Dan
Welcome to Sound Business Insights. I’m Dan Watkins. This episode is about employer defense, what keeps San Diego employers up at night. This podcast is not intended to provide legal advice,
Neil
Dan, today we’re talking about employer defense and the types of things that keep employers up at night. I guess the first place to start is California is such a nasty reputation to be an employer in this state. Why is that So,
Dan
It’s earned. It really is. If you really want to lay it out, most of the politicians are funded by labor unions. They’re all about making it painful for employers to hire them. Anything you do that is technically wrong. The state of California has hired or licensed a whole bunch of lawyers out there to be bounty hunters, and instead of funding any regulation and enforcement, they just said, we can say whatever we want. And they’ll be a lawyer out there who want to get attorney’s fees out of an employer and be a bounty hunter to try to catch you at the tiniest mistakes and make you pay dearly for it.
Neil
So as an employer, what’s the best word of caution? Pay attention and have a good lawyer.
Dan
Yeah, have a good lawyer. States up to speed and take those little technical matters seriously, because it doesn’t cost much to be in compliance. It really doesn’t, but it costs so much to get caught. Usually you don’t get caught for a few months and before you know it, you could literally lose hundreds of thousands of dollars for an accounting error or the way you put your paychecks out or your refusal or failure to put up a little sign in your break room. All those little things. There’s some lawyer out there, Mr. Bounty Hunter, looking for you to try to collect five, 10, $15,000 in fees for tiny mistakes.
Neil
So Dan, as we’re talking about protecting our employer clients, the old saying, a good defense starts with a good offense, right? Right. What are the elements of a good offense in your mind for an employer?
Dan
Employment contracts, human resource manuals, employee handbooks, rules and regulations, training and staying up to speed on the ever-changing laws in California.
Neil
Yeah, one example of That’s the arbitration situation.
Dan
The arbitration situation. There’s a lot more coming up, but yeah, the arbitration situation is still in fluxx. If you want an arbitration agreement, we can draft an arbitration agreement, but we have to be mindful of the ever-changing court system and all the different appellate opinions and United States Supreme Court opinions, state supreme court opinions and the new laws drafted by our California legislature every week, day, and year to try to get around it. And now those have to go through our appellate systems, but it doesn’t mean you should stay away from it practically. There are ways to draft them so it doesn’t cost you an arm and a leg, even the selection of arbitrators, because some of them are just $15,000 a day and some of them are a thousand dollars a day. And also how you draft them and how often you got to amend them. As the courts change and whether you draft them wrong, you can get in trouble for that too. So you got to make sure you have a good lawyer that can draft them, right, and tell you when it’s a good idea and when it’s not.
Neil
So Dan as an employer, I guess my question would be, so why do I want to go through this? What’s the arbitration agreement going to do for me?
Dan
Let’s talk about class actions.
Neil
Let’s talk about class actions.
Dan
That’s how you take a mistake on the way somebody drafted someone’s paycheck in the tune of, let’s say $15 a week. That puts you in a class action that costs you three, $400,000 because of a counting error because they went into a class action. Now, had you had certain types of agreements in place, even some kinds of arbitration agreements, that’s where we’re at now on these laws. You could have cut this off also, had you had some lawyer you could talk to about your procedures or maybe an outside accounting service to review it or a CPA or our HR person, someone you can call. If there’s any questions or your staff can call, then you won’t have this problem. And if you do, then you shut it down right away.
Neil
So that leads us to another fast action in any of these matters is the key. Pick up the phone and call us the second that you think something’s going on. Why does that matter?
Dan
Judges don’t really like these cases, and there’s a lot of technical reasons to throw them out because they’re turning into sort of a shady PI lawyer, the person that hangs out in the hospital room. These kind of employment lawyers are starting to be like that. And so if they don’t follow all the rules and you get to court in the first couple of months and you file a motion saying you didn’t give the proper notice, you didn’t state the proper cause of action, judge will throw it out.
Neil
How about if they remediate the problem?
Dan
Well, that’s part of it. If you know ahead of time and good experienced lawyer that’s not just ready to milk you, because that’s what they do, they won’t propose a solution. They’ll just propose fight, fight. But sometimes we have them come in and say, no, no, no, don’t pay us all this money. Pay the extra $3,000 in wages. Send out amended pay stubs before you even have to answer the complaint. And guess what? All of the causes of action that have attorney’s fees in them are gone. Nobody wants to see you anymore because of that. So yeah, quick action gives your lawyer the right to do things that just destroy a case in the beginning.
Neil
And our goal with our employees is to help them out. That’s not what we’re here for. We’re here to help them through this and be there for them when they really need
Dan
Us. When you do defense work, you want to get rid of cases as soon as possible. Nobody in business makes money just staying in litigation.
