Wilke Fleury is a proud Corporate Work-Study partner of Cristo Rey High School Sacramento. Four students from Cristo Rey work at the firm as a job-sharing team to cover one clerical position. The students learn valuable skills and marketable job experience, and also gain insight into various career possibilities. The firm is pleased to have the opportunity to help prepare some of our region’s students for the workplace and to participate in community outreach while doing so.

Cristo Rey High School Sacramento is part of the national Cristo Rey Network of more than 24 high schools throughout the United States. The school is dedicated to the advancement of the students both in terms of a quality college preparatory education and professional work experience. Cristo Rey Sacramento is co-sponsored by the Sisters of Mercy of the Americas, Auburn Regional Community, the California Province of the Sisters of Notre Dame de Namur, and the California Province of the Society of Jesus. The school was co-founded by Bishop William K. Weigand. Quality education is provided for youth from low income families. The unique Corporate Work-Study program provides each student an unprecedented opportunity to work in corporate America in an entry–level clerical job and to participate in paying for the cost of their education.

Craig Carnes, a Wilke Fleury associate, is set to begin an internship with the California Department of Parks and Recreation (“California State Parks”) in order to gain exposure to various areas of environmental and public agency law. California State Parks manages more than 270 park units and contains the largest and most diverse natural and cultural heritage holdings of any state agency in the nation. To learn more about California State Parks please visit http://www.parks.ca.gov/.

By Samson R. Elsbernd

Obligations of “Employers” under the FLSA Under the federal Fair Labor Standards Act (FLSA), employers must pay a minimum wage to their employees. Employers who violate this requirement may be held liable not only for the unpaid wages, but also for an equal amount of liquidated damages. In a recent federal case, former employees of a bankrupt company sued the company’s managers for unpaid wages. The court decided that the managers could be sued for unpaid wages even though the company had filed for bankruptcy. Boucher v. Shaw (2009) 2009 DJDAR 11827.

The Facts of Boucher v. Shaw

Nevada employees were fired, and alleged they were still owed wages. The employees sued three managers: the Chairman and CEO of the company, who owned 70 percent of the company; the manager responsible for handling labor and employment matters, who owned 30 percent of the company; and the CFO, who did not have an ownership interest in the company. The plaintiffs brought suit under the FLSA. The court noted that the definition of “employer” under the FLSA is to be given an expansive interpretation in order to effectuate the FLSA’s broad remedial purposes. Thus, where an individual exercises control over the nature and structure of the employment relationship or economic control over the relationship, that individual is an employer within the meaning of the FLSA and is subject to liability. The court concluded that, because each of the individual defendants was alleged to have had control of the plaintiffs, their employment and their place of employment, the case could proceed against them. It is important to note that the court did not find that the individual managers were liable for the unpaid wages; only that the case against them could proceed. It would ultimately be up to the trier of fact, after hearing all the evidence, to determine whether the individual managers were employers and, thus, liable for the wages of the employees.

The Company’s Bankruptcy does not Bar the Employee’s Claims

The managers argued that their duty to pay unpaid wages ended when their company entered Chapter 7 liquidation. Normally, the debtor in bankruptcy proceedings has an automatic stay, which means that any actions filed after the bankruptcy may not proceed. The court in Boucher noted that the automatic stay only protects the debtor, his property and his estate. There, the company was the debtor, not the individual managers. Accordingly, the company’s automatic stay did not affect the mangers’ liability. As a result, neither the managers nor their property were protected by the company’s bankruptcy proceedings, and the managers faced personal liability for unpaid employee wages.

Why Federal Court?

As most California employers know, California employees typically bring employment cases in state, rather than federal, court. In general, California law is much more employee friendly than federal law. Manager liability for unpaid wages, however, is one of the very few instances where federal law is actually more favorable to employees than state law. The California Supreme Court has determined that officers, managers, and directors cannot be held personally liable for a corporation’s failure to pay its employees under California law. Reynolds v. Bement (2005) 36 Cal. 4th 1075, 1076.

Lessons from Boucher

Boucher is a reminder that employers must comply with both state and federal wage and hour laws. Whichever law provides greater protection for the employee will be applied. Until now, lawsuits brought under the FLSA have been extremely rare in California. Expect to see a rise in lawsuits brought under the FLSA as more companies declare bankruptcy and more employees seek their unpaid wages from upper managers.

