employee has left their employment with a company has been held to be an enforceable restriction period. Loral Corp. v. Moyes (1985) 174 Cal.App.3d 268
Pregnancy Discrimination and Leaves
California has a pregnancy disability law (“PDLL”, Government Code §12945(a)) which is part of the Fair Employment and Housing Act (“FEHA”). It allows an employee up to four months of leave for disability due to an employee’s pregnancy, childbirth, or related medical conditions if the employer she works with has at least five employees. (This leave is for disabilities and not an automatic leave right solely due to pregnancy.) In addition, if the employee and employer meet the requirements under CFRA (See Medical Leaves of Absence on this website), the employee is entitled to 12 weeks of leave under the California Family Rights Act to bond with her child (“for reason of the birth of her child” (2 Cal.C.Regs. §7291.13(c)), assuming she has not used any of the 12 weeks in the year prior to her pregnancy disability leave). FEHA also provides for transfers to alternative jobs in certain circumstances and reasonable accommodation due to pregnancy, childbirth or related medical conditions.
Under the Family and Medical Leave Act (“FMLA”) a “serious health condition” includes incapacity due to pregnancy, childbirth or related medical conditions. Thus, under FMLA, an employee can take up to 12 weeks off of work for such serious health conditions. Pregnancy leave under the FMLA runs concurrently (at the same time) with leave under the California PDLL.
An employee’s privacy is protected under various laws, including the California and U.S. Constitutions, the federal Health Insurance Portability and Accountability Act (“HIPAA”), California’s Confidentiality of Medical Information Act (CA Civil Code §56), and other laws. Some of the areas covered by privacy protection laws include, misuse of confidential information, intrusion into personal activities, medical examinations, drug testing, disclosure of medical information, and developing law regarding company computer/Internet/cell phone use.
In these privacy cases, the issues often involve the individual’s expectation of privacy and the employer’s justification or interests, along with potentially less invasive alternatives.
Illegal retaliation generally consists of adverse actions that an employer takes against an employee when an employee is exercising a right they have under the law. Retaliation can come in various forms but it is often in response to whistle blowing (reporting a reasonably perceived illegal situation to an authority), or to an employee reporting harassment or discrimination, or an employee exercising a right under the California Labor Code. [See CA Labor Code §98.6] There are several federal and state laws that provide protection for employees who report violations of law.
The Fair Employment and Housing Act contains this language about retaliation:
Government Code §12940: “It shall be an unlawful employment practice, unless based upon a bona fide occupational qualification, or, except where based upon applicable security regulations established by the United States or the State of California:
(h) For any employer, labor organization, employment agency, or person to discharge, expel, or otherwise discriminate against any person because the person has opposed any practices forbidden under this part or because the person has filed a complaint, testified, or assisted in any proceeding under this part.”
For more information about retaliation and whistle blowing see Labor Codes §1102.5 and §6310 and “Whistle Blowing” herein.
In addition to patent, copyright, and trademark protections for businesses, in Silicon Valley, throughout California, and in many other parts of the United States, protecting trade secrets is vital to a company’s success. Trade secrets can cover areas that may not normally be thought of as a trade secret, and can include information, including a formula, a pattern, a compilation, a program, a device, a method, a technique, or a process. Employers typically require employees to sign contracts where the employee agrees to keep their trade secrets confidential. This is a common method used to help protect the employer and to address §3426(a) and (d)(2) of the Uniform Trade Secrets Act.
California has adopted the Uniform Trade Secrets Act, which provides protection for companies against misappropriation of trade secrets. California’s Civil Code §3426 et seq. codifies the law that California uses. Some parts of the law are provided below, but this is only part of the law. The entire act is several code sections long, beginning with §3426. As with all of our codes or statutes, the courts have interpreted their meaning which can vary from a simple reading of the code.
3426.1. As used in this title, unless the context requires otherwise:
(a) “Improper means” includes theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means. Reverse engineering or independent derivation alone shall not be considered improper means.
(b) “Misappropriation” means:
(1) Acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or
(2) Disclosure or use of a trade secret of another without express or implied consent by a person who:
(A) Used improper means to acquire knowledge of the trade secret; or
(B) At the time of disclosure or use, knew or had reason to know that his or her knowledge of the trade secret was:
(i) Derived from or through a person who had utilized improper means to acquire it;
(ii) Acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or
(iii) Derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or
(C) Before a material change of his or her position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake.
