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FMG Law Blog Line

Posts Tagged ‘#Cali’

Zenefits Offering Payouts to Former Employees Not Paid Out for PTO

Posted on: December 17th, 2015

By: Allison Shrallow

The perks of working at a startup know no bounds.   From restaurant-quality meals, in-office massages, yoga classes, transportation, and beer and wine on tap to game rooms, dog-friendly offices, and casual dress code, startup culture blurs the line between work and play. There is one perk startup employees love to boast about the most to their corporate counterparts: flexible time off (“FTO”).  FTO provides employees with unlimited paid sick and vacation days.   While the majority of American workers are restricted to two to three weeks paid time off a year – and must accrue the time off prior to use – many tech workers are free to perpetually globetrot as long as their work is satisfactory and deadlines are met.  While FTO is undoubtedly a draw to potential employees, it benefits California employers as well.   California treats accrued paid time off (“PTO”) as wages, which must be paid out to employees upon their separation of employment.  By contrast, employees do not accrue FTO, so there is no payout upon separation from the company.

Ironically, Zenefits, an online HR startup, is in the midst of a legal debacle as a result of a decision to offer its employees what it likely construed as a hassle-free FTO policy. In what Zenefits refers to as a clerical error, its 2014 employee handbook included a PTO policy.  The 2015 handbook changed the policy to an FTO policy.  Recently, former employees have alleged they were not paid accrued PTO upon separation from Zenefits, per the 2014 policy.  In an effort to thwart potential lawsuits, Zenefits has offered former employees approximately $5,000 in exchange for a waiver of their right to sue Zenefits for any violations of California labor laws.

To avoid this issue, California employers should take care to either pay out accrued PTO upon conversion to an FTO policy, or maintain records of the accrued PTO and pay it out upon separation of employment. For example, if an employer switched from PTO to FTO in 2011 and an employee accrued 20 hours of PTO prior to the company’s switch, the employee is entitled to be paid out for her PTO when she separates from the company – even if that is ten years from now.  Employers wanting to transition their vacation policies from PTO to FTO should consult with their labor and employment attorney to ensure the new policy is in line with California’s labor laws and none of the employees’ accrued PTO is forfeited.

A Bumpy Road Ahead: More Uber Drivers to Join Misclassification Class Action Lawsuit

Posted on: December 11th, 2015

By: Allison Shrallow

Living in San Francisco, the mecca of all things tech, can make a person very accustomed to getting everything on-demand. Need groceries? Use Instacart.  Want someone to clean your home? Try Handy.  Looking for a date?  Consider Bumble. The push-button economy has become so commonplace that it is difficult to imagine our lives without it.

Oh but there was a time. For most long-term San Franciscans, the prospect of attempting to hail a cab in 2009 remains in the forefront of their minds.   And then one day a miracle happened.  A little company by the name of Uber came to be.  The idea was simple enough.  Need a ride?  Push a button.  At first Uber only offered Town Cars and was seen as more of a luxury.  However, in an effort to capture more customers, Uber began offering UberX, marketed as a less expensive, more efficient option than taxis.

Uber classified their drivers as independent contractors, granting drivers with the personal flexibility to work when and for as long as they wanted.   As independent contractors, Uber was not required to pay for their drivers’ health insurance, social security, paid sick days or overtime.  Further, Uber was under no obligation to reimburse its employees for mileage and other employment-related expenses.  Uber’s current business model allows drivers to pocket 80% of the fare with the remaining 20% going to the company.   As a result of having very little overhead and expenses, customers receive low fares.

This might all change as a result of a lawsuit filed by three drivers in 2013 alleging Uber misclassified them as independent contractors rather than employees. These drivers sought to represent California Uber drivers in a class action lawsuit against the ride-hailing service.  On September 1, 2015, a court certified a class of all California drivers who have driven for Uber since August 2009 to June 2014, and who did not sign an arbitration agreement.   However, on December 9, 2015, the court expanded the class of drivers to include those who signed Uber’s 2014 and 2015 arbitration agreements, concluding the agreements contained a non-severable Private Attorney General Act waiver that rendered the entire arbitration agreement unenforceable on public policy grounds.  As a result, the majority of Uber’s 160,000 California drivers will be allowed to join the class action lawsuit.  Uber has stated it will file an immediate appeal.

The case is scheduled to go to trial in June of next year. If the court finds Uber misclassified its drivers as independent contractors, Uber could be liable for vehicle-related and phone expenses for all drivers who joined the lawsuit, and,  going forward,  it would be required to pay significant sums on wages, insurance, and reimbursable expenses for its drivers.   It would also most likely create a ripple effect throughout the entire push-button economy, prompting workers at other on-demand app companies to file suit, a move that most likely would require other companies to change their business model to account for the higher cost of doing business.  This in turn would almost certainly result in customers having to pay more for services to which they have grown accustomed and workers losing the flexibility that attracted them to these companies in the first place.

