Dan

Welcome to Sound Business Insights. I’m Dan Watkins. This episode is about 2023 new laws for employers from an attorney’s perspective. This podcast is not intended to provide legal advice.

Neil

Dan, we’re picking up the conversation from an employer’s point of view, but from an attorney’s perspective. So I guess the general question I’m going to ask you is how does an employer get sued in California?

Dan

Good question that that’s actually a double meaning question. One is how do you get sued if you do dumb things? But the real, real answer I want to focus on is how do you get sued? Meaning well, because you’re going to get sued. How do you get sued the right way? If you’re an employer, you’re going to get sued. We have a recession coming up, you’re going to get sued as unemployment rises as it usually does in a recession. No, I’m not guaranteeing a recession, but a lot of layoffs. So when there’s a lot of layoffs, there’s a lot of employment claims and there’s more damages on employment claims. If somebody gets terminated improperly and they file a claim against you, but they get a job the next week, their damages are way lower. But if it’s a tough market and they can’t get a job, then they want you to pay for all their wages and all their damages because they didn’t get a job and it’s your fault. So yes, how do you get sued the right way? It would be a better way.

Neil

So how do you prevent or limit your exposure as an employer? What are some of the things that you would want them to make sure they’re doing?

Dan

Act quickly when you terminate somebody, utilize our checklist. Utilize your attorney or your attorney’s HR people, they’re a lot cheaper. <laugh> and act quickly investigate and document. A lot of lawsuits nowadays are successful against employers because they didn’t have good record keeping. And all the new laws every year and including this year are really focused on the employer’s responsibility to keep accurate and proper records of employees.

Neil

And Dan, you’ve often said the first hint of any dispute with an employee is an immediate call to us. Can you expound it a little bit on that?

Dan

Well, hint is a strong word. We, you don’t need to call the lawyer every single time someone looks at you funny. But if you have somebody who’s in a protected class, an older person, I guess everything’s a protected class now. <laugh>, especially with all the new laws out there. But if you have somebody who is claiming unfair treatment, and that’s usually a precursor to be ensued when plaintiffs have already contacted a lawyer, some lawyers like myself will advise that potential client to go ahead and seed the, well get it ready for a lawsuit, make certain complaints and see how the employer reacts. Do certain things to paper the file You’ve heard of employers papering an employee’s file by putting in reviews and, and disciplinary actions and things like that. Well, employees can do the same thing to employers. If you see that happening, then that’s probably a really good time to contact your lawyer and get some advice on how to proceed

Neil

Because there are actions they can take that can actually remediate or mitigate their exposure in these cases a lot of times, right,

Dan

Lots of times it’s like the old saying, pay me now or pay me later. Yeah. When you go see a mechanic, do you want to get a tune up or you want to get a brand new engine? In this case you call your lawyer. If he’s an employment lawyer, he’ll know the law. There’ll be no researching this. He’ll know exactly how to advise you or she and they’ll tell you step by step based on your facts, what you should do just in case.

Neil

Right.

Dan

And then if there’s a claim filed or uh, something made your lawyer already have reviewed and understand what you’re doing right and what you’re doing wrong,

Neil

Great. And then the same thing is obviously true. If they receive any kind of letter, there’s a lot of these fishing letters that are coming from plaintiff. So nowadays, any kind of letter, that’s an immediate call to us, isn’t it?

Dan

Yes. Written communication from a lawyer or just the employee? It is, it’s a little known fact that if an employer makes a mistake and technically could be liable to the employee and it’s a slam dunk case against you. But if you fight out about that mistake and you cure the mistake, you go back and fix it before they can file a claim against you or get all formal with you. They’ve lost their case. They can’t really sue you anymore and be successful because you cured it. You beat them to the punch.

Neil

And that takes all the steam out of the plaintiffs. They can’t, there’s no fees for them to make

Dan

The plaintiff’s lawyers remember they’re here on a contingency. If they don’t smell money, they won’t take the case. And if someone came into my office and I wanted a plaintiff’s case and they said, yeah, they did this, they did that, but they cured it and now everything’s okay. But before they did a bad thing, I wouldn’t take the case. Same goes for our employer plan.

Neil

And Dan, that naturally leads us to, there’s been some big changes and updates as far as class actions and PAGA, the Private Attorney’s general Act. Can you tell us arbitration, what’s going on in that world?

Dan

Well, let’s just talk about PAGA. Okay. And the cases that are coming down and the laws are being passed, it’s a big hot topic item because your bookkeeper could be giving people checks and doing their payroll for years. And some glitz could happen in the system and an error could be made on how the, uh, pay stubs are drafted, how things are calculated, whether they round up a round down or don’t round at all. And for a small little $501,000 error, this one employee can end up being the, uh, spearhead of a class action lawsuit against you that makes you liable for penalties and damages and interest in everything else. <laugh> for a little typographical error. And so it’s big what used to be a small little mistake that you fix and you pay them and everything’s okay, can now turn into a $300,000, $500,000 liability, which you can avoid.