You could be subject to the jurisdiction of the U.S. Department of Labor Office of Federal Contract Compliance Program (OFCCP) without knowing it. In a recent case, three hospitals were held liable for noncompliance with OFCCP regulations even though they were not government contractors and were not parties to any subcontract that referenced a federal contract.

In OFCCP v. UPMC Braddock, three hospitals had contracts with the University of Pittsburgh Medical Center Health Plan (Health Plan) to provide services to government employees covered by the Health Plan. The Health Plan in turn had contracted with the Federal Office of Personnel Management (OPM) to provide medical services to federal employees. The contract between the hospitals and the Health Plan did not contain any language notifying the hospitals that they were subcontractors subject to OFCCP jurisdiction. Moreover, the Health Plan contract with the OPM specifically excluded the member hospitals from its definition of “subcontractor.” The OFCCP sent letters to the hospitals requesting copies of their affirmative action plans and other documents demonstrating that they were in compliance with various federal regulations prohibiting discrimination. The hospitals refused to cooperate, arguing that they were not federal contractors or subcontractors. The OFCCP disagreed and filed an administrative complaint against the hospitals.

The Department of Labor found that the hospitals were federal subcontractors subject to OFCCP jurisdiction even though the hospitals did not agree to become federal subcontractors and even though they had no notice of the terms of the contract between the Health Plan and the OPM. The Department of Labor determined that the equal employment opportunity and affirmative action obligations imposed by the OFCCP were incorporated into the hospitals’ contracts by operation of law. The rationale behind the decision was that, because the hospitals had assumed part of the Health Plan’s obligations under the Health Plan’s contract with the government (i.e., the provision of health care services to government employees), the hospitals were subcontractors bound by the OFCCP regulations. The Department of Labor also rejected the argument that the hospitals’ contracts with the Health Plan specifically excluded them from the definition of “subcontractor,” finding that the parties could not contractually invalidate the equal opportunity provisions of federal laws.

What This Means For You.
Health care providers with 50 or more employees that provide medical care worth $50,000 or more to federal employees may be subject to OFCCP jurisdiction. Failure to comply with OFCCP requirements can result in serious consequences, including exclusion from all federal contracting and subcontracting for three years or more. Entities that are in violation of the OFCCP requirements can also be prohibited from participating in Medicare and Medicaid programs. To avoid these unwanted consequences, you should take some simple steps. First, review your contracts to determine if you are providing health care services worth more than $50,000 to federal employees. If so, consult with legal counsel to determine your potential responsibilities under the federal government’s EEO and affirmative action programs. Finally, if you receive a compliance review letter, consult with legal counsel before refusing to cooperate.

In these tough economic times, many employers are looking for ways to save money and streamline their business operations. One way employers are accomplishing this goal is by implementing furlough days for some employees. However, this raises some legal concerns regarding the impact of a furlough day for exempt employees. This question has been considered on both the state and federal levels, and the consensus is that a prospective, temporary reduction in the work schedule of exempt employees, coupled with a reduction in their salaries, is permissible under California and Federal law as an effort to reduce or limit the need for layoffs in difficult economic times.

Who is an Exempt Employee?
To qualify as exempt, an employee must meet both the salary basis test and the duties test. To satisfy the salary basis test, an employee must earn a monthly salary equivalent to no less than two (2) times the state minimum wage for full-time employment (i.e., 40 hours per week). The duties test requires the employee to be engaged in the capacity of an executive, administrative or professional employee and to regularly exercise discretion and independent judgment.

Furlough of Exempt Employees 
The Division of Labor Standards Enforcement (DLSE) recently issued an Opinion Letter which laid out the conditions under which an employer could reduce the work schedules and salaries of exempt employees in order to avoid layoffs. Specifically, the DLSE concluded that an employer may reduce the number of its exempt employees’ scheduled work days and make a corresponding reduction in the employees’ salaries if the employer has experienced a significant economic downturn, the reduction is anticipated to be temporary and the employer intends to restore the employees’ work schedules and full salaries as soon as economic conditions permit. The DLSE pointed out that exempt employees whose work week and salary are reduced must still be paid at least two times the minimum wage so that they meet the salary basis test. Each employee must also continue to satisfy the duties test. The DLSE cautioned that the temporary reduction in hours and pay should be a one-time event. The DLSE noted that its opinion letter was in conformity with federal law, which also allows a prospective reduction of exempt employees’ hours so long as such reductions do not occur with such frequency that the employees’ status as salaried employees is a sham.