(c) “Person” means a natural person, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, government, governmental subdivision or agency, or any other legal or commercial entity.
(d) Trade secret” means information, including a formula, pattern, compilation, program, device, method, technique, or process, that:
(1) Derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and
(2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”
3426.2. (a) Actual or threatened misappropriation may be enjoined. Upon application to the court, an injunction shall be terminated when the trade secret has ceased to exist, but the injunction may be continued for an additional period of time in order to eliminate commercial advantage that otherwise would be derived from the misappropriation.
(b) If the court determines that it would be unreasonable to prohibit future use, an injunction may condition future use upon payment of a reasonable royalty for no longer than the period of time the use could have been prohibited.
(c) In appropriate circumstances, affirmative acts to protect a trade secret may be compelled by court order.
3426.3. (a) A complainant may recover damages for the actual loss caused by misappropriation. A complainant also may recover for the unjust enrichment caused by misappropriation that is not taken into account in computing damages for actual loss.
(b) If neither damages nor unjust enrichment caused by misappropriation are provable, the court may order payment of a reasonable royalty for no longer than the period of time the use could have been prohibited.
(c) If willful and malicious misappropriation exists, the court may award exemplary damages in an amount not exceeding twice any award made under subdivision (a) or (b).
3426.4. If a claim of misappropriation is made in bad faith, a motion to terminate an injunction is made or resisted in bad faith, or willful and malicious misappropriation exists, the court may award reasonable attorney’s fees and costs to the prevailing party. Recoverable costs hereunder shall include a reasonable sum to cover the services of expert witnesses, who are not regular employees of any party, actually incurred and reasonably necessary in either, or both, preparation for trial or arbitration, or during trial or arbitration, of the case by the prevailing party.
3426.5. In an action under this title, a court shall preserve the secrecy of an alleged trade secret by reasonable means, which may include granting protective orders in connection with discovery proceedings, holding in-camera hearings, sealing the records of the action, and ordering any person involved in the litigation not to disclose an alleged trade secret without prior court approval.
Wage & Hour Law
Several wage and hour laws in California are more favorable for employees than their counterparts under the federal law. For instance, the minimum wage is higher in California than under the federal law and in California overtime is measured on a daily and weekly basis where as it is only measured on a weekly basis under federal law. Employers must comply with both federal and state law.
Bonuses are usually discretionary or non-discretionary. This means that an employer has or does not have the discretion to award a bonus. This is based on the terms of the bonus program or specific arrangement between an employee and employer. Non-discretionary bonuses are those that have specific criteria for meeting objectives and once those objectives are met then the bonus is earned. With a discretionary bonus an employer has the option to award a person a bonus or not. Employers should be careful about how they award discretionary bonuses. They should avoid claims of discrimination or retaliation for not awarding a bonus to a particular person.
Breach of Contract
Many of the principles mentioned in this section apply to various contracts, including employment contracts.
Employers and employees form contracts when they form the employment relationship. Typically they agree on the general duties that the employee will perform and the compensation that the employer will provide. Sometimes this is written in a letter offering employment that the employee signs to accept the position with the employer. Sometimes it is an oral agreement. It could be an implied agreement as well, which is reflected in the performance or actions of the employee and employer.
Either party, the employer or the employee, can breach the terms of the employment agreement in various ways. For example, an employee can breach the agreement by not reporting for work or not being productive. An employer can breach the agreement by not compensating the employee in the correct amount or at the agreed time.
Whenever an employment contract or any contract is breached, it usually makes sense to respectfully speak with the other party about the breach and dialogue about how to resolve the breach. If this is not successful, then mediation or other forms of dispute resolution can be used. The harmed party always has the option to sue the other party at any time, unless they wait too long and go beyond the statute of limitations (legal deadline for filing a lawsuit), or unless the parties have already agreed to a different method of dispute resolution such as arbitration and the dispute resolution agreement or arbitration agreement is enforceable.
