Employment Law Blog

Famous Wrongful Termination Cases and Rulings by the Supreme Court

One of the most common reasons a former employee may file a lawsuit against their previous employer is for wrongful termination. This type of retaliation is common in cases where an employee speaks out against workplace harassment, discrimination, or illegal activity. After voicing a complaint, the employers have been known to retaliate by firing the employee as punishment. While it’s not always possible to prevent this from happening, federal and state law protects workers against such treatment. In fact, there are a couple of famous wrongful termination cases and rulings by the Supreme Court that make it easier for a worker to file a claim. Kasten v. Saint-Gobain Performance Plastics Corp. In December 2006, Saint-Gobain Performance Plastic fired Kevin Kasten from his job. According to Kasten, the company retaliated against him for making a complaint about the location of time clocks. Kasten noticed that the company placed time clocks away from the area where employees put on their required protective gear. This meant that employees couldn’t get paid for their time preparing their equipment.  Saint-Gobain Performance Plastic argued that Kasten’s complaints weren’t protected under the Fair Labor Standards Act (FLSA) because they were oral instead of written. The District Court and the 7th Circuit Court of Appeals determined that the FLSA did not protect verbal complaints. However, the U.S. Supreme Court overturned the ruling in a 6-2 decision, stating that the FLSA protects an employee who files either an oral or written complaint. Thompson v. North American Stainless, LP Eric Thompson and his fiancée, Miriam Regalado, both worked for North American Stainless in a manufacturing facility in Kentucky. In September 2002, Regalado filed a complaint with the Equal Employment Opportunity Commission (EEOC) alleging gender-based discrimination by her supervisors. Three weeks after North American Stainless became aware of the charge, they fired Thompson in retaliation. Thompson then filed a complaint, stating that the company violated section 704(a) of Title VII.  Initially, the District Court and the 6th Circuit Court of Appeals dismissed Thompson’s case since it was a “third-party retaliation claim.” However, in a unanimous 8-0 ruling, the U.S. Supreme Court found that Title VII’s anti-retaliation provisions cover “a broad range of employer conduct.” Since North American Stainless fired Thompson to punish Regalado, the U.S. Supreme Court ruled that they performed an unlawful act under Title VII. Pennsylvania State Police v. Suders In August 1998, Nancy Drew Suders quit her dispatcher job with the Pennsylvania State Police. She claimed that sexual harassment from her supervisors was so pervasive that she decided to quit. Before leaving, her supervisors accused her of theft, put her in handcuffs, and questioned her. She decided not to file a complaint since the equal opportunity representative in the department was unsympathetic. Suders then filed a lawsuit in District Court claiming that the discrimination she faced forced her to quit. The District Court granted a summary judgment to the state police since Suders did not use the department’s internal procedures. The 3rd Circuit Court of Appeals overturned the decision, stating that the police were directly responsible for her resignation. Finally, in an 8-1 decision, the U.S. Supreme Court ruled that any employee in a situation where a “reasonable person…would have felt compelled to resign” could file a lawsuit against their employer without filing an internal complaint. Your Options After Wrongful Termination As these famous wrongful termination cases demonstrate, you have several rights as a worker. Whether you are fired, demoted, or forced to quit due to a hostile work environment, there are legal options available to you. If your employer retaliates against you for making a valid workplace complaint, an experienced employment law attorney can help.