The DLSE’s new opinion is in notable contrast to a prior opinion issued by the DLSE, which concluded that an employer could not reduce the salary of an exempt employee during a period in which the company operated a shortened work week due to economic conditions. The DLSE stated that its prior opinion letter predated important federal cases and that it could no longer be considered persuasive.

Take Away 
Given the DLSE’s recent opinion letter, a California employer is not prohibited from implementing a one-time, temporary reduced workweek with a corresponding reduction of the salaries of exempt employees so long as the employees still meet the salary basis test by earning a monthly salary of at least twice the state minimum wage for full time employment. Such a reduction should only be made due to economic necessity and the employees’ hours and salaries should return to their pre-reduction status when the economic crisis has passed.

Wilke Fleury was pleased to bid its summer clerks-Sarah Scott, Stacy Hunter, and Angie Palmerin-farewell with two fun-filled events. On July 23, partner David Frenznick hosted a boat outing in the Delta near Walnut Grove. Attorneys and clerks wiled away the hours on a houseboat and floating dock before tubing at 40 miles per hour behind a speedboat. Miraculously, only one person was thrown from the tube-a true testament to the aquatic prowess of those involved! On July 31, Dick Hoffelt hosted Wilke Fleury’s annual summer clerk reception at his home overlooking the American River. This annual event takes place during the last Friday in July, and has been a summer fixture for over 25 years. The weather always seems to cooperate for this event, and this year was no exception. Everyone was treated to a relaxing evening . . . a great end to the legal summer season. We appreciate the efforts of Sarah, Stacy, and Angie, and wish them all the best in the coming school year!

Wilke Fleury is pleased to announce that four of its attorneys—Phil Birney, Tom Redmon, Dan Baxter, and Megan Lewis—have received accolades in the recently issued 2009 Northern California Super Lawyers Magazine. Mr. Birney and Mr. Redmon were named as “Super Lawyers” for the fifth and fourth times, respectively, while Mr. Baxter and Ms. Lewis were named as “Rising Stars.” The list of honorees is compiled by Law and Politics through a multiphase process that combines peer nominations and evaluations with third party research. Just five percent of the total lawyers in California are selected for the “Super Lawyer” designation, and no more than 2.5 percent are named as “Rising Stars.”

The achievements of these four outstanding lawyers are emblematic of the quality of services Wilke Fleury provides to all its clients. We look forward to proving it to you.

By Latika Sharma and Stacy Hunter

Most employers are aware that discrimination lawsuits are risky and expensive. A recent case, Lopez v. Bimbo Bakeries, serves as a reminder of just how expensive those cases can be, particularly if the terminated employee can garner a jury’s sympathy.

Recipe for Disaster
Lopez, a single mother of two, worked at Bimbo as a route sales representative. She transported baked goods on 15-pound trays that were stacked on wheeled racks in her truck. The design of the truck and the racks allowed her to load and unload the trays without forcing her to climb in and out of the truck. Lopez became pregnant and was diagnosed with diabetes. Lopez’s perinatal nurse provided her with a certification describing her work restrictions, which included occasionally lifting items ranging from 11 to 20 pounds, taking 15 to 20 minute breaks every two hours, and refraining from climbing. If modified work was not available, Lopez would be unable to work for the duration of her pregnancy. Lopez gave her certification to Laura Thompson-McCann, Bimbo’s HR Manager. Without consulting anyone else, Thompson-McCann told Lopez to go home immediately because Lopez was unable to perform her job duties as required. Thompson-McCann then determined that Bimbo did not have any available positions that could accommodate Lopez’s restrictions, despite Bimbo’s interim work program for employees with industrial injuries. Thompson-McCann refused to allow Lopez to return to her former position or any other Bimbo position, even though Lopez’s nurse assured her that Lopez could perform her job duties. Lopez filed for unemployment and Thompson-McCann responded by sending a letter to Lopez demanding that she confirm her resignation within 48 hours. When Lopez did not respond, Thompson-McCann determined that Lopez had resigned. Lopez sued, claiming gender and pregnancy discrimination. Following a jury trial, Lopez was awarded $340,700 in compensatory damages, $2 million in punitive damages, and over $1 million in attorneys’ fees.

