Adams HR Enterprises

ARBITRATION AGREEMENTS

The California Supreme Court issued its long-awaited ruling in Armendariz v. Foundation Health, August 24, 2000. The court held that employers can require prospective or current employees to arbitrate wrongful termination or employer discrimination claims, as long as the employee can obtain the same result that would be available in a court of law.

In order for the Agreement to be valid, the Agreement should include:

1. Express recitation of claims included
2. Bilateral agreements to arbitrate
3. A neutral arbitrator
4. No limitation on damages
5. Adequate discovery
6. A written award either required or upon written request of either party and limited judicial review, and
7. No unreasonable costs/fees to employee

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AT-WILL EMPLOYER RIGHTS

A California Supreme Court decision, October 5, 2000, in Guz v. Bechtel, put some teeth back into employers at-will termination rights, but it is important to understand these suits are decided on a case by case base and no two are ever exactly alike.

In a prior case, Foley, the Court had established what has become known as the Foley factors:

1. The employer's personnel policies and practices
2. The employee's longevity
3. The employer's conduct or communications reflecting assurance of continued employment
4. Industry practices

In the Guz v. Bechtel case the Supreme Court clarified that not every vague combination of Foley factors shaken together in a bag supports a claim of implied contract.

It is important to support your at-will rights with statements on your employment application, in your employee handbook, and in a signed At-will Agreement at the time of hire.

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DISABILITIES AND REASONABLE ACCOMMODATION

I have always tried to avoid the issue of a disability related reasonable accommodation for an applicant/employee, by first maintaining the disability wasn't covered under California disability laws and the ADA. However, effective January 1, 2001, in California state AB 2222 our politicians have broadened the definition of "disability" considerably thereby making it almost mandatory to consider anybody claiming a disability to be disabled. It also places stricter limits upon employer inquiries about disabilities. What this means is that we now have to take each situation to the next step and automatically consider "reasonable accommodation." This includes applicants, employees returning from a personal medical leave with permanent limitations and employees returning from workers' compensation injuries/illnesses with permanent limitations.

In summary, the law does the following:

1. Applies a broad definition to the term disability. To qualify, an impairment need only "limit" an individual's ability to participate in major life activities, as opposed to the federal standard to "substantially limit." An impairment now causes such a limitation if it makes achievement of the major life activity merely difficult;
2. Requires the determination of whether a limitation exists, to be done without consideration to mitigating measures;
3. Requires that "major life activities" be broadly construed to include physical, mental, social activities and working. Working is a major life activity regardless of whether the actual or perceived working limitation implicates a particular employment or a class or broad range of employments. Plaintiffs, therefore will likely now argue that to qualify as a "disability," the impairment need only to limit the particular job held by the employee, as opposed to working in general;
4. Requires an employer and the disabled employee or applicant to engage in a timely, good faith, interactive process to determine and provide effective reasonable accommodation, if any;
5. Prohibits employers from inquiring about medical issues, unless the examination or questions are job related and consistent with business necessity. Job related examinations of applicants are permissible only if given to all employees entering the same job classification after a job offer is made;
6. Protects individuals from discrimination due to an actual physical or mental impairment that is disabling or potentially disabling as well as one that is perceived or regarded as disabling or potentially disabling; and
7. Sets up co-workers to be personally liable for any harassment they inflict on another employee regardless of whether the employer knows of the conduct.

We can therefore expect the following:

1. An individual whose corrected vision with prescription glasses is 20/20 will now be considered disabled;
2. An individual that successfully controls a condition with meditation (e.g. totally controls high blood pressure with meditation) in now considered disabled;
3. One is now disabled if a minor personality disorder renders the individual unlikable and thus makes social interaction more difficult;
4. An employer which prefers an applicant with a good personality and who is physically attractive will be legally liable to those who are less personable and less physically attractive;
5. One who walks with a limp and would not be regarded as substantially limited in the major life activity of walking by the ADA will now be considered disabled by AB 2222;
6. An individual who can lift up to 50 pounds but not over 50 pounds would not be disabled under federal law because the individual would not be disqualified from a broad range of employment, however under AB 2222 must be considered disabled because the limitation applies to some physically demanding job;
7. A polio victim applies for a physically demanding job for which he clearly does not posses the ability to perform the essential duties, and demands a "timely, good-faith, interactive process." The company ignores the ridiculous request. Under federal law, since no accommodation was possible, there is no violation. Under AB 2222, the mere failure to engage in an interactive process is in itself a violation;
8. Employees will sue co-workers because one does not like the other and/or in retaliation for unspecified acts, seeking unlimited pain and suffering and punitive damages.