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Employment Law Blog

Whistleblowing Under California Employment Laws

California whistleblowing law is designed to protect employees who report misconduct at work. These laws protect employees in Los Angeles, San Francisco and throughout the state from retaliation. Whistleblowing refers to when an employee “blows the whistle” on his or her employer by reporting the employer’s misconduct which can include: Violation of a state or federal law, Violation or noncompliance with a local, state or federal rule or regulation, or Unsafe working conditions or practices in the context of employee health and safety. The main protection for whistleblowers in California is found in Labor Code Section 1102.5. What is Covered by California’s Whistleblower Law? The California whistleblower law prohibits employers from retaliating against an employee who reports violations of law or noncompliance with local, state or federal rules or regulations. In addition, the whistleblower law protects employees from retaliation for refusing to participate in an activity that would be a violation of law. Firing an employee for whistleblowing is a form of wrongful termination. Under Government Code Section 8547.1, which extends whistleblower protections to employees of government agencies, it is the declared intention of the state legislature that, in addition to violations of law, state employees should also be free to report “waste, fraud, abuse of authority” and “threat to public health” without any fear of retribution. Increased Protections Under the Whistleblower Law In 2014, the general California whistleblower law was expanded in three important ways. First, protection against whistleblower retaliation in California was extended to employees who report suspected illegal behavior internally – to either a supervisor or another employee with authority to investigate, discover or correct the reported violation. Second, employees also now receive protection if they believe they have been retaliated against based on the employer’s belief that the employee has either already disclosed or will later disclose a violation of law, regardless of whether any actual disclosure of unlawful activity has been made by the employee. Third, the types of complaints an employee may make under the whistleblower protections were expanded to include violations of local rules and regulations, such as city charters and municipal codes, in addition to state and federal laws. For example, certain cities such as Los Angeles and San Francisco have their local laws and ordinances. Reporting potential violations of those local laws are now covered by California’s whistleblower laws. Contact Us Schedule your free consultation. What Counts as Retaliation Under the California Whistleblower Laws? Whistleblower retaliation can take many forms. The most obvious is, of course, being fired. But retaliation can happen in other ways, as well. For instance, you could be demoted or denied a promotion for which you would otherwise be considered, you could be isolated from other workers, you could get threats or be harassed in other ways, you could be denied access to resources you need to do your job, or you could be denied access to professional development opportunities. You might also face retaliation that is related to your or a family member’s immigration status. Can I Become a Whistleblower and Remain Anonymous? It may be possible in some cases to remain anonymous, but you would be wise not to count on it. It can be extremely difficult to remain anonymous since many cases eventually become public. Even if it is possible to remain unknown to the public in some cases, you should still expect that the entity you are blowing the whistle against could eventually learn your identity – that entity will be entitled to defend itself against claims that is doing or has done something wrong. The more serious the wrongdoing, the more vigorously an organization may feel compelled to defend itself. Reasonable Cause of Wrongdoing is Enough Under the Whistleblowing Law You do not have to prove beyond “a shadow of a doubt,” that your organization, company or state agency is violating a law, rule or regulation in order to claim protection under California’s whistleblower law. You do need to have reasonable cause to believe that there is some sort of illegal conduct or wrongdoing. Even if the underlying conduct is not ultimately determined to be unlawful, making a good faith complaint based on your reasonable belief is enough to trigger the California whistleblower law’s protection against retaliation by your employer. Filing a California Whistleblower Complaint or Lawsuit If you are thinking of becoming a whistleblower, you may wish to seek the advice of one of our California whistleblower attorneys before you move forward. This could help you fully understand your options in the event of any fallout. If you are already a whistleblower who is dealing with retaliation in California, you might wish to consult one of our lawyers to discuss your options for filing a retaliation lawsuit. Remedies Under the Whistleblower Law If you win a whistleblower retaliation claim, your employer may be required to reinstate employment and work benefits, pay your lost wages, and compensate you for pain and suffering or emotional distress. Whistleblower verdicts can be very large. Jurors tend to punish companies for firing employees who report misconduct in the workplace. Contact us online or call (800) 668-7984 if you have been fired or retaliated against for reporting misconduct. For details about our Los Angeles office, click here. For details about our San Francisco office, click here.

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Employment Law Blog

Constructive Discharge in California

Constructive discharge is a term used to describe a situation where an employer forces an employee to quit.  This is often referred to as constructive dismissal or constructive termination. Rather than firing an employee for an illegal reason, some California employers attempt to skirt liability by forcing the employee to resign. A constructive discharge occurs when an employee is coerced into resigning as a result of the employer imposing unusually intolerable working conditions on the employee with the intention of forcing the employee to quit.   In such cases, the employee’s resignation has legally deemed a firing rather than a voluntary resignation.  Our California employment lawyers will explain. Call our firm at (800) 668-7984 or contact us online for further assistance. What is the Best Way to Prove a Constructive Discharge Claim in California? Establishing a claim of California constructive discharge requires the employee to prove “that the employer either intentionally created or knowingly permitted working conditions that were so intolerable or aggravated at the time of the employee’s resignation that a reasonable employer would realize that a reasonable person in the employee’s position would be compelled to resign.” Vasquez v. Franklin Real Estate Fund, Inc.  Employees may not just “quit and sue” based on a charge of constructive discharge or termination.  The facts must show that the employee was coerced or forced into quitting rather than simply making a rational choice to quit.  “The conditions giving rise to the resignation must be sufficiently extraordinary and egregious to overcome the normal motivation of a competent, diligent and reasonable employee to remain on the job to earn a livelihood and to serve his or her employer.”  Id.  The standard applied in determining whether or not there has been a constructive discharge in California is an objective one, and it is a question of fact – “whether a reasonable person faced with the allegedly intolerable employer actions or conditions would have no reasonable alternative except to quit.”  Id.  Contact Us Schedule your free consultation. California Constructive Discharge Examples  Courts have held that the following types of employer conduct are not, on their own, enough to amount to constructive discharge or dismissal:  The mere existence of a legal violation in the workplace. Id.  An isolated instance of employment discrimination. Soules v. Cadam, Inc.  A poor performance rating accompanied by a demotion and reduction in pay. Vasquez.  Changing an instructor’s schedule from full-time to part-time. Scotch v. Art Institute of California.    Reducing an employee’s salary and changing his or her annual bonus.  King v. AC & R Advertising.  When it turns out that the job the employee accepts is more difficult than or otherwise different from what the employee expected. Rochlis v. Walt Disney Co.  Receiving criticism and being paid less than the employee believes he deserves. Id.   However, courts have held that the following types of employer conduct could amount to constructive discharge in California:  An employee was subjected to a violation of the California Labor Code (failure to reimburse business expenses) so egregious that it resulted in the employee being paid less than minimum wage, forcing the employee to divert a substantial amount his salary to pay his employers expenses and leaving the employee unable to pay basic living expenses. Vasquez.  When an employee is subjected to a continuous pattern of discrimination by the employer on the basis of race, sex, age or national origin.  Watson v. Nationwide Insurance Co.  An employee was physically threatened on one occasion, harassed over a period of two weeks, and not given sufficient work instructions to perform his job.  Ford v. Alfaro.  An employee was subjected to three racial insults within a matter of hours and, upon quitting, was told, “You’d stay if you weren’t a sissy.  If you were a man, you’d stay.”  Watson (citing Bailey v. Binyon).  An employee who had previously received only excellent performance ratings was subjected to citations for rule violations that other similarly situated employees did not receive, to trumped–up charges of inadequate job performance, and to abusive treatment and harassment, including being told in a four–hour meeting that she was a poor and incompetent supervisor.  Watson.  Contact a California Employment Lawyer for Help If you believe your employee rights have been violated or would like additional information about California constructive discharge, please contact us online or call (800) 668-7984 for help.