Why Punitive Damages?
A corporate employer may be liable for punitive damages if a managing agent of the corporation acts with fraud, oppression or malice. A managing agent is defined as an employee who exercises substantial independent authority and judgment over decisions that ultimately determine corporate policy. Punitive damages were awarded to Lopez because the jury found that Thompson-McCann was a managing agent and that her actions were fraudulent and oppressive. The jury determined that Thompson-McCain violated the law when she terminated Lopez because of her pregnancy, and that she then attempted to conceal that wrongful act by claiming that Lopez had resigned. If the jury determines that an employer is liable for punitive damages, the amount of punitive damages must then be determined. The amount of punitive damages is based on the reprehensibility of the employer’s conduct and is designed to punish the employer for its wrongful acts. Because Bimbo’s assets were valued at $826 million and its actions were highly reprehensible, the jury determined that $2 million in punitive damages was appropriate.

Why Attorney’s Fees?
In most employment cases, the trial court will award attorneys’ fees to a prevailing plaintiff. Attorneys’ fees are awarded to ensure that the employee is not forced to bear the financial burden of litigation in order to vindicate her statutory rights. In determining the appropriate amount of attorneys’ fees to award, the Court will consider the number of hours spent by the attorney multiplied by a reasonable hourly rate. The court may then multiply that amount by a factor designed to reward the attorney for the risk incurred in taking a case in which he will receive nothing if he loses.

What This Means For You
To avoid falling into the same trap as Bimbo, you should ensure that your managing agents understand their legal obligations. When the managing agent is a human resources professional, she must understand the complex interplay between the ADA, FMLA and California’s FEHA and PDL. Here, Thompson-McCann made one mistake after another. She failed to engage in the interactive process, failed to determine whether the employee could perform her duties with a reasonable accommodation, failed to determine whether an alternative interim position was available even though company policy allowed for it, and failed to determine whether an extended leave of absence would be an appropriate accommodation. Any one of these failures would have resulted in liability for the employer. Together, they cost the employer a lot of dough.

By Anthony R. Eaton and Sarah Scott

Passed last year and signed into law by President Bush, the Genetic Information Nondiscrimination Act (GINA) will go into effect this November. Title I of GINA prohibits health insurance companies from discriminating against individuals based on their genetic information, and Title II prohibits such discrimination in the workplace. “Genetic information” is defined as an individual’s genetic tests or tests of his or her family members, as well as the medical history of an individual’s family with respect to any diseases or disorders.
Congress passed the Act in response to what it called the “current explosion in the science of genetics.” The hope is that the new law will foster medical research in the burgeoning field by offering protection to potential genetic testing participants who might otherwise be wary of disclosure of their medical records. The new protections may also allow for early detection of medical problems, and reduce the likelihood that at-risk individuals will contract or develop certain medical conditions.

Employer Obligations
Title II pertains to employers and has four prohibitions. First, employers may not engage in employment discrimination based on genetic information – i.e., employers may not terminate, refuse to hire, or otherwise “discriminate against any employee with respect to the compensation, terms, conditions, or privileges of employment” based on the employee’s genetic information. Furthermore, employers cannot use such information to “limit, segregate, or classify the employees… in any way that would deprive or tend to deprive any employee of employment opportunities or otherwise adversely affect the status of the employee.” Second, employers cannot retaliate against an employee who vocally supports the provisions of GINA or who participates in any investigation or proceeding under the Act. Third, employers cannot disclose any employee’s genetic information to any third party except under very narrow circumstances, such as to comply with certification provisions of family and medical leave laws. Finally, employers may not collect employees’ genetic information, with some exceptions (e.g., if the employer acquired the information inadvertently). If an exception does apply, employers must be careful to keep all such records strictly confidential. It is important to keep in mind that GINA is intended only as a floor of protection – state laws that provide for equal or greater protection are presumably still valid. The Act applies to all employers who have 15 or more employees, and will be enforced by the EEOC. Employees who successfully bring suit under GINA may recover attorney fees, as well as compensatory and punitive damages, if they can prove intentional (rather than negligent) discrimination – though these are subject to dollar caps depending on the size of the employer.