Clearly the changes in the law providing for broader definitions will impact litigation of disability discrimination claims by making it more difficult for a defendant employer to challenge an individual's status as "disabled" on summary judgement. Therefore, unless the disability is temporary, I recommend employers in California, posed with a disability issue, take each situation to the next step and automatically consider "reasonable accommodation."

Employers remain free to refuse employment to individuals with a physical or mental disability if the disability leaves the employee either "unable to perform essential duties even with reasonable accommodations" or unable to "perform those duties in a manner that would not endanger their health or safety or the health or safety of others even with reasonable accommodations." Furthermore, employers need not agree to an accommodation which would cause undue hardship to the employer.

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EMPLOYER PENALTIES FOR MISSED REST AND MEAL PERIODS

For as long as I can remember employers have been required to provide rest and meal periods. Rest periods must be:

• 10 minutes for every four hours of work or major fraction thereof, and
• Taken as close to the middle of the four-hour work period as possible

• Thirty minutes, and
• Employee cannot work more than five hours without one unless six hours will complete the day and the employee voluntarily requests (in writing) they not take the meal period

I informed you January 2000 that a new law, AB 60, went into effect January 1, 2000. At that time we were informed employers were going to have to pay penalties to those non-exempt employees who did not receive rest and meal periods. However, our state government was experiencing the ill effects of "foot in the mouth" disease and had some language to work out before "really" implementing all facets of the law. You see, it wasn't clear in January how the penalties were going to exactly apply.

So now, as of October 1, 2000, the Industrial Welfare Commission (IWC) Orders mandate the employers who fail to provide legally required rest periods and/or meal periods must pay the following penalties. The penalty will equal one hour of pay at the regular rate (not necessarily the straight time rate) for each day and for each category violation. For example, if one meal period and two break periods were missed, the penalty would be one hour of pay for the meal period and one hour of pay for the rest periods (even though two rest periods were missed). The penalty is payable to the employee and must be self imposed by the employer.

This penalty does not apply to legal exceptions, such as voluntary on-duty meal periods or when an employee legally waives a meal period. You may recall last year I discussed that on-duty meal periods were allowed when:

1. The nature of the work requires that the employee not be relieved of duty during the meal period and
2. The employee voluntarily in writing agrees to a work meal period. (See the attached On-The-Job Paid Meal Period Agreement)

1. The workday does not exceed six hours, or
2. Where the employee agrees to waive the second meal period and the shift is not more than 12 hours long

It is a good idea for employers to have a written employee time card certification that attests that rest and meal periods have been taken by the employee. It is advisable that such a certification be printed on the employee's time card or time sheet. You might want to use language along the lines of the attached example certification.

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EXEMPT EMPLOYEE JURY SERVICE (Salaried employees)

There are some exceptions to the standard definition of a salaried employee. Jury service is one of them. Deductions may not be made for partial week absences of exempt employees caused by jury duty. (29 CFR Sec. 541.118(a)(4). If an exempt employee works only a portion of the workweek and is called to jury service within the same workweek, the employee must be paid his salary for the entire week. The employer may offset the salary by any amount received by the employee as juror pay for a particular week without loss of the exemption. If an employee is absent from work for jury service for an entire workweek and performs no work, the employee need not be paid.

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JURY SERVICE CHANGES

California's jury system has undergone some changes in an attempt to improve jury service participation. The primary changes address an employee's ability to use company paid time off benefits during jury service, courts implementing the "one-day-one-trial" procedure and the more limiting use of the extreme financial hardship excuse.

To reduce the financial burden of jury service where employers do not provide paid jury duty leave, the government has made an amendment to Labor Code Section 230. It states: an employee may use vacation, personal leave, or compensatory time off that is otherwise available to the employee under the applicable terms of employment, as time off for jury service. Employees may augment or replace any loss of income due to jury service under this provision, which became effective on January 1, 2000.

The "one-day-one-trial" system is another recent court reform that is being phased in statewide. It is intended to make jury duty more convenient and to lessen the financial hardship, thereby making service more bearable to jurors. While the law, enacted in January 1999, required every trial court to implement the new system by January 2000, Los Angeles County has been among the last to affect the change. Conversion of all the county's courthouses is scheduled to be completed be early 2002.