Please note, assuming the contract is enforceable and the claim for breach of contract has merit and is not frivolous, generally, in California, the contract must contain an attorneys’ fee recovery provision for either party to have the right to recover their attorneys’ fees. California does not have an automatic recovery of attorney fees law for breach of contract when the contract is silent about recovering attorneys’ fees. (CA Code of Civil Procedure §1021)
Attorneys’ fees are recoverable in other types of claims as provided by statute related to the type of claim and in other situations. (Please see CA Code of Civil Procedure §1021.5 et seq.)
Please see “Lay-off, Reduction in Force, At-Will Employment” for the definition of “at-will” employment.
Key issues that often arise in commission cases are 1) enforceability of a contract (or compensation plan), 2) when commissions are earned, and 3) when they are paid.
Sometimes contracts are not enforceable because they are determined to be unconscionable. Contacts can be procedurally and/or substantively unconscionable. One is procedurally unconscionable when at the time of its formation, one of the parties to the contract has a substantial advantage over the other party because they are in a more powerful position. For instance, an employer can have an advantage over an employee when an employee accepts a job because the employee is less sophisticated or less knowledgeable, and they have no alternatives but to accept a job with the conditions that the employer imposes. The employee would lack bargaining power. Substantive unconscionability exists when the terms of a contract are so one sided that they shock the conscious of a reasonable person. A contract can be deemed unconscionable, and therefore, unenforceable, if it is both procedurally and substantively unconscionable, but the degree of each type of unconscionability can vary.
Compensation plans for sales people can often involve commissions that are earned once certain duties are performed, but paid at a different time. To avoid disputes over how much is owed to an employee at any particular time or at termination of their employment, compensation plans should be made as clear and simple as possible identifying exactly when the sales person has completed their duties to earn a commission and under what conditions the commission will be paid. If the language is ambiguous or uncertain, the agreement could be construed in favor of the employee, as it is typically the employer who drafts the compensation plan and if that happens, the employer will have caused the uncertainty or ambiguity to occur. [Please see CA Civil Code §1654]
Employees and independent contractors can usually recover for the value of the services they rendered even if the terms of an employment or independent contractor agreement are not discernable.
Both California and the U.S. have equal pay acts, California Labor Code §1197.5 and 29 USC §206(d), respectively. They are laws that are designed to have equal pay for males and females who do substantially equal work. Both laws are very similar. Several factors are considered, including, the skill required to do the job, the physical or mental exertion needed to perform the job, whether the responsibilities are equal, whether the employees are part of a seniority system or merit system, whether compensation is measured by quality or quantity, if the difference in pay is due to something other than sex or gender, and if the work conditions are similar. An employee may file a lawsuit under either law without first filing an administrative claim, charge, or complaint with a government agency. Nonetheless, an employee can file a federal Equal Pay Act claim with the Equal Employment Opportunity Commission. An employee can file a state Equal Pay Act violation with the CA Department of Industrial Relations, Division of Labor Standards Enforcement.
Exempt v. Non-Exempt Employment
Employers often believe that if someone is paid a salary rather than hourly, that they are exempt from overtime, minimum wage, and other Labor Codes. However, whether they are truly exempt is based on several factors which can include the amount of compensation they are paid, their duties, and other factors. Under the federal Fair Labor Standards Act (“FLSA”) and the California Industrial Welfare Commission Orders there are several categories of employment that are exempt. The standard categories of exemption are:
1) Executive exemption -generally for managers and supervisors.
2) Administrative exemption – for certain types of administrative positions where the employee uses independent judgment and discretion in performing their duties.
3) Professional exemption – typically a licensed employee such as a doctor or attorney, but not necessarily.
Under the FLSA these other types of employees are exempt from overtime and minimum wage requirements: outside sales person, agricultural workers, computer system analysts, amusement park/recreational employees, newspaper business employees, switchboard operators, seamen, criminal investigators, baby-sitters and personal attendants.
California law has these other exemptions: outside salespersons, state and local government employees, computer software design and development, members of an employer’s family, employees licensed under the Fish & Game Code, live-in employees in substance abuse alternative housing, student nurses, and carnival ride operators. California also exempts certain inside sale commissioned employees if more than half of their compensation comes from commissions.
