California’s Labor Code recognizes at-will employment, or employment which may be terminated by employee or employer at any time for any reason. Of course, this broad definition of at-will employment is subject to numerous exceptions and restrictions stemming from both state and federal laws – noncompliance with which can lead to a wrongful termination lawsuit. Contrary to what common myths about at-will employment might lead you to believe, there are right (and wrong) ways to fire employees, with which California employers and business owners must familiarize themselves.
Forms and Documents for Terminating Employees in California
As an employer in California, you are not permitted to spontaneously terminate one of your employees. On the contrary, state and federal laws both require you to provide the employee with various notices and documents in advance, as described below.
Under California law, you must provide the following (where applicable):
- A 27-page brochure titled “For Your Benefit: California’s Programs for the Unemployed” (DE 2320). This brochure is produced by the Employment Development Department (EDD). The brochure must be supplied on or prior to the date of termination.
- A short form titled “Notice to Employee as to Change in Relationship.” This is required by EDD. This form simply notes the date of the termination/layoff.
- If you have 20 employees or more, you must provide all (eligible) employees to be terminated with a single-sheet form titled “Notice to Terminating Employees: Health Insurance Premium Payment (HIPP) Program” (DHCS 9061). This form is supplied by the Department of Health Care Services (DHCS).
Under federal law, you must also provide the following (where applicable):
- A Certificate of Group Health Plan Coverage, if the employee was covered by a group plan at the time of his or her termination. This is a requirement of the Health Insurance Portability and Accountability Act (HIPPA).
- If you have 20 or more employees, you must provide a Consolidated Omnibus Budget Reconciliation Act form (COBRA notice and election form) to (1) any employees covered by a group plan, and (2) the dependents of employees who are covered by a group plan. This form must be provided no later than the day before termination.
Please note that the requirements described above are not exhaustive and do not account for all documentation and notification requirements. Our employment lawyers will sit down with you to review your records and determine precisely which standards you need to follow to mitigate your risk of exposure to fines and litigation.
How to Avoid a Wrongful Termination Lawsuit
Providing mandatory forms and notices is an important part of the termination process. However, proper documentation isn’t the only factor which employers must bear in mind. In order to avoid a workplace discrimination lawsuit, employers must also consider the circumstances of the termination itself.
The freedoms normally afforded by the at-will employment system are heavily restricted by various laws establishing protected classes of employees. Some key pieces of federal and California legislation establishing protected classes include:
Collectively, these acts prohibit discrimination against the following classes of employees (provided other necessary criteria are in place, such as meeting a minimum number of employees):
- Employees belonging to minority groups
- Employees from foreign countries
- Employees over age 40
- Employees who practice a religion
- Employees who identify as gay, lesbian, or bisexual
- Employees who are pregnant, nursing, or have related medical needs
Of course, this does not mean that employers can never terminate the aforementioned employees – simply that employers who do plan to terminate members of protected classes must be extremely careful. The workplace discrimination lawyers of Bellatrix PC defend businesses facing lawsuits related to sex discrimination, race discrimination, and more.
Even in cases where an employee does not belong to a protected class, wrongful termination lawsuits can still arise for other violations, such as terminating an employee:
- Because he or she reported illegal activity or a safety violation to a regulatory agency like OSHA or the DLSE. This can lead to a whistleblower lawsuit.
- In retaliation for alleging sexual harassment, wage law violations, or other misconduct by the company, coworkers, or upper management.
- Based on the results of a drug test which was not authorized by law.
- In a way that violates privacy.
- In a way that constitutes libel, slander, or defamation.
Regardless of the circumstances at hand, or the class an employee may or may not belong to, all employers should:
- Keep detailed and accurate records of policy violations, disciplinary actions, employee misconduct, etc.
- Prepare clear, unambiguous employee handbooks and employment contracts whose terms are enforceable and which follow all state and federal laws.
- Subject all employees to consistent, uniform standards.