Neil
So you once told me, Dan, that the most important piece of advice you would give an employer is the second that you become aware of any potential employee related dispute. Pick up the phone and call you because you could tell them that mole isn’t cancer. Talk about the most important piece of advice and why that matters to our clients. What it’s like to have a guy like you, they can pick up the phone and call you…
Dan
Call us, and you describe what’s going on with a certain troubled employee. And we can tell you like skin cancer, oh, that fact scenario doesn’t really fit something that I would go ahead and fight with them or we can say, oh, this one looks bad because of the things they’re complaining about or just the general facts. I would handle it this way. And so you can turn a 20, $30,000 lawsuit situation into empowerment where you can stand your ground or maybe you make some concessions because you got some advice from your lawyer. You need to know when you got to worry about it and when you don’t.
Neil
And then in the worst case scenario, there is a lawsuit brewing or one’s even been filed, there’s a secret clock they’re not even aware of. There’s a timeframe that they need to act. Tell me about the secret clock.
Dan
First of all, when a plaintiff thinks about suing, they go to a lawyer, right? And then you’ll see a change in the way they’re talking to you. So there’s one all
Neil
Of a sudden they start posturing
Dan
And you’ll start receiving communications that sound like you’re getting set up. And you might be, and people in your staff will say, this person’s acting different. Well, if you called your lawyer, I would run a check to see if anything was filed already, because what I like to do is if I’m a plaintiff’s lawyer, I’m going to file it and not let you know until I’ve gathered evidence. But if you know that they filed and they’re hoping you won’t be gathering evidence and they’re trying to set you up, you can be gathering evidence yourself before they even serve you. And you could be fixing things, mitigating things before their case gets going and beat them to the punch, so to speak.
Neil
Great.
Dan
So we can look it up. You think you’re getting sued? We can look it up and tell you if online, if anyone’s filed an action against you today,
Neil
And even if there isn’t a lawsuit filed, there’s usually something they can do to make things better or to make them go away altogether, right?
Dan
Like a simple description of how you’re treating this employee sends off bells and whistles to us or sends off nothing.
Neil
And yet, if you treat them decently and under the law, that goes a long way if it ever gets to court, doesn’t it?
Dan
Yes. That’s a good point. If you think there’s something going on and we spot it, we can say, okay, instead of communicating this way, we’ll give you some good suggestions on what to say, how to say it. We can actually ghost write your emails for you, and because we’re your lawyer, no one can ever discover that. So we can do lots of things for you to really set yourself up for the worst and hopefully head off a lawsuit.
Neil
And there are effective ways for an employer to look at the situation and say, how can I approach this respectfully, and how do I clarify the situation to say, this is your job. Here’s my job. This is where we are. That’s a fine tuned discussion, isn’t it?
Dan
Yes. Yeah. Well, your procedures have to be updated every year and they should be in place and they should be looked at, and you’ll get some gentle suggestions. Well, why don’t you try this and why don’t you try that and just have a resource available.
Neil
And if an employer is engaged like that dam, if it ever becomes a trial ish, or not a trial ish, but a litigation matter, the actions of an employer matter when it gets before a mediator, a judge, a arbitrator, how they behaved and what they say and how they handle themselves goes a long way, doesn’t it?
Dan
Oh yeah. I had to defend a case one time where the senior manager fired a lady, an assistant, and she was complaining about something and he was all mad, and he said, if you don’t like it, get the (edited) out.
Neil
Out. Wow.
Dan
She was an at-will employee, and technically he had to right to fire. But because he said it that way, he got sued and everything else fell into place for him, and it became a real big lawsuit. He lost his cool. So yeah, it does matter. Yeah. Oh, we ended up winning that case, by the way. I don’t know how it was really bad, but we won. I’ve had actually three of those where managers have said that exact same thing. Apparently it’s a trendy thing to be able to say that to your employee,
Neil
But we don’t recommend…
Dan
No, we don’t recommend it.
Neil
So we’ve talked about the types of things that they can do to kind of head things off or to prevent them from ever happening. So what are the types of common issues, lawsuits, danger points that California and San Diego employers get themselves into? What do you see most
Dan
Wage and hour?
Neil
Wage and hour.
Dan
No doubt about it. There’s always some lawyer looking at a paycheck and trying to figure out whether it came on time, whether the deductions were correct, whether everything was stated clearly and not in a vague manner, whether the size of the type print is correct.
Neil
Wow.
Dan
Whether anything they can think of is wrong. And sometimes they just send out a letter and it won’t even, they’ll be wrong, but they’ll just want to blackmail somebody. Yeah, they’ll send out a frivolous claim to try to get you.
Neil
So wage and hour covers unpaid overtime, minimum wage violations. What other type of things does falls into that bucket of wage and hour?
