Avoid Common Employee Claims in Seven (Easy) Steps

Posted: August 21, 2018 | News

Avoid Common Employee Claims in Seven (Easy) Steps

Employee complaints are virtually inevitable, but the effort that an employer invests in prevention will pay dividends.  Employers can avoid many of the common employee claims that we see filed in state and federal courts daily by taking preventative steps to treat their workforce correctly and in compliance with federal, state, and local law.  Awareness of California’s increasingly technical labor laws allows businesses to stay ahead of potential claims.

ONE:        Provide Legally-Compliant Meal and Rest Breaks

It can’t be overstated.  Every employer with non-exempt employees should examine their meal and rest break policies and implement good timekeeping practices.  Employers must provide non-exempt employees who work more than five hours in a workday with a minimum 30-minute unpaid, uninterrupted meal break, starting no later than the end of the fifth hour of work.  Each day that an employer fails to provide an employee with a meal or rest break, the employee is due a premium equal to one additional hour of pay at the employee's regular rate. Failing to provide compliant meal and rest periods exposes a business to a potential class action and Private Attorneys General Act (PAGA) lawsuit.  Keep good records of the employee's time worked, including the actual time the employee began and ended her meal period.  Avoid making automatic deductions for meal times, which are generally problematic.

TWO:          Classify Employees and Independent Contractors Correctly

Knowing when to classify a worker as an employee or independent contractor will go a long way in preventing potential claims.  The California Supreme Court dealt a severe blow to businesses earlier this year, restricting the manner in which workers may be classified as independent contractors.  Under the new analysis adopted by the Court, workers are presumed to be employees unless all of the following tests are met:  (A) Is the worker free from the control and direction of the hiring entity in the performance of the work, both under the contract for the performance of the work and in fact?; (B) Does the worker perform work that is outside the usual course of the hiring entity’s business?; and (C) Is the worker customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity?  Businesses should conduct a review of their independent contractor arrangements to determine whether they meet the new ABC test.  Potential liabilities for misclassification include liability for unpaid payroll taxes, unemployment benefits, disability insurance, workers’ compensation claims, and wage and hour claims.  Significant civil penalties may be imposed by state and federal agencies as well.

THREE:     Understand the Difference Between Exempt and Non-Exempt Employees

Employees are not exempt from state or federal overtime laws unless one or more of the exemptions apply.  Employers should become familiar with the Wage Order that regulates their business and review the job duties of each position to determine whether an overtime exemption applies.  If an exemption does not apply, the employee must be treated as a non-exempt employee who entitled to overtime pay.

FOUR:         Remain Aware of Ever-Increasing Local City and County Ordinances

More and more local city and county governments are enacting ordinances that affect employees working within their boundaries, including minimum wage and sick pay laws.  If you have employees working in Northern California, and some Southern California cities including Los Angeles, Malibu, Pasadena, San Diego, and Santa Monica, you may need to revise your policies.  Even when an employee works in a location with a local ordinance for a short time, those local rules may apply.

FIVE:           Consider Implementing Arbitration Agreements

If your company employs non-exempt employees, consider implementing arbitration agreements with class action waivers.  Having an enforceable arbitration agreement in place can mean the difference between an individual arbitration and a class action lawsuit.  Although the company is responsible for paying the arbitrator’s fees, if it is determined that the employee waived her right to participate in a class action, there is significantly less risk and ultimate cost to the employer and many employers have enjoyed tremendous protection by implementing arbitration agreements with class action waivers.

SIX:              Double-Check Sick Leave Compliance

Although California’s paid sick leave law has been in place for a few years, many employers are still struggling to catch up with their obligations.  California law requires all employers to provide paid sick leave to employees in an amount that is the greater of three days or 24 hours each year, including part-time and temporary employees. Employers may elect to use an accrual method of at least one hour of paid sick leave for every 30 hours worked, or another approved method.  Check local jurisdictions where your employees perform work as well, as paid sick leave laws under some local ordinances provide even greater employee benefits.  

SEVEN:      Don't Ignore Employee Issues

Employee problems often start small, but can escalate very quickly.  When an employer learns of an employee complaint, address the issue quickly to diffuse the situation and investigate where necessary.  Ignoring the problem generally doesn't make it go away, and employees who feel that their issue has been heard and addressed won’t seek legal assistance because their issues has been resolved and thus contained.

Take steps to protect your business from employee lawsuits.  Set up policies and practices that comply with local, state and federal law and then implement those policies and practices correctly and vigilantly.  Stay knowledgeable about changes to the law, and with a little luck, you’ll be able to stay one step ahead of employee claims.

Colleen M. McCarthy

Colleen M. McCarthy, Esq. is a Partner and chairs the Firm’s Employment Practices Group. She has dedicated her practice to representing and protecting employers, with a particular emphasis on risk mitigation through preventative counseling and sound practical advice. For 15 years, Ms. McCarthy has counseled employers about the complicated employment laws that impact their businesses to ensure that they are in compliance, and to reduce the chance of costly litigation. Ms. McCarthy may be reached by phone at (949) 608-6900 or email cmccarthy@ferruzzo.com