At Bellatrix PC, our employment law attorneys bring years of experience and practical knowledge to each and every termination matter we handle on behalf of employers. Whether you need to revise your company’s standing termination policies, wish to make legal preparations in anticipation of a future termination, or have questions about handling large-scale layoffs and reductions in force (RIFs), we are prepared to counsel you with regard to your rights, responsibilities, and legal recourse. We work with corporations, partnerships, and limited liability companies across a broad spectrum of industries.
If you have any questions or concerns about how to terminate an employee in California, the knowledgeable employment attorneys of Bellatrix PC can help. To set up a private consultation, call us today at (800) 449-8992.
If you have a morale problem with your workforce, you better do something about it… fast.
When you have a disgruntled worker, it always leads to problems.
As a business owner, here are the problems I see when a person turns bad apple:
- They “poison the well” and create negativity amongst your other staff
- People lose their drive and initiative, so work quality suffers
- People start scrutinizing the employer or developing “grievances”
- The bad person (or several) have to be replaced, costing money
In addition to the practical aspect of having to spend more money replacing employees (not a small consideration in itself), leaving employees always carry risk. People tend to treat a break in an employment relationship with the same emotions as leaving a personal relationship.
In other words, unhappy ex-employees sue. Even when you are squeaky clean, unhappy ex-employees will threaten it.
Sometimes they will sue frivolously, and you end up with a problem, regardless. There will always be a percentage of litigious ex-employees, which means that if more employees are leaving, then there will be a proportionate increase in the number of lawsuits.
Here’s another legal issue: demoralized employees take more stress-related medical leaves. This actually happens a lot and is the leading cause for medical leaves. It’s really easy to violate the leave and disability laws (thus inviting lawsuits). It’s also disruptive to your workforce. And an unhappy, stressed employee doesn’t always recover and return to employment smoothly.
Finally, whenever employees leave, employers must immediately pay all earned compensation (including vacation pay, non-discretionary bonuses and earned commissions). If you do not have a bunch of cash on hand to deal with terminating and replacing employees, you may find yourself in the middle of a wage and labor crisis.
What can an employer do to avoid employee morale problems bankrupting them? Here are four strategies that could save you thousands of dollars.
- Focus on improving employee morale and retaining skilled workers. Take some time to improve relationships with those employees and foster loyalty and contentedness. This is not just a hippie-dippy people idea. Research shows that people work based on “purpose” (which includes a strong sense of community, being valued, loyalty and other social factors), not based on money. Yes, people need money. But an employer who fosters the right social conditions can get away with lower pay or other hardships without loss of morale. And definitely get rid of the bad apples because their drama is unfair to the rest of your team.
- Clean up your HR act by reviewing employees. Employees actually want to be reviewed if they care about their jobs (see point above regarding purpose). You can use reviews to praise (important) and address frustrations and failures that cause low morale. You should also use this as an opportunity to document issues with problem employees so that you can defend yourself later.
- Audit your wage and pay practices with the help of your employment lawyer. Wage and pay class actions are the most common type of class action litigation filed in California, constituting roughly two-thirds of all new class actions being filed and hundreds of new cases each year. You are vulnerable to these types of lawsuits if your pay practices aren’t pretty close to perfect (and there are many laws out there that are traps for the unwary employer, so do not trust an HR service or a do-it-yourself). Not only do audits give you an opportunity to find and fix liabilities before they become lawsuits, but you can use it as an opportunity to show your workforce positive change and encourage their loyalty.
- Encourage — or even require — your employees to take their accumulated vacation during slow times. This is a good way to get vacation time off the books of an employee who has thousands of dollars worth stocked up, which will have to be paid in total at the time of quitting. Plus, employees who take regular vacations are less stressed and happier.
If you have any business or workforce concerns, spend 30 minutes with us on a free Business and Employment Planning Session or schedule a consultation with one of our business law attorneys or our real estate attorneys at (800) 449-8992.
If I had a dollar for every time a client told me that some dispute should be easy to resolve, or they can’t imagine that the other side would litigate… well, I pretty much do because I always end up defending those “surprising” lawsuits.