Dan
Everything you can imagine when it comes to how you pay someone, when you pay someone, when you let someone go sick leave. Sick leave is a big one being out because you are got a doctor’s note or don’t have a doctor’s
Neil
Note, some type of leave issue,
Dan
Right? It’s chronic, intermittent leave. I’m sick today. You know what I mean? Not, you know what I mean? You see them outside or they’re on social media.
Dan
Whatever they’re doing at the beach, they’re full of it and they’re always letting you down and you want to let them go because they’re always letting you down. And then they go, but my doctor says I have anxiety, or I have this and I have that. How do you get around that as an employer? Well, we know we do this all the time. It’s not easy. It’s delicate, but we counsel people around this exact employee every month, and it happens in every workplace. There’s always somebody working the system. They’re probably out working two jobs, who knows? It’s very trendy right now. So how you handle it and how you communicate before it even gets to a lawsuit phase is important because we can do that. We can write your communications to that individual employee. It doesn’t mean we only draft agreements for everybody. We’ll draft stuff for you for one employee just to get you through this problem so that it would be very difficult for them, even though they’re trying to set you up to get one of these bounty hunter lawyers to take their case
Neil
Or one of the state agencies.
Dan
Because sometimes these bounty hunter lawyers, they coach their potential clients into setting you up. So if they’re being coached, you should be coached too and shut them down. You kind
Neil
Of hit it at wrongful termination. But that’s another really common issue here in California. It’s not really at will. So we’ve actually gone in and helped handle that process for them. Right?
Dan
That’s true. It’s technically and legally at will state, but there’s so many exceptions that they can say, I’m in a protected class. I think everybody’s in a protected class now. I think we are. No matter who you are, I’m in, I got a toothache, and that’s a disability, and they will stick it to the employer every time. So yeah, if you are a San Diego employer and you don’t have somebody taking advantage of your payroll policies and your sick leave and all that, then you’re the one. The rest of us have this. And don’t let them sucker you into a lawsuit that, because then they’ll just go on disability for six months or a year thinking they got it made, and they’ll collect their disability check and their plaintiff’s lawyer will tell them, you’re going to get a bunch of money.
Neil
And the cost of calling the Watkins firm and getting an answer from either you or one of our paralegals is nothing compared to what they’re about to go through.
Dan
That’s true. Think about that. You have a payroll expense in your accounting books that payroll over the years, probably your biggest number, your rent, your payroll, those are big numbers. Absolutely. If you take a tiny percent of that and put it towards getting consultations to make sure we’re doing things right so we don’t get sued and that number doesn’t double, that’s thinking ahead. Yep.
Neil
Private attorneys General Act is another one of those things. I don’t know that most smaller employers would be aware of it, but this has become a major issue over the last couple of years. Tell me a little bit about that. Risk for employers.
Dan
It’s a law that allows attorneys, terrible plaintiff’s lawyers to the Dark side to file class actions more easily against employers. So if you’re a San Diego employer and you have a problem with one employee and their paycheck and they go to the wrong lawyer and he says, let’s file an action, not just on behalf of one employee but against all employees because this is a representation of how terrible this company treats all of its employees because they made a mistake on a paycheck.
Neil
So that person in effect steps into the shoes. That employee becomes like an attorney general. There’s immense power to go after previous employees records, current employees. That opens the door to a lot of exposure, doesn’t it? Right.
Dan
And judges hate it. So the good news is judges are sick of these. If you tell us as a San Diego employer that you have a problem with this employee, we can look at it quickly and guide you in what to say and then diagnose any other problems you may have, and before anyone can turn it into a class action, you spend very little money, you’ve fixed a problem, and there’s nowhere to go. You’ve shut a door
Neil
And you’re sleeping at night.
Dan
And you’re sleeping at night.
Neil
So tell me about retaliation. That used to be a really big one. What’s it like lately?
Dan
It’s still a big one. Once you get hit with the retaliation, we’ve defended lots of them. One of the problems I see is your average plaintiff’s law firm has a bunch of paralegals or first year lawyers or staff just processing paperwork. They don’t get paid on all their files, so they just want to have a mill. And so they’ll turn a retaliation claim that doesn’t have any basis in the law and do a retaliation claim. I’ve seen them where I saw a retaliation claim where the employee said, I think that the boss is deducting too many things on their taxes, and I’m going to retaliate. No. Okay. No. I seen one where I think that the boss breached a contract with a supplier. I’m going to retaliate. No, no. There are limitations on retaliation claims. And so when you have a problem employee, you want to retire them, then you should give us a call,
Neil
Manage them correctly.