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Employment Law Blog

Non-Compete Agreements in New York

NEW YORK NON-COMPETE AGREEMENTS REVIEW & CONSULTATION Our firm will review your non-compete and meet with you via phone or video chat, answer your questions, review your non-compete agreement, and draft a written analysis to assist you in understanding your situation. For this review and consultation there will be a legal fee of $750. A Review & Consultation is often the first step. In many cases, we continue representing executives in negotiations or litigation. We have been assisting executives with non-compete issues since 1999. Submit the short form below to get started with a consultation. Important Information About Non-Compete Agreements in New York Subscribe to Our YouTube Channel New York non-compete agreements are widely misunderstood and many of them are unenforceable. This is because New York strongly disfavors non-compete agreements and courts will not enforce them unless a company can overcome a presumption of unenforceability. New York non-competition law attempts to strike a balance to protect an employer’s legitimate business interests, an employee’s ability to earn a living, and the public interest in free trade. Speak with an Employment Attorney About Your Non-Compete Agreement If you are looking for immediate help with a non-compete issue complete the short form below to get your free consultation started. We review your non-compete agreement and then meet with you over the phone. We will assess the agreement’s enforceability and suggest strategies. Call 347-492-1904 to speak with Robert Ottinger if you have questions regarding your non-compete agreement in New York. Locked into a Non-Compete in NY? Here are Five Ways Your Can Potentially Defeat Your New York Non-Compete Agreement Are you bound by a New York non-compete agreement?   Are you trying to move from one employer to another in the same industry?   A non-compete agreement can ruin your plans.   How to Beat a Non-Compete Agreement in New York Robert Ottinger is an expert when it comes to non-compete agreements in New York. Watch the short video below to find out if your non-compete is enforceable. The Ultimate Guide for Executives This article provides a brief overview of tactics that can beat a non-compete agreement.  If a non-compete agreement is causing problems for you, it may be possible to invalidate it or reduce its impact.  We offer a non compete review & consultation to help you understand your options. First, a little background on New York non-compete agreements.   These agreements were once limited to high-level company executives who had access to company trade secrets or who developed unique skills while employed by the company.   Over the past decade, however, companies have started asking rank and file employees to sign non-compete agreements.   As a result, employees at all levels find themselves constrained by these agreements.   It’s estimated that one in five people today are bound by a non-compete clause.   The overuse and abuse of non-compete agreements are also creating a backlash against them.    Last year, New York Attorney General Eric Schneiderman prosecuted three companies for abusing non-compete agreements.    According to the Attorney General, “unless an individual has highly unique skills or access to trade secrets, non-compete clauses have no place in a worker’s employment contract.”  The tide has turned against non-compete agreements in New York.  Courts are now more likely than ever to void these agreements. Contact Us Schedule your flat-rate consultation. What is a Non-Compete Agreement? A non-compete agreement is a clause typically inserted into an employment or separation agreement that prohibits a person from working for a competitor of their employer for a period of time.   A non-compete agreement can limit your ability to move around in your industry.   By signing one, you effectively agree that if you stop working for your employer, you will leave your industry and abandon your skills and experience for a period of time that typically ranges from six months to two years.   Here is a typical non-compete agreement: “Employee shall not, whether directly or indirectly, alone or as a partner, joint venturer, officer, director, employee, consultant, agent, independent contractor or stockholder of any company or business anywhere in the United States, except on behalf of the Company or with the company’s written consent: (a) engage in the Business of the Company or in any business that is in competition with the Business of the Company; (b) be employed by, consult for or provide any services to any person or entity that is engaged in the Business of the Company or is engaged in any business that is in competition with the Business of the Company; (c) solicit or accept the same or substantially related business of any customer or account of the Company or induce any customer or account of the Company to cease doing business with the Company or in any manner interfere with the goodwill and customer relationships of the Company.” The Legal Standard used to Evaluate New York Non-Compete Agreements In New York, courts disfavor non-compete agreements and enforce them only when necessary.  Here are the main factors courts consider: non competes are enforced only when necessary to protect legitimate business interests such as trade secrets or special skills acquired during employment non compete agreements must be reasonable in time and geographic reach the agreement cannot be harmful to the general public the agreement must not be unreasonably burdensome on the employee. Courts apply the same standard to non-solicitation agreements. 5 Ways to Defeat a New York Non-Compete 1. FIRED WITHOUT CAUSE If your employer is not willing to employ you, courts generally will not enforce a non-compete agreement. This is almost black letter law in New York, so if you were fired without cause, your non-compete agreement is not enforceable. But there is no reason to feel trapped by that non-compete agreement. It’s not enforceable in this situation. A Common Scenario Today, most New York executives are bound by non-compete agreements. And many find themselves fired without cause or laid off at some point. They feel trapped by their non-compete agreement. They want to stay in their field because that is where […]