Other exceptions to the law exist other than those noted above and the general exempt categories noted above have very specific definitions.
The tests under the Fair Labor Standards Act are different than they are under California law. An employee may qualify as being exempt under one law but not under another. Therefore the exemption requirements must be met under both laws to truly be exempt.
Determining whether an employee is exempt or not under the FLSA or California law can be tricky, so this determination should be made by someone who is familiar with these laws.
Failure to properly classify an employee as exempt or not can be costly to an employer. They can be assessed serious penalties and be liable to employees for years of underpayment of wages.
Independent Contract v. Employment
In Silicon Valley and other places, entrepreneurial spirit is alive and well. Many businesses and individuals do business together under an independent contractor arrangement. Although both parties (the business and the individual) may be content with that arrangement, under various laws the individual may actually be an employee, rather than an independent contractor. If that is the case, the business (employer) could be liable for a significant amount in overtime pay (if the employee worked overtime hours), taxes, and penalties. The employee could be losing benefits to which they are entitled under the law, such as Workers’ Compensation insurance protection provided by the employer and overtime wages. This surprise can occur when an individual’s relationship with the business ends in a manner where the “independent contractor” is discontent or unhappy and explores claims against the business, discovering that they were actually an employee.
If a business or “independent contractor” is unsure about whether they have formed an enforceable independent contractor arrangement or an employment arrangement, they should see an employment law attorney to help them make that determination because the consequences of not complying with the law can be significant.
Manager & Individual Liability for wage violations
Although managers are generally not individually liable for any wage issues related to employees, there may be potential cases where an individual could be liable. The California cases have differed in their opinion on how to define an employer who could be liable for minimum wage payments, for instance. One recent case on this issue is Matinez v. Combs (2010) 49 Cal.4th 35. In that case California’s Supreme Court changed the definition of employer under Labor Code §1194 in a minimum wage case and said that more than one entity could be held liable as an employer at the same time.
Another consideration in some situations is whether the manager could also be liable as an owner. This occurs at times when the employer is small and owned by one person or a few people. Sometimes the corporate veil can be pierced and expose the owners to liability. Generally, this happens if the owners have not followed corporate formalities, if the corporation is undercapitalized, and/or the corporation has comingled personal money with corporate money.
If an employee is non-exempt, they are entitled to a minimum hourly wage for their work under the federal Fair Labor Standards Act (“FLSA”) and California law. California’s minimum wage has been higher than the federal minimum wage. To see the latest minimum wage and an historic table of the minimum wages in California, please see the DLSE (Division of Labor Standards Enforcement) website or this link: http://www.dir.ca.gov/iwc/MinimumWageHistory.htm
Under California’s Labor Code §1194.2 an employee can recover liquidated damages equal to the amount of underpayment of the minimum wages if the employer cannot prove that they acted in good faith and had reasonable grounds for believing that their acts were not a violation of the Labor Code.
Missed Meal Periods
Under California’s Labor Code §512 An employer is generally required to provide an exempt employee with a meal period of at least 30 minutes if the employee works more than five hours in a shift. The code says:
“512. (a) An employer may not employ an employee for a work period of more than five hours per day without providing the employee with a meal period of not less than 30 minutes, except that if the total work period per day of the employee is no more than six hours, the meal period may be waived by mutual consent of both the employer and employee. An employer may not employ an employee for a work period of more than 10 hours per day without providing the employee with a second meal period of not less than 30 minutes, except that if the total hours worked is no more than 12 hours, the second meal period may be waived by mutual consent of the employer and the employee only if the first meal period was not waived.
(b) Notwithstanding subdivision (a), the Industrial Welfare Commission may adopt a working condition order permitting a meal period to commence after six hours of work if the commission determines that the order is consistent with the health and welfare of the affected employees.”
There are exceptions to the above law such as in the wholesale baking and broadcasting or movie producing industries when a collective bargaining agreement applies or in the construction industry or for operators of commercial motor vehicles in a public agency.
An employer can be liable for an hour of regular pay if an employee is not given the opportunity to take a 30-minute meal period or 10 minute rest break during the times required by law. Labor Code §226.7 provides:
“226.7. (a) No employer shall require any employee to work during any meal or rest period mandated by an applicable order of the Industrial Welfare Commission.