Dan
Let us look at the way you want to let them go, and then we’ll make sure it doesn’t fit in. None of the reasons you let them go, don’t fit in the way that you could get in trouble. I have literally been hired by a client during a downsizing to sit there and terminate his employees for two days and let 20 or 30 people go. And I drafted the communications, I did the verbal communications, I had the meetings. I handed them their exit documents and their checks. There was no chance they were going to tell them anyone that the manager did something wrong because the manager’s lawyer did it and they did not get sued. Even though there’s a lot of grumbling going on.
Neil
Another interesting aspect of California’s laws has to do with independent contractors and our unique law that we just recently put on the books, that every worker in California is an employee unless they can pass a specific test. Misclassification has become a real challenge for some employers.
Dan
Yeah. We went from 14 prongs to an A, b, C rule, which nobody ever passes. So unless you’re specifically in the statute, it’s difficult, but it’s still being litigated. These rideshare companies, they are making progress in some courts and they’re coming up with resolutions in some places, and they’re still litigating in others. The jury’s out on how this is going to land. There’s a lot of talk about it being unconstitutional. What California does, our conservative US Supreme Court doesn’t like the ninth Circuit. They slap them down quite a bit and I don’t blame them. But yeah, there’s a lot of things going on. This can happen as part of wage and hour where they’ll claim misclassification because you can get attorney’s fees for that, and a lot of employers are still calling people independent contractors, and they’re still getting sued for it. So yeah, if you’ve got a problem with it, and we do consulting agreements and other types of agreements that can help you with the whole issue of exempt versus non-exempt in greater detail. In fact, we actually set up companies and there’s a way around it, but you really got to get serious about it and be determined to change a lot of your procedures to get around the whole exempt, non-exempt independent contractor and employee situation.
Neil
And a lot of this comes down to overtime, pure and simple
Dan
Overtime’s part of it, whether you get sick leave, all the other,
Neil
The benefits
Dan
Protections are part of it. Workers’ comp doesn’t like it. They want to get a piece of you. So yeah, all the big bad wolves are out there to take a bite out of you, and if you want to do that, you used to always do it, then let’s draft some agreements and go about it the right way.
Neil
So there’s all these things out there that I could worry about. If I’m an employer, they’re all going to head to a dispute of one form or another. We kind of take a really unique approach to managing disputes, and the whole point is to keep the cost down, resolve it, and get it moved on. So he once told me that we were able to resolve the vast majority of our legal disputes through negotiation chronology and the mastery of damages, basically. Right, right. We’re not here to soak our clients and to take them through big lawsuits. We’re here to resolve things and get on with business, Dan.
Dan
Well, we can do that because we’ve tried so many cases and won. Yes. And we have a track record
Neil
And a reputation
Dan
While we’re trying to resolve matters, we’re also hammering the other side. We have databases that are built on databases that are built on databases of discovery questions, litigation strategies, and software programs. So when we get a certain type of case, and it’s not the first time we’ve done it, and we have a protocol that the whole office knows that we do on how to handle these cases. So yeah, we’re still very aggressive, and if the other side wants to go to trial, we’ll go to trial, but they probably know there’s a good chance that they may lose.
Neil
So the basic steps in the process negotiation, we’re always going to try to negotiate our way through something first upfront. Right.
Dan
Well, it would be unethical for any lawyer to say, I never negotiate. Yeah, that’s your job is to, if you receive a settlement offer, you must communicate it to the other side, to your own client. I mean, yes, if you receive a settlement offer, it’s an ethical violation not to do so. I’ve heard of lawyers doing that, keeping your case alive, but that’s what you do. Plus we’re so busy that the best thing we can do for our business is to resolve cases, have happy clients, and you get more return business.
Neil
Absolutely.
Dan
If you’re slow, then I guess in your lawyer, you’re going to try to keep that case alive. We’re not,
Neil
And on the other hand is, if you’re in the sauce, we can handle you from the negotiation upfront through mediation, arbitration, and if necessary, at trial
Dan
One stop. We get hired right before trial sometimes. Sometimes the clients get scared and they start chopping around when it becomes real. So that happens. Yeah.
Neil
So the bottom line for employers, Dan, is a little bit upfront, goes a long way down the road.
Dan
That’s what I prefer. I prefer crushing the hopes and dreams of plaintiff’s counsel, and if you give me the tools and you get to us soon enough, then we get to do that. When that letter comes and we’re sitting there just waiting for them to say the wrong thing or waiting to hammer them and beat them to the punch. And if you’ve talked to us early, that’s what we get to do most of the time.
Neil
And that’s fun.
Dan
Well, it really is. It’s a competitive sport, litigation, and we want to win
Neil
And we want to keep them out of it.
Dan
Right. That’s what we think we need.
Neil
Thanks, Dan
Dan
Thank you. You can learn more about the Watkins firm at https://watkinsfirm.com or call our office at (858) 535-1511.