Being a lawyer makes you cynical. Most of the time, things don’t come to me until long after everyone has stopped being reasonable or cooperative. So perhaps my clients are not being delusional when they think that the problem they are dealing with will peter out… perhaps that happens nine times out of ten.
The tenth time, though, you are in my office, and it’s going to be a doozy.
Sometimes you need a little insurance so as to avoid spending too much time with me and people like me. That’s why I suggest getting releases from exiting employees strategically.
A release is an agreement not to sue you for any harms (real or imagined) in exchange for some sort of benefit (usually an extra payment, like a severance agreement). A release ensures (with only the very rare exception) that the employee will not come back to create problems.
But the release has to be done correctly.
Releases are legal contracts that are also regulated by a dozen or more employment laws. Here are a few things you should know:
- You cannot enforce a release on undisputed, owed wages.
- You cannot enforce a release without adequate consideration (that’s the benefit provided to the employee in exchange for waiving rights).
- Certain laws require waiting and revocation periods for certain classes of employees, and these cannot be waived.
- You cannot enforce a release on future liabilities (i.e. harms that have not happened yet).
- Certain provisions may be illegal, such as non-compete, no rehire, confidentiality or non-disparagement clauses.
- You cannot have an employee release rights to complain regarding criminal activities or to certain governmental agencies because that might amount to payment for blackmail.
- You should have carefully considered construction and enforcement provisions to ensure that the release will hold up in court and in your favor.
Releases do not need to be done for every exiting employee. Nor would that be cost-effective or even necessary. So do not do them routinely as part of the exit interview.
But if you have an employee who has had some drama during their employment, then a release can be worth the extra expense. You must weigh the cost of providing a benefit for severance and using a lawyer against the likelihood that you will be sued. But remember that the expense of a payment and release is often a teeny, tiny fraction of a lawsuit.
Releases are a great strategy to mitigate or avoid risk. If you have an employee you are worried about, contact your employment lawyer to determine whether a release is a worthwhile idea.
I have a college degree in English Literature. So you would think that I read a lot of novels. You’d be wrong. Since I graduated, I have mostly read must-read business books and law books.
It’s not that I’m boring. (Although I may be that.) Rather, I’m extremely focused on growing Bellatrix PC into the greatest law firm ever. (I may also be a tad bit competitive.)
Running a successful business requires more than vision, dedication and an entrepreneurial spirit. It requires being a lifelong learner.
Business books can inspire, motivate and help you get past operational, management or financial blocks. Here are my favorites:
- How to Win Friends and Influence People by Dale Carnegie
Published in 1936, this book is still relevant and insightful. This book teaches three fundamental techniques for dealing with people, both in business and everyday life. It also teaches six unique ways to make people like you, twelve ways to turn people to your way of thinking, and how to influence change in people without making them resent you.
This is perhaps one of the most important must-read business books for small business owners and decision makers to read. Understanding people is one of the keys to success in business and sales.
- The 4 Hour Workweek by Tim Ferris
I didn’t I was an entrepreneur until I read this book in 2007. I started my first business almost immediately after read this book. So Tim Ferris literally changed my life.
This book promises to teach you how to “escape 9-5, live anywhere, and join the new rich.” Working only 4 hours a week is not immediately feasible for an entrepreneur, though, so it’s promise is initially elusive. But the ideas in this book form the cornerstone of a new school of thought in the business world.
Pen-ultimately, The 4 Hour Workweek teaches the art of leverage, which is the key to finding freedom as an entrepreneur. It also teaches you how to eliminate 50% of your work in 48 hours using proven principles. A lot of the work you do does not move the needle enough. Ferris teaches you to ruthlessly slash those things so you can make more money and take back your life.
This Must-read business book is not for the faint of heart.
- The E-Myth Revisited by Michael Gerber
Truer words have never been put on paper about why small businesses fail than what is in this book. Most small business owners have bought themselves a job and are not flourishing as entrepreneurs. This book explains why through examples and by contrasting how most small businesses operate to successful models, such as franchises.
If you are struggling as a business owner, doing it all, and barely making ends — read this book right now. It could save your business and your sanity.