California Law
California’s FEHA already prohibits employers from discriminating on the basis of genetic information, and state law goes even further than GINA to prohibit testing for the presence of a genetic characteristic. Since California laws on genetic nondiscrimination were already among the most protective in the country, GINA will likely have a minimal effect on employers in this state. However, it has yet to be determined how courts will treat any disparities between state and federal law in this area, so employers would be wise to ensure compliance with GINA as well as with existing state law.

By Jason Cinq-Mars and Angie Palmerin
Employment attorneys were quite busy in 2008. According to the Equal Employment Opportunity Commission (EEOC), a total of 95,402 discrimination charges were filed by workers against their employers in 2008, as compared to 82,792 in 2007. That is a 15% increase. According to the new report, age discrimination complaints increased 29% from 2007, followed by retaliation complaints up 23% and sex discrimination complaints up 14%. The EEOC also saw an increase in complaints based on national origin discrimination, up 13% from 2007, race discrimination, up 11%, and disability discrimination, up 10%. With the economy in turmoil and a continuing rise in unemployment, it should be no surprise that employment litigation has dramatically increased.

The Odds
With the number of discrimination filings on the rise, employers must be aware of the risks they face if an employment case is filed against them. Statistics show that if an employer is sued by an employee in federal court, there is a 61% chance that the employer will lose. This number increases to 66% if the suit is filed in state court, where most employment discrimination cases are filed. The chances of an employer losing jumps to 65% if disability discrimination is alleged and to 70% if the suit alleges sex discrimination.

The Bottom Line
If an employer takes an employment case to trial and loses, the verdict can be quite large. Statistics show that in 2008, the average verdict in a federal employment suit was around $627,447. This number was higher in state court, where the average verdict was approximately $852,838. This number increases to approximately $948,018 for state discrimination cases, while state age discrimination verdicts top the list at an average of $1,967,923. There is a 27% chance of a verdict of $500,000 or more and a 45% chance of a verdict of $250,000 or more. In light of this dramatic increase in employment litigation and the high costs associated with lawsuits, the wise employer will be sure to provide effective management training on harassment and discrimination, hire competent human resources professionals and consult counsel before making high risk termination decisions.

Wilke Fleury is happy to welcome its 2009 summer law clerks, Sarah Scott, Stacy Hunter, and Angie Palmerin.  Ms. Scott and Ms. Hunter recently completed their second year of study at UC Davis School of Law, while Ms. Palmerin just finished her first year at University of the Pacific, McGeorge School of Law, and is a participant in the Sacramento County Bar Association Diversity Fellowship Program, of which Wilke Fleury was a founding member.  All three women will spend the summer assisting Wilke Fleury attorneys with research, writing, and court filings.

Wilke Fleury is proud to be a part of these dynamic individuals’ professional development, and looks forward to working with them in the coming weeks.

By Samson R. Elsbernd and Kelli M. Kennaday, Esq.

Discrimination in the workplace has been prohibited since at least 1964.  In addition to prohibiting discrimination, the Civil Rights Act of 1964 also prohibits retaliation against employees who “oppose” unlawful employment practices.  Over the years, there has been surprisingly little guidance from the courts on what constitutes “opposition” to discrimination or harassment sufficient to trigger those protections.  It has generally been understood that someone who complains that they are the victim of discrimination or harassment is protected by the anti-retaliation provisions of those laws.  On January 26, 2009, however, a unanimous United States Supreme Court extended the protections of those laws to employees who report discrimination or harassment of others during an employer’s internal investigation.

Employees who disclose unlawful employment practices when asked may not be retaliated against by their employer.
In Crawford v. Metropolitan Government of Nashville and Davidson County, Tennessee, the local government investigated rumors of sexual harassment made against its employee relations director.  A supervisor asked Ms. Crawford if she had seen “inappropriate behavior” by the employee relations director and Ms. Crawford shared several instances of such behavior.  Ultimately, the employer did not take action against the employee relations director.  However, it fired three employees who had disclosed inappropriate conduct when asked about it during the investigation, including Ms. Crawford.  The employer claimed Ms. Crawford was fired for embezzlement; Ms. Crawford claimed she was fired in retaliation for reporting the sexual harassment.  The lower courts did not allow Ms. Crawford’s case to proceed, finding that she did not “oppose” an unlawful employment practice because she had not made an actual complaint about it.  Rather, she had simply disclosed what she had seen when asked.  The Supreme Court reversed, finding that the anti-retaliation provisions of Title VII protect not only employees who make an initial complaint or report of unlawful employment practices, but also employees who have “taken no action at all […] beyond disclosing it” when asked.