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Employment Law Blog

103 Laws Protecting California Employees

If you want to find a comprehensive list of laws protecting California employees, then this post is the place for you! Below you will find 103 laws that offer legal protection to employees working in California. If you are looking for a specific type of employment law, you can click on the categories listed below to jump to that section. Check it out! Wage and Hour Minimum Wage and Overtime IWC Order MW-2019: As of January 1, 2020, employers with 26 or more employees must pay their California employees $13 per hour. Additionally, employers with 25 or fewer employees must pay their California employees $12 per hour. Cal. Labor Code Section 510: Non-exempt employees must receive overtime for eight or more hours worked in a single day. Also, employers owe overtime for more than 40 hours worked in a workweek. Employers must pay double time for hours worked in excess of 12 in a day or eight on the seventh day of any workweek. Cal. Labor Code Section 1194: Any employee who is receiving less than the legal minimum or overtime wage can file a lawsuit. This lawsuit can be for unpaid wages, interest, and attorney’s fees. San Francisco Administrative Code, Section 12R (For San Francisco Employees): Any employee who performs two or more hours of work in a week for an employer in San Francisco is entitled to San Francisco’s specified minimum wage. As of July 1, 2020, this minimum wage will be $16.07. Meal and Rest Breaks Cal. Labor Code section 226.7: Non-exempt employees must receive rest breaks of at least 10 minutes for every four hours of work. If rest breaks are not provided, then an employer must pay the employee one hour of pay for each day that the rest break was not offered. Cal. Labor Code Section 512: Non-exempt employees that work more than six hours in a day must receive a meal period by the fifth hour. Additionally, this meal period must be at least 30 minutes long. Along with this, employers must offer additional meal periods for employees who work over 10 hours. Record-keeping Cal. Labor Code Section 1198.5: Any current or former California employee, with limited exceptions, has the right to receive a copy of his or her personnel records. 29 CFR Section 516.2: All employers must maintain accurate payroll records for their employees. For instance, these records must contain the employee’s rate of pay, hours worked, overtime hours, and deductions. Cal. Labor Code Section 226: An employer must provide employees with accurate and itemized wage statements. Cal. Labor Code Section 353: An employer must keep accurate records of all tips received. Cal. Labor Code Section 1174: Employers must keep an employee’s payroll records on file for no less than three years. Along with other information, these records must include the ages of any minors who worked for the employer. Los Angeles Ordinance No. 184320, section 188.03(B) (For Los Angeles Employees): Employers within the city of Los Angeles must maintain payroll records for four years. Cal. Labor Code Section 432.3: Employers cannot ask prospective employees for salary history. Employers must also offer prospective employees with pay scale information upon request. Wages Cal. Labor Code Section 2802: Employees are entitled to reimbursement of any necessary business-related expenses that they make. As a result, employers cannot pass operational costs onto their employees. Cal. Labor Code Section 201: Employers must pay wages immediately to an employee who is discharged. Cal. Labor Code Section 202: Employees who quit are owed wages within 72 hours after quitting. If the employee gave 72 hours’ notice of quitting, then the employer must pay the wages at the time that the employee quits. Cal. Labor Code Section 203: Employers must pay employees wages owed when their job ends. If they do not, the employee is entitled to payment for each day he or she is not paid owed wages. Additionally, this penalty continues for a maximum of 30 days, unless payment is submitted or legal actions commence. Cal. Labor Code Section 204: California employees, with some exceptions, must be paid at least twice a month. Also, employers must establish a regular payday for their employees. Cal. Labor Code Section 231: If an employer requires an employee to have a driver’s license for the job, then the employee must pay for any medical exams associated with obtaining that license. However, this does not apply to medical exams taken prior to the employee’s application. Cal. Labor Code Section 232(a): An employer cannot prevent an employee from disclosing the amount of his or her wages. Cal. Labor Code Section 351: Generally, an employer cannot withhold or take a portion of an employee’s tips. Cal. Labor Code Section 2800: An employer must compensate an employee for losses incurred due to the employer’s “want of ordinary care.” So, employers must take reasonable precautions to prevent an employee’s losses. Discrimination and Harassment General Protections Title VII of Civil Rights Act of 1964: This federal law makes it illegal for an employer to discriminate on the basis of race, color, national origin, sex, and/or religion. Cal. Gov. Code Section 12940(a): This law, also known as FEHA, offers protections from discrimination to certain classes of employees. Among these classes are race, religion, sexual orientation, physical or mental disability, gender identity, age, and veteran status. Cal. Gov. Code section 12940(j): An employer cannot harass an employee, applicant, or intern because the employee is a member of any of the protected classes in Section 12940(a). Cal. Gov. Code Section 12990: This law applies to workers contracted by the state for public work. These workers cannot be discriminated against for any of the protected classes listed in FEHA. Cal. Labor Code Section 1735: A contractor for public works projects cannot discriminate employment of people to work on public works on any basis listed in FEHA. Hiring and Firing Cal. Labor Code Section 432.7(a): An employer cannot use any record of arrest or detention that did not result in a conviction for […]