Neil

So what’s the net takeaway from a rounding point of view? For example,

Dan

Well, <laugh>, every year the court of appeals or the Supreme Court of the state of California says, no, no, this isn’t accurate. Or you need to round up now. Now they’re saying, when in doubt roundup, basically they’ve made a judicial law that says they’ve got to pay them more than they worked just in case you mathematically paid them less. Because if you pay them less, then you have waiting time penalties and you’ve got to pay them 30 days or more and you’ve got to pay them interest and you’ve got to pay and you’ve got to be subject to a PAGA lawsuit. Wow. So Roundup is the new mantra and there’s a whole bunch of other reasons that you should be very accurate in the way keep your timekeeping records. Very good. Well, finally, when you said arbitration, arbitration, a new ruling came out that says you can have arbitration agreements,

Neil

Voluntary,

Dan

Voluntary arbitration agreements. However, how you get arbitration agreement is really tricky. You can’t just say everybody signs an arbitration agreement. That would

Neil

Be involuntary.

Dan

Right. But if you get an arbitration agreement, then, then they have to go to arbitration instead of this expensive court if they have any disputes. And it’s harder to move forward with a PGA claim. However, <laugh> and it dis it really discourages lawsuits. Yes. On the flip side, you’ve got to pay for the arbitrator. And if you’ve got to determine plaintiff, and you could have a squirrely arbitrator, I mean, trials are more expensive. You get a full jury and you got a judge that’s experienced, I mean, you get the right to appeal, but arbitration can mean no right to appeal or very little. Right. And you end up with some uninformed or moody arbitrator <laugh> with an agenda and they can rule against you in a big way. So we say 80, 90%, yes, it’s a good idea to have arbitration agreements and we also assist our clients in presenting them in a way that won’t be detrimental to you.

Neil

Good. Which is really important from the voluntary perspective.

Dan

Yes. Having it presented, having all the language in there, everything done tied up in a bow, and you’ll have an arbitration clause that doesn’t make you look like the bad guy.

Neil

And there can be incentives associated with this as well. How do you do that without looking like you’ve paid them or given them, you know, it’s gone from voluntary involuntary. What’s the process there?

Dan

Again, the same thing. You have to have advice on a case by case basis. I mean, if you’re in one industry, what is customer practice for that industry may be different from, from a transportation matter or if you’re in a, a service industry or you’re in the industry that has licensed professionals or you have exempt and non-exempt employees, you have salespeople, you have a whole list, you have software engineers have different rules. So you, you want to have some advice before you implement this. It’s not very expensive. We draft them, you know, 500 to thousand dollars as the average cost. We draft them and we advise them because we have dozens, I mean thousands of different kinds of industries we deal with every year. And so we know the rules and we can advise them pretty quick.

Neil

And the short answer is this is a big deal. This is a big change. And it’s, this is one thing that actually could be good for our employers.

Dan

Yeah, it’s a, one of the few times California law said something good you can do for your employees and your employers.

Neil

You know, California’s really good at working on every little aspect of employment and they’ve got to carve out now for warehouse workers, that has to do with quotas AB 7 0 1. What can you tell me about that, Dan?

Dan

Most people will not ever run into a quota at the workplace, but in certain industries like warehouse workers, industrial manufacturing, machinists, you can say, I want to work, you know, by the hour and just take your time and be relaxed <laugh>. Or you can go and look for a job that says if you produce so many parts, if you produce so many pallets, if you produce more, then you should get paid more. And that’s called a quota. And so what happens is the people doing this are doing manual or skilled labor and they’re, they’re not college grads and not CPAs. And they get told one thing and they get ripped off in another way. Mm. And so lawsuits are filed, lots of evidentiary issues have come about. And now what the law says is if you want to pay people on a quota, you’ve got to have that in writing. You’ve got to let them know you’ve got to give them 90 days and you can’t take any adverse effects against them if you don’t have it in writing.

Neil

And there’s also some verbiage about rest breaks and meal breaks.

Dan

Yes. You have to allow them all of their normal rest breaks and meal breaks and not be adverse to them. What happens is go on a quota <laugh> and you’re getting paid on a quota and the boss comes in and says, I want you to work more. You mean they treat you like you’re not on a quota? And then they take adverse actions against you. On the flip side, if you’re going to do a quota <laugh> and you don’t want to get sued, understand this law now says the burden’s on you. The burden of proof used to be 50 50. What this new law, the burdens on you. If you want help drafting your quota agreements, having everything clear and abundant, maybe an arbitration clause, we do that. And you will have a harder time becoming a good defendant in a lawsuit because you’ll be prepared, there won’t be any am ambiguities and you’ll have more ability to spot slackers poor workers versus the quality ones. Because you’ll have it all in writing and you’ll have a less chance of getting sued if you want to get the, uh, the bad eggs off your workforce and have the talented, honest, hardworking employees you want.

Neil

Dan, settlements is another area. It’s changed. That used to be that he’d, one of the best things about a settlement was when the settlement’s over everybody keeps their mouth shut and one party gets paid and the other party gets the promise of secrecy in a way we go, that’s changed, hasn’t it?

