Consider the case of Gina Holmes, who sued her employer, Petrovich Development Company, asserting causes of action for sexual harassment, retaliation, wrongful termination, violation of privacy and intentional infliction of emotional distress. (Holmes v. Petrovich Dev. Co., LLC 2011 DAR 671.) Gina interviewed and was hired in June 2004. In July 2004 she announced her pregnancy, her December 7th due date, and her intention to work until the due date, and take only six weeks of leave.
The following month, the boss sent her an email discussing the need for qualified person to assist during her leave of absence. Sh responded by stating she would be leaving about November 15th and possibly be gone four months, the maximum allowed in California.
Understandably, the boss was confused and upset. He asked Gina when she decided to leave earlier and be gone so much longer. He felt that Gina was not honest with him. Gina responded by explaining the difficulties she has had with pregnancies, and that she did not want to announce her pregnancy before she confirmed all was well -- also understandable.
They appeared to settle the issue, with Gina expressing how much she enjoyed her job and wanted to stay, and the boss telling her he wanted her to stay. However, later that day Gina sent an email to her lawyer complaining that she felt like an outcast and that the boss had forwarded her emails to others (with HR responsibilities) in the company. She also set up a meeting with her lawyer. After that meeting, Gina wrote another email to her boss telling him that she could not put the matter behind her and that she had no choice but to resign. A few weeks later the lawyer filed a lawsuit on Gina's behalf.
Gina lost the lawsuit and she appealed. She claimed that the emails between she and her lawyer, made with the company computer, were protected by the attorney-client privilege and could not be used in the case. The court disagreed with this claim. The handbook notified employees that they do not have any right of privacy in the use of company computers, and that emails or other messages could be accessed by the company. Gina waived any attorney-client privilege by communicating with her lawyer knowing that the communications could be reviewed by the company. Such behavior is similar to consulting a lawyer in the employer's conference room, with the door wide open and speaking with a loud voice. Gina's failure to communicate in confidence negated the attorney-client privilege.
This is an important case for employers for a couple of reasons. First, this case shows employers the importance of establishing policies and informing employees that their use of electronics, such as computers, can be monitored. A password does not guarantee privacy. The company can review anything an employee does on his/her computer.
Another important lesson is for employers to watch what they say and do when an employee announces a pregnancy. I have had the situation arise with multiple clients where an applicant is hired to fill a position just to announce, within weeks or even days, that she is pregnant and will need time off. The law allows for this, whether or not it may be considered fair for an employer. Address the issue of time off in an appropriate way. If a substitute will be needed to fill in, try and determine when the leave might commence so you can take appropriate action to find and train the substitute.
Will it be inconvenient to do this? Yes. Will it be more expensive? Probably. However, the bother and the cost is insignificant compared to a lawsuit. Even if the employer wins, the employer spends a lot of time, money and energy to defend a lawsuit.
Nevertheless, this is a great victory for employers. A court has concluded that under the circumstances of this case, the employer's review and use of emails between the employee and her attorney were not privileged. And the use of those emails greatly helped the employer prevail in this case.
Friday, January 21, 2011
Friday, January 7, 2011
In California, failing to pay an employee all of his/her wages at the time of termination (or within three days in certain circumstances) results in waiting period penalties pursuant to Labor Code section 203. This penalty, calculated at the employee's daily wage, grows each day the employee is not paid all wages, up to a maximum of 30 days.
It is not uncommon to find an employer who fails to pay all wages at the time of termination. For example, an employee might say, "I am leaving Tuesday but I will come back in on Friday to pick up my check." Or an employer may fail to pay all accrued, but unused vacation. Another common example is if the employer misclassified an employee as exempt and did not pay him/her overtime compensation. In each of these examples, liability for waiting period penalties arises.
Labor Code section 203(a) states that "the wages of the employee shall continue as a penalty from the due date thereof at the same rate until paid ...." The Code of Civil Procedure, section 340(a) provides a one year statute for the recover of penalties.
Labor Code section 203(b) states that an employee may sue for "penalties at any time before the expiration of the statute of limitations on an action for the wages from which the penalties arise." Code of Civil Procedure section 338(a) contains a separate three-year statute of limitations for "an action upon a liability created by statue" such as unpaid wages.
This is where it gets interesting. Mr. Pineda was not paid until four days after termination of employment. However, he was paid all wages due. Those final wages were just late, by four days. Therefore, Bank of America owed him four days of waiting period penalties. Assuming Mr. Pineda earned $20 per hour and worked eight hours per day, the penalties totalled $640. ($20 x 8 hrs) x 4 days = $640.
Mr. Pineda could have gone to the Labor Commissioner and asked for his $640. But he didn't. He went to a lawyer who no doubt suggested filing a class action lawsuit. Filing a class action lawsuit would not result in more money for Mr. Pineda; however, the lawyer was likely to get a lot more money. Mr. Pineda's lawyer filed the lawsuit 18 months after the termination of Mr. Pineda's lawsuit.
Here's the legal issue: Does Mr. Pineda have three years in which to file a lawsuit, pursuant to Labor Code section 203(b), or because he is seeking a penalty only, must the lawsuit be filed within one year under 203(a)? Unfortunately, the Supreme Court ruled that the three-year statute applies to all claims for waiting period penalties, whether or not the employee is also seeking unpaid wages. (Yes, you noticed -- a $640 case made it all the way to the California Supreme Court.)
What does this mean to employers? It means that an employee can come back after you three years later for unpaid waiting period penalties. It may also mean that the employer could face a class-action challenge. Whether or not ultimately successful, the assertion of a class action lawsuit substantially increases the costs of litigation.
Employers must scrutinize their pay practices. Have you properly classified employees? Do you pay overtime correctly? Do you make rest and meal periods available? Do you make seating available to employees who could reasonably sit and perform their duties? Do your paycheck stubs include all of the required information? Any small error in any of these areas could result in a claim against you. Could you pay $640? Of course. But could you pay that cost multiplied by the number of employees in a similar situation? And could you pay the attorneys' fees associated with the lawsuit? That's a more difficult question.