The Supreme Court stated that any other outcome would result in a “freakish” rule that protected employees who reported discrimination on their own, but not those who reported it after they were asked about it by a supervisor.  Such a rule would discourage employees from cooperating with employers during internal investigations.  The Court rejected the argument that its rule would discourage employers from conducting internal investigations.  Under the Court’s previous decisions, employers have a defense to harassment and discrimination claims when no tangible employment action is taken if the employer “exercised reasonable care to prevent and correct promptly” any discriminatory conduct and “the plaintiff employee unreasonably failed to take advantage of any preventative or corrective opportunities provided by the employer or to avoid harm otherwise.” Thus, the Court concluded, employers always have good reason to conduct an investigation into allegations of unlawful employment practices in the workplace.

How broad is the Supreme Court’s Interpretation of “Opposition” to Unlawful Employment Practices?
The language of the Supreme Court’s opinion in Crawford suggests that courts will interpret the term “opposition” within the anti-retaliation laws very broadly.  The Supreme Court noted that when employees share their belief that the employer has committed harassment or discrimination, the employee has “virtually always” opposed an unlawful employment practice.  The exceptions, noted the court, will be the “eccentric cases.”  Even more troublingly, the Court specifically stated that it was not deciding whether “opposition” includes silent opposition to unlawful employment practices. An example of  “silent opposition” would be when an employee disapproves of an unlawful employment practice but never shares that disapproval with her employer.  While stating that it was not deciding the issue, the Court suggested that “opposition” might include silent opposition.  In giving an example of what does not constitute opposition, the Court referenced an employee who thinks a supervisor’s racist joke is hilarious.  The Court found that such an employee would not be covered by the anti-retaliation laws because that employee did not oppose an unlawful employment practice.

Lessons from Crawford
As always, if you are considering terminating an employee, it is important to review the employee’s history to determine whether he falls within a protected classification.  An employee who has participated in a workplace investigation now should be included in the category of a protected class.  The termination of an employee in a protected classification is a high risk termination and you should make sure that the reason for the termination decision is absolutely unrelated to the protected activity, is well documented and, if possible, was not made or influenced by the employee who was the subject of the investigation.

In this tough economic climate, many employers are being forced to consider rather unpleasant ways to reduce costs.  Some of those methods include laying off non-critical employees, furloughs (requiring employees to take unpaid periodic time off) or RIFs (mass layoffs).  While all of these strategies have obvious downfalls, including decreased morale, increased unemployment compensation premiums and possible litigation, employers also need to be aware of the various legal requirements that apply when these tools are used.  Making matters even more confusing, the new economic stimulus plan has placed increased burdens on employers when employees are terminated.  If you are considering a layoff, furlough or RIF, do not forget these important rules.

FINAL PAY RULES
If you let an employee go as part of a layoff or RIF, you must provide their final pay on their last day of work.  The final paycheck must include all earned unpaid wages and benefits, including accrued time off.  Commissions and bonuses must also be paid on the employee’s final day if the employer is capable of calculating the amount of the commission or bonus on that day.  If the employer is not able to calculate the amount of the commission or bonus (for example, if the employer has not yet received payment on the sale), then the employer must pay the commission or bonus as soon as it is able to make that calculation. If you fail to provide a terminated employee with her final pay on the last day of work, the employee is entitled to a waiting time penalty for each day the final paycheck is late, for up to thirty days.  Final pay rules do not apply to furloughs unless the furlough spans more than one pay period.

FURLOUGHS AND REDUCED HOUR SCHEDULES
Many employers are choosing to furlough employees for short periods in order to save money now, while retaining employees for the anticipated recovery.  If you are considering furloughing employees, be aware of potential issues with respect to exempt employees.

You may furlough non-exempt employee by asking them to take off one or more days per pay period without pay.  In that case, you simply don’t pay the employee for the time the employee does not work.  For exempt employees, however, the situation is much more complicated.  You are required to pay an exempt employee an entire week’s salary for each week in which the employee performs any work.  Thus, you may not ask an exempt employee to take off a Friday and pay that employee 4/5 of his salary without jeopardizing the employee’s exempt status.  However, you can furlough an exempt employee without pay for an entire workweek.