Under "one-day-one-trial" Rule 861 of the California Rules of Court, a prospective juror is on telephone standby for five days (as opposed to spending five to thirty days in a waiting room). If called in and not selected for a trial that day, service is complete and the juror will not be required to return for a minimum of one year. If assigned to a jury, service for that trial satisfies the juror's obligation.

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On-call Policy and Practices

You called me early this week to ask me about having non-exempt employees on-call (standby) to be available to attend to emergency issues [This does not apply to legitimate exempt (salaried) employees].

The first step requires us to determine if the employee is to be paid for the time that they are oncall. If the Company places unreasonable geographic restrictions on the employee's movements, and/or places unreasonable response time limitations on the on-call employee, and/or places unreasonable limits on the use of the on-call time such that it is not available for the employee's own benefit, the actual time spent on-call, is paid. For example if the Company were to require that the employee remain within 5 miles of their home or require that the employee be able to respond to the emergency within ten minutes, the employee would have to be paid for their oncall time. This is because the restrictions would be considered unreasonable for the purposes of determining payment of wages. If an on-call employee were told they couldn't go to a movie or to a sports bar to watch the Lakers, the employee would have to be paid for their on-call time. Once again, this is because the restrictions would be considered unreasonable for the purposes of determining payment of wages.

Once an employee has been called and they determine they must respond, “call-in” pay comes into play. There are two occasions when an employee must be paid for being called to return to work. The first is when the employee is on-call following a scheduled day of work. The other is when the employee is on-call on a day other than their normal work schedule (i.e. Saturday or Sunday).

When the employee is called in a second time in any one workday and is given less than two hours work on the second reporting, “report time” pay is owed. That is, the employee must receive at east two hours pay for the second appearance. The Company must also pay the call-in time based on the total hours worked by the employee that day. (Check to see what your employee's payday is. It's probably midnight to midnight.) If the employee has already worked an 8 hour day, the call-in time is paid as overtime, time and one half. If the number of work hours exceeds twelve, all time beyond twelve in the same work day is paid at double time.

In addition, if the break between the end of the employee's shift and the beginning of call-in (when the call is received) is greater than one hour, the call-in is considered a split-shift, and the employee must be paid a split-shift penalty which is an extra hour's pay at minimum wage ($8.00 as of Jan 1, 2008). However, there is an exception. That is, any base wage over the minimum paid to the employee (i.e. an employee paid $10.00 an hour is being paid $2.00 over the minimum) can be applied to the $8.00 split-shift penalty.

When an on-call employee is called in to work on a day other than their normal work schedule (i.e. on Saturday or Sunday), the employee must receive at last two hours pay. This two hours might very likely be at a premium wage since the employee may have already worked 40 hours that week or (check your policies) the Company may have a policy of paying time and one half for Saturday or Sunday work.

All time spent on the call-in emergency is counted as time worked. This includes a reasonable time for travel both to and from the work site from the point at which the employee is summoned to return to work. Use good judgment and reasonableness in determining travel time. For example, consider an employee who lives three miles from the jobsite but is at the beach 20 miles away when reached to return to work. In this case, it is reasonable that the travel time would be calculated from the beach to the jobsite and back to the employee's home. If tools are required to perform any call-in work, it is wise to require that the employee carry the tools with them in their personal vehicle while on-call. However, the employee may have family members with them and may have to return home to drop them off before responding to the emergency.

If an employee uses their personal vehicle to respond to an on-call emergency, the employee is required to write down their car's mileage (beginning at the location they were at when they got the emergency phone call, to the worksite, and back to home) and to submit it to the Company so they can be reimbursed for the mileage by the Company. (The amount to be paid is established by the IRS). The reason for this mileage payment is that the employee is being required to use their personal vehicle for the Company's benefit beyond a trip to and from work on a regular scheduled day of work. It's no different than asking an employee to go to the post office to pick up the company's mail. They must be paid for time and mileage to and from the post office. By the way, for legal reasons (i.e. a car crash), it is important that the Company pay the IRS mileage rate for every employee that uses their personal vehicle on behalf of the Company. This limits some of the Company's liability. It is also very important that the Company require that such employees have adequate auto insurance with limits acceptable to the Company's insurance carriers. There should be a Company list of every employee that uses their personal vehicle for the Company's benefit (even occasionally) and the Company should require those employees to provide them proof of insurance on a regular bases (usually every six months).