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Employment Law Blog

Defeating a Non-Compete Agreement

In this post, I’m going to show you EXACTLY how to get out of a New York non-compete agreement. In fact, this is the exact process we use to help all of our clients get out of non-compete agreements.  If you want to get out of a New York non-compete agreement, you’ll like this post.  The graphic above makes it easy to see how this works. You can also visit FindLaw to learn more about non-compete agreements in detail. Let’s dive right in …. 1. Fired Without Cause Were you fired without cause? If you were fired without cause, you most likely have nothing to worry about.  Courts in New York generally will not enforce a non-compete against you in this situation because it’s so unfair. If your employer is not willing to employ you, then it cannot prevent you from working within your field. It’s just that simple.  Also, most firings are without cause. Cause only exists if you do something seriously wrong like commit a major crime, steal from your employer or do something intentionally harmful to the company.  If you were not fired, then go to steps 2 & 3 below. 2. Company Trade Secrets New York courts will not enforce a non-compete agreement against an employee unless the company has a legitimate interest to protect. In almost every case, the only possible legitimate interests are trade secrets. Therefore, your non-compete agreement is probably unenforceable unless you have access to your employer’s trade secrets.   Most people do not have access to trade secrets. For example, at the Coca Cola company, their trade secrets are the formulas for coke and other drinks, and they are closely guarded secrets.  If you do have access to trade secrets or confidential information, then go to step 4 below.  3. Unique Skillset Do you have unique or extraordinary skills? This step only covers doctors, famous singers, actors & athletes and nationally renowned experts. Very few people have to worry about this. Unless you are one of them, your non-compete will not be enforced.  4. Reasonable Geographic Scope Is the non-compete agreement reasonable in time and geographic scope?  This step only applies if you answered yes to step 2 or 3 above. Generally, a non-compete will be deemed reasonable if the restriction is limited to a year or less but that can vary. An agreement is reasonable in geographic scope if it covers the company’s service area or market.  For example, if you are a doctor who works for a medical practice that serves Brooklyn, then the non-compete should only cover Brooklyn. Or if you work for Google, most of their products have global reach so a non-compete with Google could cover the globe.  Summing it Up Those are the four steps. If you answered yes to the first step or no to steps two and three, then your non-compete is unenforceable. These rules only apply to New York cases because other states have different rules.  If you need help with a non-compete agreement or want to learn more about New York Non- Compete Core Concepts, please contact us.  