Dan

Yes it has. Now the plaintiff can always say, I I want to keep it secret, but the, uh, employer can’t except in sexual harassment then certain types of allegations are you can’t make them public or you, you can choose not to make them public. But the rationale from the legislature is you got a bad employer, <laugh>, they don’t want anyone to know they did something bad. So they settle with the one complainant and they make them sign a non-disparagement confidentiality agreement. And then no one else at the company or in the industry knows they’re guilty of this. It’s buying it off secrecy, it’s avoiding PAGA lawsuits, class acts and lawsuits mm-hmm. <affirmative>.

Dan
And so they’re making it harder for people who get cut doing something bad from keeping it from disclosure. And nobody wants anyone to know, Hey, I, uh, I just made, uh, a million dollars on Joe, why don’t you go sue Joe, everybody in your company’s suing you. So it’s tricky. And so also there’s severance agreements. It used to be a you, you have someone who’s upset with you, say, I’ll tell you, I’ll pay you a severance and you promise not to say anything. Right. Can’t do that anymore or else they can sue you again <laugh> for violating their rights.

Neil

So as an attorney, how does this change your strategy going into these settlement conferences and what’s the real impact going forward of this change?

Dan

It’s a tough impact. I mean, you have to judge what’s going on and you have to understand that, um, these people may speak out. And so when you settle a matter and you feel like, uh, your client’s done something that may cause liability, you, you correct that like we talked before mm-hmm. <affirmative>, if you fix a mistake, if you remedy a problem before anyone else can make a claim against you, then you’ve protected yourself. But you’ve got to know this in advance before you settle because the number that you settle for may be impacted in anticipation of future lawsuits.

Neil

Wow. And that’s only true here in California.

Dan

Um, there’s other states that have it, but we’re the leaders and employee rights we’re the leaders and making it more expensive to have employees in California.

Neil

Well, on the topic of being sued as an employer, Dan, there’s been a couple of big wage and hour cases that have come down recently. One of them is Naranjo versus Spectrum. Can you tell us a little bit about that case and why it caught your attention and what you think gets the takeaway from this experience?

Dan

Well, the legislature passes laws about meal breaks, rest periods and documenting those things. And then our, uh, our court system seems to expand them and expand them because it doesn’t say a lot of the things. So the court rules that it’s implied, for example, in this case. And it’s frustrating as, uh, a business owner’s and employers attorney because we see it time and time again. And here’s another example of expanding rights of the employee. You have a job to give people the opportunity to take a meal break and a rest break. The courts have decided time and time again that any time an employee doesn’t take one <laugh>, it’s presumed that you didn’t let them take it. Right. And they switch the burden of proof even though it’s not stated. So in the law, and even then when you can prove you did provide opportunity, you got documentation and documentation, they come up with other reasons to make it more expensive for you if they find against you.

Dan
And in this case, it, it seems a nitty gritty or, or picky. But the court has now decided that if it is determined that you didn’t accurately reflect that they’re going to to state that, let, let’s say you have a rest break in a meal break 30 minutes. And then it turns out that they say, well, you didn’t, you didn’t let them take it, or we don’t know if they took it or whatever. It’s your fault in a distance saying, okay, now pay them the 30 bucks, you owe them No, no. They want to say it’s a premium wage and you’ve got to pay overtime. <laugh>, you have to pay penalties, waiting time penalties. And you, you can be charged with more and more damages for a simple clerical error or, or failure to accurately describe what you’re doing with your employees or documented. And all of a sudden there’s a class action lawsuit against you with bigger and more plentiful damages for doing these kind of things.

Neil

And what this really says is to employers, you really need to take this seriously and you need to enforce it.

Dan

Right. However, <laugh> arbitration agreements, if properly drafted Hmm. Can help you with these types of claims under this new court case.

Neil

Fascinating. Another big case that came down recently was Johnson versus WinCo had to do with time being compressed for a drug test.

Dan

Finally won for the winner. Tell me, I mean the losers, us employers <laugh> finally one for US employers. The court ruled that we don’t have to pay for the drug test because a drug test is a condition of employment. So I think they’re talking just about when you give someone a drug test to get the job. Mm-hmm. <affirmative> not on the job drug test. And so you pay for the drug test and they, you don’t have to pay for their time. Now imagine this, it’s five minutes and there’s some lawyer out there grabbing people who had to spend five minutes getting a drug test and asking for a Class X and lawsuit with all the damages described in all these cases and laws I talked to you about. Those are the laws that tell me to tell you if you’re an employer, call your employment lawyer and have them review your procedures at least once a year <laugh> and spend a few bucks so you don’t have to spend a few hundred thousand later.

Neil

Because the negative wisdom you started this with Dan, was it’s not a matter of if, it’s a matter of when

Dan

And it’s going to get worse this year if all the indicators are correct.

Neil

Appreciate your time, Dan.

Dan

Thank you.

Dan

You can learn more about the Watkins firm at https://watkinsfirm.com or call our office at (858) 535-1511.