- The Hard Thing about Hard Things: Building a Business When There Are No Easy Answers by Ben Horowitz
Building a successful business is hard! I wish more “gurus” would acknowledge this fact.
What is useful about this book is that Horowitz goes there. Ben discusses how difficult it can be to run a successful business. Where other books focus on inspiration, founding a company and getting started, this one focuses on the myriad challenges that can derail a business after it’s up and running.
Throughout the book, the author shares insights on managing, buying, investing in and developing a business (with a focus on tech companies, but applicable to all industries).
- Dotcom Secrets: The Underground Playbook For Growing Your Company Online by Russell Brunson
When I got this book, I devoured it…. And then I promptly read it again. The only other business book that I’ve read more than once is The 4-Hour Workweek. Now Dotcom Secrets sits dog-eared on my desk and I refer to it regularly.
Dotcom Secrets is a hardcore marketing and sales book. I already knew a lot about marketing and sales when I read it. But this dense book filled in some gaps for me. It’s made easier to digest with a lot of stick figure diagrams.
This book generously doles out evidence-based advice on how to sell to your audience (in any context — not just online). There is applied psychological theory in masterful sales. Don’t just emulate — understand.
Optimizing your sales processes could change your business and change your life.
No matter what sized business you are, cash flow is a major consideration. In fact, I’d say that cash flow is the King Kong issue of any business.
Whether you are just starting out, or you’ve been running a business for several years, you’ll find that ensuring ongoing cash flow is hard and requires vigilance.
Having access and carefully managing a line of credit can be the answer to short term problems (and there are always problems!).
There are many options, but the rewards available on credit card purchases make it an attractive way to manage expenses. You just need to be careful not to get into debt. Do your due diligence as an employer and know what to do for your business.
Things You Must Consider
1. It is easy to get into debt on a credit card.
Sure, a credit card means that your company will have additional funds available when you need them. But it also makes it tempting to take on debt through spending.
Debt can be a good thing if you leverage it for a return on investment. So, for example, if you buy advertising on your credit card for $500 and it returns a measurable result of $1000, then the debt was worthwhile.
Pay off the card before it incurs interest and repeat.
But if you are buying nicer throw pillows for your office, ask yourself whether that is worth paying interest on or tying up your credit cushion (no pun intended). Everyone likes a nice office, and maybe those throw pillows will make you money somehow. But if they do not have a measurable ROI, then wait to buy them until you have surplus cash.
The key is, don’t use a credit card to “consume” goods and services. Use it to keep your business in growth. If you can keep to that discipline, a credit card is an excellent tool.
2. Consider the cost of the card versus the benefit.
Here’s a simple example:
My husband immigrated to the United States when we got married. When he got here, he had no credit. In order to establish credit, we wanted to get a credit card for him. After that, we got an offer for a 1% cash back rewards card.
The card had an annual fee of $99. In order to break even on the fee after the 1% cash back was applied, we would have to use the card over the year for a total of $9,900 in purchases, or $825 per month.
And since he had no established credit, they only offered a line of $500 to start.
Doing the math, we would be losing money on the card unless we maxed it out and paid it off twice per month.
Needless to say, the card was not worthwhile. So we chose a card without an annual fee that was also without rewards, until his credit could get established.
As you can see, evaluating a credit card goes much deeper than just comparing interest rates and policies. You need to know your business, your spending habits, and what type of rewards program would be the best fit for you.
- Annual Fees
- Grace Periods
- Late Payments
- Interest Rates
- Reward Types and Restrictions
- Insurance and Charge-back Policies
3. Whether you should give your employees access.
There are two ways to handle expenses with your employees. Way one is to give them permissions to use the company card. Way two is to make the advance expenses and turn in an expense report.
Personally, I do both, depending on the employee. For purchasers or key managers, having a company card makes more sense. I can’t ask them to order $1000 worth of office supplies on their own cards and expense it.
But for employees who have expenses related to sales or travel, a separate card is a good idea. It makes expense accounting must easier. But, just so you know, the employee gets to keep perks such as mileage or points.
To schedule a consultation about a business law issue, contact our attorneys at (800) 449-8992 or contact us online.