(b) If an employer fails to provide an employee a meal period or rest period in accordance with an applicable order of the Industrial Welfare Commission, the employer shall pay the employee one additional hour of pay at the employee’s regular rate of compensation for each work day that the meal or rest period is not provided.”
Missed Rest Periods
Pursuant to California’s Industrial Welfare Commission Wage Orders, generally, non-exempt employees are entitled to a 10-minute rest period for each four-hour work period, or major fraction thereof. There are several exceptions to this requirement. If an employee is subject to this requirement, and if one or more rest periods is missed in a workday, the employee is entitled to an hour of pay at their regular rate pursuant to Labor Code §226.7.
Generally, both federal law (Fair Labor Standards Act) and California law provide for payment of overtime (1 ½ times an employee’s regular rate of pay) for non-exempt employees who work more than 40 hours in a workweek. (A workweek can be Monday through Sunday or a different seven-day arrangement.) California law also provides for payment of daily overtime if more than 8 hours is worked in a workday. California also provides payment of double an employee’s regular rate if they work more than 12 hours in a workday and more than 8 hours on the seventh consecutive workday in a workweek. In California, the non-exempt employee is also entitled to 1 ½ times their regular rate of pay for the first eight hours worked on the seventh consecutive workday of a workweek. See California Labor Code §510. There are many exceptions to these general laws.
Alternative work weeks can be arranged where employees work more than 8 hours in a day but are not paid overtime.
Liquidated damages under the FLSA
Under the federal Fair Labor Standards Act (29 USC §216), an employer can be liable for liquidated damages (additional compensation to an employee equal to the amount of unpaid overtime) if it acted in bad faith when it failed to pay earned overtime.
Federal and California law requires the payment of prevailing wages on government contracts or public work. Contractors who secure this work generally must pay their employees minimum prevailing wages. In California, this law is found under Labor Code Labor Code §1770 et seq.
Retaliation – CA Labor Code §98.6
An employer can be liable for lost wages and benefits and reinstatement of an employee who succeeds with a retaliation claim for exercising their rights under CA Labor Code §98.6, which in part is the following. Those rights include filing a claim with the CA Labor Commissioner for unpaid wages:
98.6 “(a) No person shall discharge an employee or in any manner discriminate against any employee or applicant for employment because the employee or applicant engaged in any conduct delineated in this chapter, including the conduct described in subdivision (k) of Section 96, and Chapter 5 (commencing with Section 1101) of Part 3 of Division 2, or because the employee or applicant for employment has filed a bona fide complaint or claim or instituted or caused to be instituted any proceeding under or relating to his or her rights, which are under the jurisdiction of the Labor Commissioner, or because the employee has initiated any action or notice pursuant to Section 2699, or has testified or is about to testify in any such proceeding or because of the exercise by the employee or applicant for employment on behalf of himself, herself, or others of any rights afforded him or her.”
Unpaid and Late Paid Wages, Labor Codes §201, §202, §203, §203.1, §204, §208
Labor Code §204, et seq. provides time periods for payment of wages to exempt and non-exempt employees. Employers typically pay their employees at the correct times. However, sometimes employees are paid with a bad check, which is one that “bounces” or is returned for insufficient funds in the bank account to cover the check or payment on the check is refused for another reason. When this occurs, under Labor Code §203.1, an employer who intentionally failed to pay with a good check can be liable for up to 30 days of pay to the employee for causing the employee to wait for their pay, so long as the employee did not recover a remedy for a “bounced” check under CA Civil Code §1719.
An employer also needs to be aware of when wages are due at the time that an employee’s employment ends to avoid being liable for a waiting time penalty pursuant to Labor Code §203.
Labor Codes §201 and §202 define the timing of the final pay to an employee at termination. §201 applies when an employer ends the employment and §202 applies when the employee ends the relationship. Here are the basic laws, without the exceptions noted here.
“201. (a) If an employer discharges an employee, the wages earned and unpaid at the time of discharge are due and payable immediately….”
