New Independent Contractor Test: 3 Clarifications from the Court of Appeal

If your business uses independent contractors at all, you have probably heard about Dynamex Operations West, Inc. v. Superior Court and the new “ABC Test” to analyze whether a worker is an employee or an independent contractor. You were probably worried about whether your independent contractors pass the ABC Test. You are justified in worrying because the new test makes it much more difficult for someone to be classified as an independent contractor. This then opens the door for claims of misclassification, for missed meal break and rest break penalties, and unpaid overtime because that’s what you paid your hourly workers but not your independent contractors. Your business may be sitting on a 5 to 6-figure time bomb.   ABC Test Recap If you have not heard about Dynamex or the ABC Test, or if you need a recap, here it is. Under this new independent contractor test, a worker is properly considered an independent contractor to whom the applicable wage order does not apply if the hiring entity establishes all of the following: (A) that the worker is free … Continue reading

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New California Employment Laws 2019

This is the time of year that Californians, especially California businesses, learn of the slew of new laws that will go into effect in the coming year.  This year is not any different and the new laws are reflective of the social discussions around sexual harassment over the course of the last couple of years. California employers now have a number of laws that will require changes in your documents, training requirements, and how you do business, to name a few.  Below is a list of new laws that I thought were the most interesting and relevant by category, although there is inevitably some overlap. Contracts 1. Employers will be prohibited, with certain exceptions, from requiring an employee to execute a release of a claim or right under the Fair Employment and Housing Act (FEHA) or to sign a nondisparagement agreement or other document that purports to deny the employee the right to disclose information about unlawful acts in the workplace, including, but not limited to, sexual harassment.  This is applicable when the release is provided in exchange for a raise … Continue reading

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Paystubs and When An Employee Requests Records

How many times have you said the following words:   “If I had known this, I would have done things differently.”   That is a common refrain of many small business owners in California. Many small businesses have grown organically and owners often cobbled together pieces of agreements and policies from your former employers and samples on the internet thinking “if my big employer did this, it must be fine,” and generally “winging it.”  It generally works pretty well, sometimes even for years, until it doesn’t. When given the opportunity to reflect, most business owners will have the nagging feeling that they’re doing something “wrong.”  You’re trying your best, paying your employees well, giving them flexibility, and are fair.  Unfortunately, that is not enough. One of these moments  that highlights the extreme complexity of having employees in California is when the business receives a letter from a lawyer asking for a copy of an employee’s personnel file and pay records. Upon receiving this letter, you will probably ask: What documents do I have to make available? The employee left years … Continue reading

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Salary History and Equal Pay Laws Clarified

News of the Pay Privacy law prohibiting reliance on an applicant’s salary history in determining employment and pay hit the business world at the end of 2017 and went into effect in January 2018.  Since pay is a large factor in the hiring decision, the new law raised many questions among business owners who are especially concerned about complying with California employment laws.  Some of the common questions related to the salary history requirements and equal pay were: Is it legal to ask an applicant about their desired salary or salary requirement?   Am I liable if an applicant voluntarily gives me their salary history or what they made a their last job?   If an applicant voluntarily discloses their salary history, can I take that information into consideration?   What about a current employee, I already know what they make, so can I take their salary into consideration to determine raises or pay for a new or different position? The conflict between California labor and employment laws and the practical questions that business owners must ask and take into … Continue reading

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Confidentiality Agreements in Sexual Harassment Cases – Banned if AB 3080 Signed

It’s difficult as a business owner to know what you need to know in the area of employment law and employee rights without having someone to guide you. The legal landscape is complex and ever-changing. New laws keep getting passed and court decisions could easily turn something that was an acceptable practice into a prohibited practice, forcing employers to scramble to change practices, usually crossing their fingers and hoping that the changes don’t trigger someone to ask whether what you were doing in the past was wrong. Most of the time, you don’t even know what you don’t know. I’ve often heard business owners say “had I known that I would have done it differently, but no one told me.” We’re here to tell you. The California legislature recently passed Assembly Bill 3080 (AB 3080), which is now awaiting Governor Brown’s signature.  The bill has 2 main components. Bans Confidentiality Agreements Regarding Sexual Harassment Claims The first responds to the #MeToo movement and the argument that confidentiality agreements in settlements of sexual harassment claims allow harassers to become repeat offenders … Continue reading