Through our blog, we always want to keep you up to date on new laws and/or cases that will affect the way you do business. Today’s post is on an old topic that still creates huge liability problems for employers every day. If I were to make a Greatest Hits List of the top employment law mistakes that businesses make, Medical Leave/Disability Accommodation mistakes would top my list.
Here’s a common scenario: you have a California employee on a medical leave for some type of illness or disability. The leave can be for any condition, ranging from depression to cancer to a bank injury to pregnancy complications. Generally, the employee begins taking leave for a serious medical condition under the Family Medical Leave Act (“FMLA”) or California Family Rights Act (“CFRA”). In this common scenario, the employee has taken and exhausted their allowable leave under these acts. The employee is unable to return to work at the end of that leave and needs to remain on medical leave.
WHAT NOT TO DO: Do NOT summarily send the employee a letter from Human Resources, stating something to the effect of, “You have exhausted your FMLA/CFRA leave and are unable to return to work. Therefore, we are terminating your employment.” This is a common mistake that even large companies make. Let’s refresh your disability laws savvy.
Why is this letter so devastating for your business? Because the leave laws are different than the disability accommodation laws. Sometimes the disability laws require longer leaves, even if the leave laws have been satisfied. If your Human Resources personnel misses doing a disability accommodation analysis, that letter is going to be answered with a lawsuit for disability discrimination.
In my practice I have seen this occur an astounding number of times. The worst part of this scenario is that the best evidence the plaintiff employee will have against you will be the letter from your HR Department that basically admits you terminated that employee because of a medical leave of absence or because of their disability.
Writing letters such as these is like putting a bulls-eye target on your business. You might as well just send out a flyer to Plaintiff’s lawyers that says, “Please sue me and use the smoking gun document that I just sent out to my former employee to prove your case.” Plaintiffs’ lawyers salivate when a disabled potential client brings in such a letter from their former employer. And disability discrimination claims are the largest category of discrimination claims brought by both the EEOC and plaintiffs.
WHAT TO DO: Instead of sending such a letter, what you should and must do, if an employee is unable to return to work after exhausting their FMLA/CFRA leave, or even if they do not qualify for FMLA/CFRA leave in the first place, is to turn to an ADA analysis. A disability is generally defined as any condition that interferes with a major life activity, which includes interfering with working and sleeping. This definition is very broad and encompasses most health conditions. The law was expanded in recent legislation and is constantly growing to include new conditions and facts. A disabled employee can ask their employer for an accommodation for their disability, and they are entitled to a reasonable accommodation, as long as it does not create undue hardship for your business.
If your employee requests an accommodation for their disability, such as a leave of absence, you MUST engage in the interactive process with them. This means, simply, having a dialogue with the employee (and potentially their physician) on how you may be able to accommodate their disability. Then, it’s your duty to provide a reasonable accommodation for their disability. A leave of absence of reasonable length (which is sometimes well beyond a few months) has been held by courts to be a reasonable accommodation.
And even if your employee does not request accommodation, but simply states that they cannot work, the onus is on the employer to begin the interactive process. Once you are on notice of a potential issue, you must act to comply with the law.
This is only a snapshot of these rules, and there are other intricacies. As you can see, this is clearly not a simple analysis to perform and having lawyers involved who are well-versed in the application of these laws is extremely helpful in your attempt to insulate yourself as much as possible from liability.
SUMMARY: The lesson to be learned here is to make sure that your HR personnel and business managers are knowledgeable that there are numerous laws that apply to disabled employees who are on medical leaves of absence. Employees on medical leave have a great many rights, and to take steps toward terminating an employee who is on medical leave, you must jump through all the hoops under Americans with Disabilities Act (ADA) and you should document this process well. Protect yourself by preparing yourself with evidence to defend a disability discrimination case that may be brought later. Do this by documenting the interactive process and your attempts to accommodate the employee. When you find yourself in this situation, involve a lawyer and go through these steps meticulously. Disability discrimination cases, if successful, can have a lot of jury appeal and be very costly to your business.