“202. (a) If an employee not having a written contract for a definite period quits his or her employment, his or her wages shall become due and payable not later than 72 hours thereafter, unless the employee has given 72 hours previous notice of his or her intention to quit, in which case the employee is entitled to his or her wages at the time of quitting. Notwithstanding any other provision of law, an employee who quits without providing a 72-hour notice shall be entitled to receive payment by mail if he or she so requests and designates a mailing address. The date of the mailing shall constitute the date of payment for purposes of the requirement to provide payment within 72 hours of the notice of quitting.”
If an employer does not pay the final earned wages pursuant to §201 or §202, they can owe up to 30 days of pay as a waiting time penalty to the employee as follows:
“203. (a) If an employer willfully fails to pay, without abatement or reduction, in accordance with Sections 201, 201.3, 201.5, 202, and 205.5, any wages of an employee who is discharged or who quits, the wages of the employee shall continue as a penalty from the due date thereof at the same rate until paid or until an action [lawsuit] therefor is commenced; but the wages shall not continue for more than 30 days. An employee who secretes or absents himself or herself to avoid payment to him or her, or who refuses to receive the payment when fully tendered to him or her, including any penalty then accrued under this section, is not entitled to any benefit under this section for the time during which he or she so avoids payment.
(b) Suit may be filed for these penalties at any time before the expiration of the statute of limitations on an action for the wages from which the penalties arise.”
The place for payment of the earned wages at termination is designated in Labor Code §208.
“208. Every employee who is discharged shall be paid at the place of discharge, and every employee who quits shall be paid at the office or agency of the employer in the county where the employee has been performing labor. All payments shall be made in the manner provided by law.”
An employer is also liable for interest when it is late in paying wages.
“218.6. In any action brought for the nonpayment of wages, the court shall award interest on all due and unpaid wages at the rate of interest specified in subdivision (b) of Section 3289 of the Civil Code, which shall accrue from the date that the wages were due and payable as provided in Part 1 (commencing with Section 200) of Division 2.”
Vacations §227.3, §203
Generally, in California, pursuant to Labor Code §227.3 and the case of Suastez v. Plastic Dress-Up Co. (1982) 31 Cal.3d 774, if an employer has a paid vacation plan, the vacation is considered accrued every time an employee works. The accrued vacation is considered earned “wages” that must be paid (if not already used) at the time that an employee leaves his or her job. Employers should be careful to include such unused vacation time in their final payment to an employee pursuant to Labor Code §201 or §202.
“227.3. Unless otherwise provided by a collective-bargaining agreement, whenever a contract of employment or employer policy provides for paid vacations, and an employee is terminated without having taken off his vested vacation time, all vested vacation shall be paid to him as wages at his final rate in accordance with such contract of employment or employer policy respecting eligibility or time served; provided, however, that an employment contract or employer policy shall not provide for forfeiture of vested vacation time upon termination. The Labor Commissioner or a designated representative, in the resolution of any dispute with regard to vested vacation time, shall apply the principles of equity and fairness.”[emphasis added]
Recovery of attorneys’ fees – Labor Codes §218.5, §1194, §2699
Employees can generally recover attorneys’ fees in lawsuits under three different Labor Codes. Labor Code §218.5 allows recovery of attorneys’ fees if an employee or an employer prevails (wins) in a lawsuit for unpaid wages, fringe benefits, and health and welfare or pension fund contributions as noted below.
Labor Code §1194(a) only applies to employees. It allows for recovery of attorneys’ fees if an employee prevails on a claim for minimum wage (employers must pay a minimum hourly rate or more to non-exempt employees) or overtime pay.
Labor Code §2699 allows for recovery of attorneys’ fees if an employee completes a notification process in addition to filing a lawsuit. (For more information on §2698, please see the Private Attorney General Act noted below.)
“218.5. In any action brought for the nonpayment of wages, fringe benefits, or health and welfare or pension fund contributions, the court shall award reasonable attorney’s fees and costs to the prevailing party if any party to the action requests attorney’s fees and costs upon the initiation of the action. This section shall not apply to an action brought by the Labor Commissioner. This section shall not apply to a surety issuing a bond pursuant to Chapter 9 (commencing with Section 7000) of Division 3 of the Business and Professions Code or to an action to enforce a mechanics lien brought under Chapter 2 (commencing with Section 3109) of Title 15 of Part 4 of Division 3 of the Civil Code.