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Wages & Hours

Zoom and the Inside Sales Exemption

The Coronavirus pandemic is forcing rapid change on the way we work and some of those changes might stick.  Zoom meetings, for example, are replacing business trips while travel is restricted.   But will the convenience and efficiency of online meetings reduce business travel once the restrictions are lifted? Why travel to see prospects when you can meet them online for a fraction of the cost?  If this becomes a lasting change in business behavior, it could have serious legal implications for sales teams.           The Distinction Between Inside and Outside Sales in California In California, there is an important legal difference between inside and outside salespeople. Inside salespeople have more rights than outside salespeople. Namely, inside salespeople are entitled to meal and rest breaks and, in some cases, overtime pay. Outside salespeople, on the other hand, are not entitled to breaks or overtime pay. Companies are required to properly classify salespeople so they know who is entitled to and breaks and overtime. Misclassification of salespeople can be costly because there are steep penalties for missing breaks and failing to pay overtime As sales teams reduce travel, they may need to be reclassified from outside sales to inside sales.  This is because the classification system is based on travel frequency.  The defining characteristic of an outside salesperson is travel. Those who spend more than 50% of their time traveling outside of the office are classified as outside sales.   Those who don’t travel much and spend most of their time working from the office are inside sales.   If salespeople conduct more business online and travel less, their classification can change from outside sales to inside. Contact Us Schedule your free consultation. Inside Salespeople are Always Entitled to Meal & Rest Breaks All inside salespeople are always entitled to meal and rest breaks. There are no exceptions.  When rest breaks and meal periods are not provided as required, employees may recover penalty payments from employers of up to two hours of play per day for missed meal periods and rest breaks (one hour for each missed break).  United Parcel Service, Inc. v. Superior Court of Los Angeles County, 192 Cal.App.4th 1043 (2011). Outside salespeople are not entitled to meal and rest breaks. Inside Salespeople and Overtime Pay Inside salespeople are also entitled to overtime pay. But the right to overtime pay is a moving target and difficult to track. As explained below, a salesperson’s right to overtime pay can vary each quarter and each pay period. Here is the rule: inside salespeople are entitled to overtime pay, unless more than half of their pay comes from commissions and their earnings exceed one and one-half times the minimum wage.  Each part of this rule is discussed below. The 50% Commission Rule Applies Quarterly As explained above, a salesperson is entitled to overtime pay unless commissions make up 50% or more of their total compensation. This rule is not applied annually. Instead, it must be measured during the “representative period.” Since most sales organizations operate on a quarterly cycle, the period is typically a quarter. Therefore, a salesperson’s total compensation must be measured each quarter. If commissions make up less than half of their total compensation for the quarter, the salesperson is entitled to overtime pay. A salesperson’s right to overtime pay can vary quarter to quarter. During a good quarter with high commissions, a salesperson might not be entitled to overtime. But during a slower quarter, they might be entitled to overtime pay. The Minimum Wage Test Must be Calculated each Pay Period A salesperson must be paid overtime for each pay period that their total earnings do not exceed 1.5 times the minimum wage. This is true even if commissions account for more than 50% of their compensation. And, in California, commission payments cannot be carried over to other pay periods. Each pay period is analyzed separately and the right to overtime pay can vary each pay period. As a result, employers must essentially run the overtime exemption test anew for each pay period to determine whether or not a particular employee is overtime-eligible or -exempt, based on the earnings for that pay period.  Employers must also maintain diligent, accurate timekeeping records for any insides sales employees for whom they wish to claim the California overtime exemption.  Anytime requirements for the exemption are not met in a workweek, the employer must ensure the employee is paid appropriately for any overtime worked. Failure by employers to properly classify inside salespeople can also have other costly repercussions.  For example, there are requirements for employers to pay all overtime due prior to an employee’s last day of employment.  Failure to do so can result in “waiting time penalties” if the failure is willful.  Employers must also itemize paystubs for non-exempt employees, showing the number of hours worked by the employee during the pay period.  California Labor Code §226(a).  If an employer has misclassified an inside salesperson as exempt when they shouldn’t have, they may also have failed to properly itemize the employee’s hours on their pay stub.  Employees who have been misclassified by an employer may also recover attorney’s fees in many cases. The Impact of More Zoom Meetings and Less Travel As you can see, a company is required to treat inside salespeople much differently than outside salespeople. It’s very possible that thousands of outside salespeople are now actually inside salespeople. If they are conducting meetings online instead of traveling, they might be entitled to meal and rest breaks and overtime pay. But companies are just trying to survive the pandemic and possibly unaware that their sales teams now are entitled to breaks and overtime pay. A wave of Zoom misclassification lawsuits may be on the horizon.

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Employment Law Blog

Federal Ban on Non-compete Agreements—Is It Possible?

Non-compete agreements have the attention of congress.  A bipartisan effort to regulate non-compete agreements on a federal level was introduced in the U.S. Senate in October 2019 by Senators Chris Murphy (D-Conn.) and Todd Young (R-Ind.). Senate Bill 2614, the Workforce Mobility Act of 2019, proposes a near federal ban of all employee non-compete agreements, with limited exceptions for certain business transactions. The bill would have sweeping implications, but does it have any chance of becoming law?   Workforce Mobility Act Would Limit Noncompete Agreements  The Workforce Mobility Act (WMA) defines a “non-compete” agreement as any agreement between “a person and an individual performing work for the person” that restricts the individual, after the termination of the working relationship, from doing the following:  Working for another person for a period of time.  Working in a specified geographic area.  Working for another person similar to the individual’s work for the company.  The WMA generally prohibits the use of non-compete agreements, except in limited instances.  The bill permits non-compete agreements in connection with the sale of a business, as part of the dissolution of a partnership (or buyout of a person’s partnership interest), or as part of a severance agreement with senior executives as part of the sale of a business (but the agreement is limited to 12 months and the employee must receive 12 months’ severance pay).   The WMA does not expressly prohibit non-solicitation agreements or non-disclosure agreements. Still, the definition of a “noncompete agreement” leaves open the possibility that these agreements may also be restricted. The bill does not prohibit agreements that prevent employees from sharing trade secrets.   The Federal Trade Commission and the Department of Labor would be responsible for enforcing the WMA. The bill does allow workers to file suits for violations of the WMA.   How the WMA Impacts Employees  Non-compete agreements limit employee mobility, stifle wage growth and innovation, and prevent true competition. An estimated 40 percent of American workers have been subject to a non-compete agreement at some point in their careers. Given the growing use of these agreements in today’s workforce, even with employees in low-paying jobs, the harm imposed on the economy and workers has not gone unnoticed.   A prohibition on non-compete agreements would force companies to find a new way to protect their company’s legitimate interests without impeding a person’s ability to change jobs and earn higher wages. Passage of the WMA would also provide a uniform standard, which would ease the current discrepancies between states.  Does the Workforce Mobility Act Have a Chance?   The WMA is not the first attempt by legislators to regulate the use of non-compete agreements. Similar federal efforts failed in 2018 and January 2019, and many states have proposed or enacted legislation to limit the use of non–compete agreements.   While the WMA received praise from many, its future seems uncertain, and some critics argue that safeguards against employer abuse of non-compete agreements already exist in the court system and that the bill goes too far. A hearing was held in November 2019, but there has been no movement since that time. While passage of the bill may be unlikely, it has again brought the issue of abuse of non-competes to the forefront and may be a good step towards negotiating a compromise bill.  The Ottinger Employment Attorneys have drafted, reviewed, and negotiated non-compete agreements for over 20 years. Non-compete agreements can ruin your future career prospects, so it is critical that you carefully review and consider the long-term implications of these agreements. If you are contemplating entering into a non-compete agreement or fighting enforcement of an agreement, contact us today.  Click here for more about non-compete agreements in New York. 