California’s Paid Sick Leave Law – A New Headache for California Employers

Posted on: July 22nd, 2015

By: Kacie L. Manisco

California’s newly enacted Healthy Workplaces, Healthy Families Act of 2014 (HWHFA) can be added to the lengthy list of laws creating major headaches for California employers. The statute, which requires virtually all California employers to provide employees with paid sick time off to care for themselves or their family members, imposes onerous, often unclear, obligations on California employers.

Accrual and Use

The HWHFA, which took effect on July 1, 2015, enables employees to accrue at least one hour of paid sick time for every 30 hours worked, which totals a little more than eight days per year. Employers, however, can cap accrual at six days or 48 hours and limit the use of paid sick leave to 24 hours or three days in one year. An unofficial interpretation from the Labor Commissioner’s office is to provide covered sick leave at the more generous measure of 24 hours or three days, which means an employee who works 16 hour shifts would actually be able to use up to 48 hours (three days) of paid sick leave. Similarly, an employee who works 16-hour shifts would be capped at 96 hours (6 days) of paid sick leave. This becomes complex for employees with fluctuating hours and shift lengths, as employers either need to implement a different cap for each individual employee taking into consideration the particular employee’s longest shift, or provide one generous cap for all employees.  Fortunately, employers also have the option of disregarding the accrual method and instead frontloading each employee with three days or 24 hours of paid sick leave at the beginning of each 12-month period. Of course, that 12-month period started July 1, 2015 and, practically speaking, most employers would prefer to fill the sick leave bank at the beginning of each calendar year. Accordingly, many of our clients have opted to place three days or 24 hours of paid sick time into the employee’s leave bank on January 1, 2016, and every January 1st thereafter. Employees will not be able to carry over the unused sick days provided to them on July 1, 2015; rather, each employee will get three new sick days. Needless to say, this is more generous than what the law requires if an employee uses any paid sick time off between now and the beginning of the year, but employers are electing this method due to its administrative ease.

Record-Keeping and Notice Requirements

The statute additionally requires the employer show the amount of sick leave an employee has “available” on their pay stub or a document issued the same day as their paycheck. Although not clear in the text of the HWHFA, “available” means sick time the employee has to use, not sick time the employee has accrued.  Employers must also display a poster notifying employees of the sick leave law in a conspicuous location at the work place, and provide all new employees with an individualized Notice to Employee that includes paid sick leave information. The notice can be found here. It is also available in Spanish.

Interaction with Existing Personnel Policies

In addition to creating a sick leave policy that complies with all the nuances of the HWHFA, employers should carefully consider the statute’s interaction with existing personnel policies. For example, the HWHFA prohibits an employer from disciplining an employee for using sick days accrued under the statute. Accordingly, if an employer has disciplinary procedures in place in the event of an unexcused absence, an employee who invokes their accrued sick time for protected reasons will be shielded from adverse action. Likewise, attendance policies requiring employees to give a certain amount of advanced notice in the event of an absence will need to be revised, as the HWHFA limits employers to requiring only “reasonable advance notification” of an employee’s use of sick leave and, where a sick leave absence is unforeseeable, an employer may only require notice when “practicable.” Employers should consider drafting attendance policies that impose discipline for absences that take place after an employee has exhausted all accrued paid sick days.

Along those same lines, while not explicitly addressed in the HWHFA, the Labor Commissioner has cautioned employers that requiring employees to submit documentation as a condition for payment of sick leave can arguably interfere with the employee’s use of paid sick leave. But, this conflicts with the Family Medical Leave Act’s (FMLA) express provision allowing employers to request medical certification from an employee who requests FMLA leave. If employers have a policy mandating or allowing use of accrued sick time before taking the remainder of the FMLA leave unpaid, employers may not ask for medical certification until after all accrued paid sick days have been used.

Interaction with City Sick Leave Ordinances

The intricacies of the HWHFA become even more complex for those employers with employees working in the cities of Oakland, Emeryville, and San Francisco. All three cities have enacted their own sick leave laws that impose additional requirements on employers. For example, all three laws expand the definition of “family members” to allow care for a “designated person” if the employee does not have a spouse or registered domestic partner. The Emeryville law broadens the definition of “family member” even further by allowing time off to care for guide dogs and signal dogs, or a family member’s guide dog or signal dog. Most importantly, these cities do not allow for frontloading of sick leave time. Queue the complicated accrual cap scenario discussed above.

Enforcement and Relief for Violations

The California Labor Commissioner has the authority to investigate alleged HWHFA violations, and we can expect it to come down hard on non-compliant employers. Potential relief for violations may include reinstatement, back pay and administrative penalties. The labor commissioner or the attorney general may also file a civil action and seek legal or equitable relief, attorney’s fees and costs. It is therefore critical employers not only create a sick leave policy that is compliant with the HWHFA and any applicable city ordinance, but that employers revise all existing personnel policies to comply with the law(s) as well.