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TERMINATION OF UNILATERAL POLICIES

In a decision in Asmus v. Pacific Bell, employers have the right to terminate or modify unilateral policies if their change is done after a reasonable time and with reasonable notice. Vested employee benefits, however, must be maintained.

This came from a decision by the California Supreme Court in which Pacific Bell had issued a unilateral policy that it would offer all management employees who continued to meet its changing business expectations, employment security through reassignment to, and retraining for, other management positions, even if their present jobs were eliminated. It stated that the policy would be maintained so long as there was no change that would materially affect the company's business plan achievement. Five years later the company announced it would unilaterally terminate this policy so that it could achieve more flexibility in conducting its business and compete more successfully in the marketplace. Eight employees filed an action in federal court challenging the termination policy.

The Appeals court requested the Supreme Court to answer the following question: "Once an employer's unilaterally adopted policy (which requires employees to be retained so long as a specified condition does not occur) has become a part of the employment contract, may the employer thereafter unilaterally terminate the policy, even though the specified condition has not occurred?" The answer was yes. An employer may unilaterally terminate a policy that contains a specified condition, if the conditions one of indefinite duration, and the employer effects the change after a reasonable time, on reasonable notice, and without interfering with the employees' vested benefits.

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Workers’ Compensation 2010 Experience Modification

Some of my clients are contractors/subcontractors. Some of their clients require that they have an Experience Modification less than 125% in order to be their vendor. No matter what your situation is, this is important for you to understand.

Just yesterday I was looking at one of my clients Experience Rating Form with a 1/1/10 renewal date and noticed a disturbing pattern. As you know, each workers’ compensation claim that is reserved (indemnity and medical combined) for $2001 or more is individually listed for three years on your Experience Rating Form. Among the information listed on each claim are the Actual Incurred Loss (indemnity and medical combined) and the Primary Actual Loss (a number calculated by the Rating Bureau that is less than the Actual Incurred Loss and for large claims, significantly less). For example:

	Actual	becomes	Primary
	$ 3,170	became	$2,805
	$ 8,705	became	$4,989
	$18,886	became	$6,566
	$30,103	became	$7,302
	$69,771	became	$8,179

The amount of the Primary is the number used in the Rating Bureau’s equation to calculate your Experience Modification.

What I noticed about the 19 claims (3 years worth) was that on 10 of the claims the amount of the Primary was $7,000. What I noticed next was that the $7,000 was there on all sizes of Actual size claims from as little as $7,605 to their most expensive Actual claim of $71,942. By the way, the Rating Bureau didn’t just apply the new rules to the last year reported on a company’s Rating Form. They applied the new rules to all three years that were reported. So even if the Actual Losses on a two or three year old claim didn’t go up this year, the Primary Losses on all claims over $2000 did go up. I immediately called the insurance broker for this client and he said that the state had established new rules effective 1/1/10. He stated that the Primary Losses for all Actual Loss claims of $7,000 and above were now reported at a minimum of $7,000. I have also noticed that for any Actual Losses under $7,000 the Primary is now being reported in the same amount as the Actual. For example:

	Actual	becomes	Primary
	$71,942	became	$7,000
	$30,380	became	$7,000
	$ 9,684	became	$7,000
	$ 5,924	became	$5,924
	$ 3,079	became	$3,079

I believe this is a substantial change in the way Experience Modifications are now being calculated. I believe the increase in the reporting of Primary Losses may significantly increase the Experience Modification of many employers and will hurt the chances of contractors and subcontractors of getting new business.

I will also point out that I have not seen anything about this being published for the public to read. I have not seen it in Newspapers, Radio or TV news, or in any of the legal updates from which I receive such news.

I believe that what used to be the 100% Experience Modification is now very likely going to be closer to 110%. This means to me that organizations that previously demanded that a vendor have an Experience Modification below 125% must now increase their expectation toward 135%.

What is the actual impact? Well that will vary from company to company based on their current and last three years of losses. But it will affect any company that produces or manufactures a product, even those with just a few employees. This is because any employee that performs physical labor is at risk for injury. Consequently this will affect any employer that has had or will be having injuries over $2000 even if just a few.

What this also means to me is that effective safety programs have never been so important as they are now and will continue to be. Every member of supervision must be informed about the increased impact of workers’ compensation claims and the importance of their responsibility to implement safe work practices in their department. I expect some of you will want to attach this memo to your bids or include it in conversations with your contracting clients.

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