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Employment Law Blog

Non-Solicitation Agreements: Announcing Your Change of Firms without Getting Sued

Recently, an Indiana federal district court tackled the issue of whether a former employee’s change in employment announcement to clients constitutes solicitation. In Edward D. Jones & Co., L.P. v. Kerr, No. 1:19-cv-03810-SEB-DML (S.D. Ind., Nov. 14, 2019), the court concluded the announcement was not a solicitation and, for those looking to enforce or defend against non-solicitation agreements, this decision provides helpful insight into behaviors that may cross the line from notification to solicitation.    Background  Mr. Kerr was a Financial Advisor for Edward Jones, serving as the sole advisor in the Westfield, Indiana branch for twenty years. At the outset of his employment, Kerr executed an employment agreement (“Agreement”) requiring, among other things, the return of account records and customer files upon termination or resignation, and a one-year prohibition on soliciting the employer’s clients.   Kerr resigned his position during a meeting on August 1, 2019; however, the parties offer drastically different versions of how the resignation came about. Kerr claims that he printed confidential client reports in preparation for the meeting and destroyed them thereafter; Edward Jones contends Kerr printed the reports because he knew he would be terminated, and he used the reports to solicit clients.   On August 2, 2019, Kerr began working at a different firm. Over the next few days, he contacted his former clients to announce his transition. Around that same time, Edward Jones also notified Kerr’s clients of the transition through letters and telephone calls.   Edwards Jones filed suit to enforce the Agreement and requested a temporary restraining order; Kerr did not challenge the validity of the Agreement but argued that his actions were not “indirect solicitations.” The court limited its review to the alleged breach of the non-solicitation provision of the Agreement.  Transition Announcement Does Not Constitute Indirect Solicitation  Ultimately, the court denied Edwards Jones’ request for a TRO. Relying on the below case-specific facts and Kerr’s intent, the court concluded Kerr’s announcement was not a solicitation.   Content of the notification. During the notifications, Kerr did not provide information about his new firm unless clients initiated the discussion or explicitly requested more information. In fact, some clients first learned of the transition from phone calls by Edward Jones’ employees, not Kerr.   Origination of alleged solicited clients. Approximately 70 percent of clients that followed Kerr to his new firm had personal relationships with Kerr that predated his employment with Edward Jones.   Employer’s protocol for new employees transitioning from other firms. Edward Jones’ protocol requires new employees to contact their former clients to inform them of their new affiliation and provide their new contact information. The court found this very persuasive and acknowledged such an announcement may be consistent with industry practices as evidenced by the employer’s policies.   Extent of the former employee’s contacts with clients after the initial departure notification. Kerr made no contact with the former clients after the initial notification.   The Kerr court notes that many courts reject the theory that an announcement like Kerr’s constitutes a solicitation, even when an employment agreement prohibits direct or indirect solicitation; however, transitioning employees should approach any client notifications with caution.   Takeaways  Financial advisors have a fiduciary duty to inform clients of a change in employment, but they must ensure that any notification does not cross the line into solicitation because non-solicitation provisions are enforceable.    If you have questions regarding a non-compete or non-solicitation agreement, contact the Ottinger Firm for a free Review & Consultation. With offices in New York and California, our skilled employment attorneys will examine your agreement and meet with you to review and discuss your options. We have litigated non-compete and non-solicitation agreements in federal and state court and mediated, arbitrated and negotiated hundreds of disputes. Contact us today at (415) 325-2088 (San Francisco), (213) 377-5717 (Los Angeles), or (347) 305-5294 (New York). 

