Year-End Bonuses and Holiday Cheer, Making Certain the Legal Risks Don’t Outweigh the Rewards
The Goldstein Law Firm
December 2010/January 2011 Newsletter
By: Charles H. Goldstein, Esq.
“Year-End Bonuses and Holiday Cheer, Making Certain the Legal Risks Don’t Outweigh the Rewards”; “Thieving Employees – What Employers Can and Cannot Do To Them”; “Preventing Labor Code Section 132(a) Claims from Becoming Costly Disability Lawsuits”; and “The 8 Steps You Should Take for HR Survival in 2011”
I. Year-End Bonuses and Holiday Cheer – Making Certain the Legal Risks Do Not Outweigh the Rewards
A. Year-End Bonuses
Despite the challenging economic environment, many of our clients have asked about the wisdom of giving holiday bonuses and holding parties. If you decide to give holiday bonuses, make certain that you are not creating a permanent expectation and legal obligation to continue to give bonuses year after year, even if your company can no longer afford this practice. The best way to preserve your right to discontinue holiday bonuses is by advising employees, in writing, that holiday bonuses are given at the sole and exclusive discretion of the company and may be discontinued at the sole discretion of the company.
Also, recognize that in the age of wage and hour class actions, any Christmas or year-end bonus that you give your employees is dependent on hours worked, production and/or efficiency that they achieve, and becomes a part of the employee’s regular hourly rate of pay for the purpose of calculating overtime during the week in which the bonus is given. However, if the bonus is purely a gift, then the bonus does not have to be folded into the employee’s regular hourly pay rate. Exempt employees’ bonuses do not have to be folded into their salary to create a higher base salary for the purpose of other benefit calculations, such as the calculation of vacation pay.
B. Holiday Cheer
There is usually a legal nexus between holiday parties and the workplace because most employees believe that they are required to attend holiday parties given, and sponsored by, their employer. This nexus becomes even clearer when the holiday party occurs and gifts are exchanged in the workplace. However, if there is a benefit to the employer, or if the holiday party becomes a customary incident of the employment relationship, the employee who attends the party is still acting within the scope of his or her employment. This means that employees who engage in misconduct at a company sponsored event, such as engaging in sexual harassment or a fight, can still be disciplined for their actions. In addition, employer’s can be sued for sexual harassment that occurs at, or after, the party. Employers also can be sued depending on a wide variety of circumstances for injuries caused by an intoxicated employee who injures someone after the party as a result of becoming intoxicated at your company party.
C. How to Avoid or Minimize Your Liability
1. If alcohol is served at your holiday party, limit and control the amount of alcohol your employees and their guests can consume at the party. Open bars with no time limits or controls over how much alcohol is being served, is an open invitation to a lawsuit should one of your employees injure either themselves or someone coming from your party.
2. Move in immediately to warn employees who you believe may be consuming too much alcohol and arrange for a safe means of transportation for them to return home.
3. Make everyone aware in advance of the holiday party, preferably in writing, that the company will not tolerate any misconduct under the guise of “holiday frivolity.”
4. Do not condone employee misconduct at your holiday event.
5. If you are going to warn an employee that he or she is violating company rules, do so in a discrete manner so that you do not embarrass or humiliate the employee in front of their guests or other employees.
II. Thieving Employees and What Employers Can and Cannot Do
Unfortunately, the incidence of employees who steal from their employers is on the rise during the current economic downturn. Employee theft costs employers billions of dollars each year. Cash businesses, such as restaurants and bars, are particularly susceptible to light fingered employees who become “silent partners”. Employee theft is not limited to cash businesses. Employees who have access to their company’s payment accounts can find ways to steal from their employers by sending checks to false vendors and by various other devices. Still, other employees steal valuable customer information and other critical confidential business information that can be easily copied in the digital age and sold to competitors to unfairly compete with their employers and former employers.
A. What You Can Do
1. Make certain that your Employee Handbook makes “dishonesty” a dischargeable offense.
2. If you become suspicious that an employee is stealing or engaging in other dishonest acts, thoroughly investigate your suspicions before acting on them to discharge the employee.
3. Have your employment lawyer review and “quarterback” your investigation.
4. Suspend the employee who you believe may have engaged in dishonest acts pending investigation, but make certain that they do not remove any information and/ or documents from the workplace.
5. Do not allow the employee to impede your investigation.
6. Once you have completed your investigation of the employee’s alleged dishonest acts, give the employee an opportunity to respond in writing and/or in person to what you have found during your investigation.
7. Remember dishonesty is an intentional act of active concealment or misrepresentation. Being a careless or sloppy accounting person may qualify an employee for termination for poor performance, but not for discharge due to dishonesty.
8. You can report employee theft to law enforcement authorities and can seek restitution from the employee.
9. If you believe in good faith that the employee engaged in dishonesty, after investigating and giving the employee an opportunity to respond, you have the legal right to discharge them.
10. Strictly control access to confidential information and trade secrets and have all employees with access to this information sign Confidentiality Agreements with an Arbitration provision.
11. Do not hesitate to enforce your Confidentiality Agreement with an Arbitration provision and where actual theft of confidential information and/or trade secrets is involved, immediately report the matter to law enforcement and seek prosecution of the offender.