This section does not apply to any action for which attorney’s fees are recoverable under Section 1194.”
“1194. (a) Notwithstanding any agreement to work for a lesser wage, any employee receiving less than the legal minimum wage or the legal overtime compensation applicable to the employee is entitled to recover in a civil action the unpaid balance of the full amount of this minimum wage or overtime compensation, including interest thereon, reasonable attorney’s fees, and costs of suit.
(b) The amendments made to this section by Chapter 825 of the Statutes of 1991 shall apply only to civil actions commenced on or after January 1, 1992.”
Private Attorney General Act – Labor Code §2698, §2699 et seq.
This 2004 law expanded the opportunity for employees to recover attorneys’ fees on many Labor Code violations and to recover a partial penalty as well, if the employee follows the protocol explained in the law. Heretofore, only select Labor Codes provided for recovery of a penalty for violation of the select codes. This law provides that an employer can be liable for a penalty if it violates one or more of many other codes that don’t have their own penalty provision. This law provides an incentive for employers to be careful about complying with the law. Here is the text of only a few parts of the fairly lengthy law.
“§2699 (g) (1) Except as provided in paragraph (2), an aggrieved employee may recover the civil penalty described in subdivision (f) in a civil action pursuant to the procedures specified in Section 2699.3 filed on behalf of himself or herself and other current or former employees against whom one or more of the alleged violations was committed. Any employee who prevails in any action shall be entitled to an award of reasonable attorney’s fees and costs. Nothing in this part shall operate to limit an employee’s right to pursue or recover other remedies available under state or federal law, either separately or concurrently with an action taken under this part.
Whistle Blowing / Retaliation
There are several federal and state laws that provide protection for employees who report violations of law, including the following, which is a partial list:
Federal Whistle Blower Statutes
Whistleblower Protection Act
General Military Law – protection for a military person who reports various types of violations.
10 U.S.C. §2409 – federal defense contractor employee protection.
Sarbanes-Oxley Act – protection for security analysts.
Toxic Substances Act
Asbestos Hazard Emergency Response, 15 U.S.C. §2651
Consumer Product Safety Act
Major Fraud Act
Age Discrimination in Employment Act
Occupational Safety and Health
False Claims Act
Title VII – civil rights
Americans with Disabilities Act
California Whistle Blower Statutes
Government Code §8547 – disclosing improper government activity.
Health & Safety Code §1287.5 – disclosing unsafe patient care and conditions in health care facilities.
Labor Code §98.6 – reporting Labor Code violations.
Labor Code §1102.5 – general whistle blowing statute.
Labor Code §6310 – health and safety violations.
Labor Code §6399.7 – toxic or hazardous substance violation reporting.
Financial Code §6530
False Claims Act, Government Code §12653 – protection for those reporting fraud against the government.
The Fair Employment and Housing Act contains this language about retaliation:
Government Code §12940: “It shall be an unlawful employment practice, unless based upon a bona fide occupational qualification, or, except where based upon applicable security regulations established by the United States or the State of California:
(h) For any employer, labor organization, employment agency, or person to discharge, expel, or otherwise discriminate against any person because the person has opposed any practices forbidden under this part or because the person has filed a complaint, testified, or assisted in any proceeding under this part.”
Often employees who have been terminated feel that they have been wrongfully terminated and therefore they have a legal right to sue their employer. They believe that they were good employees and therefore they should not have lost their job. They may have been great employees, but if they were at-will employees (see Labor Code §2922), like most private sector employees, they will have no right to sue their employer, unless their employer did something illegal, which is an exception to the at-will doctrine (that allows employers to terminate their employees at any time without liability for the termination).
Sometimes employees have employment contracts that do not allow an employer to terminate their employment at will. These contracts are rare. Some top executives have these arrangements. If the employer breached the contract by terminating an employee, then that employee could sue their employer for breach of contract.
More often, if an employee is “wrongfully terminated” the employer violated a common or statutory law. Usually in these circumstances, the employee has the burden of proving that the employer violated a law such as the CA Fair Employment and Housing Act or the CA Labor Code. Please see other sections on the law related to retaliation, which could be the cause of an employee’s termination.