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Employment Law Blog

Study Finds that Non-Compete Agreements are Bad for Employees and the Economy

A recent report released by the Economic Policy Institute (“EPI”) is arguing in favor of prohibiting noncompete agreements after concluding that the increasing use of noncompete agreements may be contributing to rising wage inequality, stagnant wages, and decreasing job mobility. Relying on data from a national survey of private-sector businesses, EPI found that almost half of responding establishments required at least some of their employees to sign noncompete agreements. Should noncompete agreements be prohibited? Do they stifle competition? EPI certainly makes a strong argument, showing just how dangerous noncompetes can be for workers and the entire American workforce. The Growing Use and Abuse of Non-Compete Agreements Noncompete agreements are commonly found in employment agreements or as free-standing agreements, prohibit an employee from working for a competing business or starting their own competing business within a prescribed timeframe and within a specified geographical area. While their use was formerly limited to executives and other highly paid employees, the use of noncompete agreements has spread into all industries and to all levels of employees, including minimum wage employees and those working entry-level jobs.  As a result of employer overreach, some states have made significant efforts to eliminate or limit the enforceability of noncompete agreements. Labor Market Trends EPI began its report by highlighting two main trends in recent decades: (1) rising inequality and stagnant wages among all but highly paid employees; and (2) the decline in job mobility and other measures of labor market fluidity. While many factors influence these trends, evidence suggests that the increasing use of noncompete agreements may be part of the problem. In terms of wage growth, workers often change jobs for a pay increase; when noncompete agreements limit mobility and competition, wages remain unchanged. Since noncompetes prohibit a worker from starting their own business or taking another job, there is a decline in dynamism in the national labor market. In fact, EPI noted that enforceability of noncompetes reduces the formation of new firms by 12% and is associated with an 11% increase in the length of time a worker remains at their job. Indeed, noncompete agreements are inhibiting workers’ individual growth and impeding competition between organizations. Key Findings about Non-Compete Agreements The EPI study made several notable findings that supported its conclusion and argument for the prohibition of noncompete agreements. Almost half of businesses use noncompete agreements. Specifically, 49.4% of establishments reported that at least some of their employees were required to sign noncompetes; 31.8% of organizations indicated that all employees were required to enter into noncompetes (regardless of wages or duties). Based on the available data, EPI was able to estimate that 27.8% to 46.5% of private-sector workers are subject to noncompete agreements. Based on the assumption that there are 129.3 million people in the private-sector workforce, that means between 36 million and 60 million private-sector workers are subject to noncompetes. Mid-sized organizations are more likely to have all employees sign noncompete agreements. Establishments with 50 to 100 employees are less likely to use noncompete agreements than organizations with 100 or more employees. However, while larger organizations (1000 or more employees) are more likely to have legal counsel and sophisticated HR policies, mid-sized organizations (100–499 employees) are more likely to require all employees to sign noncompetes than both smaller and larger organizations. In the 12 largest states, 40% of establishments have at least some employees sign noncompete agreements. The EPI study reviewed the use of noncompete agreements in the 12 largest states (including California and New York) and found that 40% of organizations in these states use noncompete agreements with at least some of their employees. Shockingly, 45.1% of California establishments subject some of their employees to noncompete agreements even though noncompete agreements are unenforceable in that state. Why would California employers do this? They are relying on the fact that workers rarely challenge these agreements in court. The EPI study notes that employees’ fears of being sued and pressure from employers causes workers to stay in positions regardless of whether the noncompete agreement is enforceable. This lack of mobility leads to lower or stagnant wages, and it stifles creativity and the development of new companies, products, and ideas.  Significant use of noncompete agreements in business services and wholesale trades. Seventy percent of business services and wholesale trade organizations use noncompete agreements. These agreements are used less in transportation, education, health services, and leisure and hospitality establishments. Noncompete agreements used more frequently at higher-wage workplaces. While noncompete agreements are used more with higher-wage workplaces than lower-wage workplaces, 29% of establishments where the average wage is less than $13.00 use noncompete agreements for all workers. Many opponents of noncompete agreements take issue with the use of noncompetes on lower wage earners arguing, in part, that organizations are not protecting legitimate business interests by limiting employment options for entry-level and lower-wage employees. Higher use of noncompete agreements with employees with higher education levels. Noncompete agreements are used more frequently with workers with higher education levels, especially in organizations where employees usually have a four-year college degree or higher. In addition, 45% of establishments where the typical education level is a college degree or higher used noncompete agreements for all employees. Lastly, in 27.1% of organizations where the typical employee has only a high school diploma, noncompetes are used for all workers. Employers requiring mandatory arbitration are more likely to use noncompete agreements. More than half (53.9%) of establishments have mandatory arbitration procedures. EPI concluded that employers using mandatory arbitration are more likely to use noncompete agreements. Advocating to Ban or Limit Non-Compete Agreements In 2019, the Workforce Mobility Act of 2019 [hyperlink to blog post on this Act] was introduced in the United States Senate, which would prohibit the use of noncompete agreements on a federal level; this bill is unlikely to pass. Regardless, many states have enacted their own legislation to address abuses of noncompete agreements, but this can be confusing and cumbersome for employers working in multiple states. In addition to legislation, the EPI suggested the Federal Trade Commission […]

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