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Waiting Time Penalties (to Appeal or Not to Appeal)

  “I quit.”   These words from an employee leads to a string of questions from an employer.   What do I need to pay the employee? How quickly do I have to do it? Can I wait until the next batch of payroll checks are processed? Do I have to cut the employee a separate check? What happens if I do it wrong? These are all legitimate questions because the laws in California are very specific about what an employer must do and the penalties for failing to do it correctly in the eyes of the law. A recent appellate opinion (Nishiki v. Danko Meredith, APC) is a great example of how a small inconsistency in the final paycheck that ultimately meant the employee is owed only $2,250 in penalties, resulted in the employer having to pay over $86,000 to the former employee in attorney’s fees. That’s 3,822% of the penalty itself. The inconsistent final pay check What happened in Nishiki could have happened to any one of us.  In this case, plaintiff, who worked as a paralegal at … Continue reading

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Off-the-Clock Work Must be Paid

Last week, the California Supreme Court, in a case called Troester v. Starbucks Corporation, confirmed that California wage and hour law “does care for small things.” In this case, it cares about small increments of time spent on work off-the-clock by hourly employees. Small increments in this case is about 4 to 10 minutes after clocking out. De Minimis Doctrine This is a departure from federal law’s more employer-friendly version of the de minimis doctrine. The de minimis doctrine is an established defense under the Fair Labor Standards Act (FLSA), which allows employers to disregard time as de minimis (and therefore not have to pay employees for that time) if the employer could prove: (1) it would be difficult and impractical for the employer to record the additional time; (2) the total amount of compensable time is minimal; and (3) the additional work is irregular. For example, pre-shift or post-shift meetings. Starbucks Hourly Employee Worked 4 to 10 Minutes Off-the-Clock Each Shift In the Troester v. Starbucks case, Douglas Troester worked for Starbucks as an hourly shift supervisor. As part of … Continue reading

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Three Ways to Transfer the Family Business

I’ve had clients who have had to deal with business succession issues and so I invite John L. Wong to provide some insight into what business succession planning is and why business owners should think about it.   As an Orange County Estate Planning Attorney, many of my clients own some form of small business. One of the first questions I ask is: “What’s going to happen to your business when you retire or pass away?” There are two very common responses: I’m going to transfer the business to my children; or I’m going to sell the business. I could certainly go through a bunch of hypotheticals to poke holes in these two responses, but often times, if the question was phrased differently, the issue becomes much clearer. “What would happen to your business if you died today?” After some reflection, common responses are: The business would fail; The business would be taken over by an employee. So how do ensure your business is transferred under the first set of scenarios instead of the second set? How do you ensure … Continue reading

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New Independent Contractor Test Could be Game Changer

The California Supreme Court recently published an opinion that describes a new independent contractor test that is broader than the current independent contractor test.  The “Borello” multi-factor test has been applied for decades, and this new test makes it harder for businesses to properly classify a worker as an independent contractor. This opinion will affect many businesses that hire independent contractors within the State of California. The main take away from this opinion, Dynamex Operations W. v. Super. Ct., Cal. is this: There is a new independent contractor test for purposes of the obligations imposed by a wage order. Here is a breakdown to help understand the preceding statement: What are wage orders? In California, employment laws are spelled out in different places, including statutes, case law, and wage orders. This case specifically addresses the obligations that are imposed on employers by the wage orders that apply to different industries. These wage orders address issues such as the payment of wages (minimum wage), regulating meal and rest breaks, and the number of hours worked (overtime pay), for example. Since these wage … Continue reading

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Non-Compete Agreements in California

Non-compete agreements are void in California except in certain limited circumstances.  More specifically, California’s Business & Professions Code § 16600 states: “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.” This means that non-competition clauses in employment agreements that purport to prohibit an employee from working for a competitor or starting a competing business after the employee leaves are void.  This is true in California, even if the prohibition is limited to a certain geographic area or for a limited period of time.  This is because California fiercely protects a person’s right to work and to engage in the profession of his or her choice, including working for a competitor or starting a competing business. Under what circumstances are non-compete agreements valid in California? Although the general rule is that agreements that prohibits someone from competing or engaging in a lawful profession, trade, or business is void, there are specific circumstances where a court will uphold a non-compete agreement.  … Continue reading

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