B. What You Can’t Do
1. Tell employees that “you will not have them prosecuted if they pay back the money they stole to the company” because you would be engaging in the crime of obstruction of justice.
2. Tell third parties who do not have a direct interest in your communication that “the employee was fired because he or she was a thief” because you may be subject to a claim of defamation or a claim for breach of the employee’s right to privacy.
3. Disclose that you fired the employee for theft to third parties, except disclosure to governmental agencies and/or pursuant to a lawful court order, without violating the employee’s right to privacy.
4. Believe employees who tell you after they have been caught stealing that “this is the first time they stole from you and that if you give them another chance they will never steal from you again.” (THE GOLDSTEIN LAW FIRM RULE FROM MANY YEARS OF EXPERIENCE)
III. Preventing California Labor Code Section 132(a) Claims from Becoming Costly Disability Discrimination Lawsuits
Increasingly, employee workers compensation attorneys are filing Labor Code Section 132(a) claims against employers to attempt to increase the dollar amount of workers compensation settlements.
The defense against a Petition for Increased Benefits under Labor Code Section 132(a) must be solely paid for by the employer and is not covered under your workers’ compensation policy. An employee who is successful in pursuing a Petition for Increased Benefits under Labor Code Section 132(a) is entitled to reinstatement, back pay; $250 for attorney’s fees and the employer is required to pay a penalty of $10,000. While these damages pale in comparison to the damages and attorneys’ fees that a successful litigant can receive in a disability discrimination lawsuit, these 132(a) cases must still be aggressively defended because an employee who files a claim for Labor Code Section 132(a) benefits is not precluded from also filing a lawsuit against the employer for disability discrimination and other employment related claims. In fact, employee workers compensation attorneys are a fertile source of client referrals for employment lawyers who represent employees in disability discrimination cases.
Employee lawyers file Labor Code section 132(a) claims when employers refuse to return their clients to work. This may happen even when the employee has so many work restrictions that as a practical matter, they cannot really perform the essential duties of the job they left when injured or for that matter any other open available job for which they are qualified.
A. Cost Effective Ways to Prevent Labor Code Section 132(a) Cases from Turning into Costly Lawsuits
One of the most cost effective ways to prevent the filing of costly lawsuits for disability discrimination, and if a lawsuit is filed to have valid defenses to win the case, is to have the Labor Code Section 132(a) case aggressively handled by our firm at the administrative stage and not wait for a lawsuit to be filed.
B. What Steps You Need to Take to Prevent a Labor Code Section 132(a) Case from Turning into a Costly Disability Discrimination Lawsuit
1. Take the employee’s deposition early when the Labor Code Section 132(a) claim is filed to establish that the employee does not have a prima facie case of disability discrimination because the employee cannot perform the essential duties of his or her job.
2. Make certain that the employer does not abdicate its responsibility to engage in the “good faith interactive process” to find a reasonable accommodation for the employee and was unsuccessful or was successful. Some employers wrongly believe that this is the function of their workers’ compensation carrier.
3. Be able to demonstrate that the employee either has not engaged in the “good faith interactive process” or that the restrictions imposed on the employee by his or her treating physician prevented the employee from being returned to work because no reasonable accommodation can be found that would allow the employee to perform the essential duties of any job for which the employee is qualified.
4. Make certain that all of these critical steps are taken and clearly documented.
IV. The 8 Steps You Should Take for HR Survival in 2011
1. Make certain that you have your Employee Handbook updated to reflect your current policies, practices and current federal/state law.
2. Review your policies relating to classifying employees as exempt and non-exempt from the California Wage Orders and Fair Labor Standards Act because 2011 will be a year when both State and Federal agencies will be intensifying their audits of employers to determine whether employees are being properly classified.
3. If you use independent contractors, make certain that you have properly drafted independent contractor agreements. Make certain that your independent contractors meet the rigid criteria for determining independent contractor status imposed by the California EDD, IRS and other federal and state administrative agencies.
4. Make certain that your practices for the documentation of overtime, unpaid meal periods and paid break periods fully comply with the California Wage Orders. In the absence of a decision by the California Supreme Court in the Brinker case, employee class action lawyers are continuing to file class actions against employers for allegedly missed meal and break periods.
5. If you have not required all of your employees to sign validly drafted and enforceable Arbitration Agreements, you should do so immediately. If you have employees in other states, you should have Arbitration Agreements drafted that reflect the provisions of the Federal Arbitration Act.
6. Make a decision to secure earlier advice on any “budding employee problems” rather than waiting until you are served with a lawsuit or administrative charge.
7. Make a commitment that your organization will train managers and supervisors, who are your first line of defense, and if not properly trained, can create substantial liability for your organization. We conduct training programs on all areas of employment law and provide relevant real life scenarios as part of our training programs.
8. Make certain that you have Employment Practices Liability Insurance coverage from a carrier that will allow you to have choice of defense counsel endorsed into your policy. You want to be represented by a lawyer who will represent both your company and the insurance company’s interest.
HAPPY HOLIDAYS AND A PROSPEROUS 2O11
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The Goldstein Law Firm
8912 Burton Way
Beverly Hills, California 90211
Telephone: (310) 553-4746
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