You may also reduce the normal schedule of a non-exempt employee to save costs.  In that situation, you would change the non-exempt employee’s normal work schedule to a reduced hour schedule (i.e. thirty-two hours per week versus forty hours per week). Again, the exempt employee would only be paid for the hours worked.  For exempt employees, however, you may not reduce the employee’s weekly salary based on a reduction in the amount of time worked during the week.  Accordingly, you may not use a reduced hour schedule for exempt employees in order to reduce their pay.

If you decide to furlough employees or impose a reduced hour schedule, you must also decide whether to allow affected employees to use their accrued time off. That decision is up to you.  For exempt employees, however, you can require the use of accrued time off in order to satisfy the requirement that an exempt employee be paid for a full week in which they perform any work.  In this example, you could require an exempt employee to take every other Friday off and to use accrued PTO to be paid for that day.  While this will not result in any immediate cost savings, it will get the PTO off your books.  Of course, if the exempt employees does not have enough accrued PTO to cover that day, you must still pay the employee for the full week.

RIFS, WARN ACT NOTICES AND SEVERANCE AGREEMENTS
If you are doing a large scale RIF (defined as an unemployment loss at a single site of employment for fifty or more employees during any thirty day period), you are required to provide WARN Act Notices to all affected employees and to the EDD, the Local Workforce Investment Board and the chief elected official of each city or county government within which the RIF occurs.  You must provide these notices sixty days prior to the RIF date.  A failure to meet these requirements can result in liability to the affected employees for the difference between sixty days and the amount of notice actually provided.  Penalties may also be assessed.

If you offer your RIF’d employees a severance package as part of their termination, there are also additional requirements for obtaining a valid release from those employees.  Employees included in a RIF must be provided with forty-five days in which to consider a release agreement.  The employees must also be informed in writing as to any class, unit or group of individuals covered by the program pursuant to which the release agreement is being offered, any eligibility factors for the program, any time limits for applying for it and the job titles and ages of all individuals eligible or selected for the program within the portion of the employer’s organization from which eligible employees were chosen, as well as the ages of all individuals in the same unit who were not eligible or selected for the program.  Release agreements that do not comply with these requirements are invalid as to age discrimination claims.
NEW COBRA RESPONSIBILITIES

The recent economic stimulus bill imposes additional COBRA requirements on employers when an employee is terminated, whether as part of a RIF or an individual termination. When you terminate an employee, you must now provide them with a notification that they are eligible for subsidized COBRA benefits.  As an employer, you may be responsible for paying the subsidy to the provider but may seek reimbursement by deducting the subsidy from your payroll taxes.

In addition to notifying employees who are currently being terminated of their COBRA subsidy rights, employers must also notify employees who involuntarily lost their jobs as far back as September 1, 2008 of their right to subsidized COBRA benefits, even if those employees did not initially sign up for COBRA.  Those employees now have a second chance to sign up for subsidized COBRA benefits.

If you are contemplating a layoff, furlough or RIF, make sure you understand your obligations under the various state and federal laws that apply.  Otherwise, your attempt to save money may actually cost you money.

Craig Carnes, a Wilke Fleury associate, was recently elected to serve on the board of directors for TEAM (Teaching Everyone Animals Matter).  TEAM is a Sacramento based non-profit corporation formed to help Sacramento Animal Care and Regulation reduce the number of healthy, adoptable, and unredeemed animals who arrive at the Sacramento County animal shelter each year. TEAM works to accomplish its mission by sponsoring community-wide adoption events, spay and neuter education events, a special medical needs program for shelter animals, and public awareness events focusing on responsible animal ownership.  To learn more about TEAM please visit http://www.sacanimalshelter.org/.

The client, faced with an impending mediation session, requires a careful explanation of the process, particularly the role she or he is to have as well as those of the mediator and counsel.

Mediation is a dispute resolution process that may be carried out in a number of different models or configurations, among which, and perhaps the most used, are the facilitative style and the evaluative style or a combination of both. In the facilitative style the mediator assists the participants to reach their own mutual decision to settle their dispute. The style of the evaluative mediator is to provide an opinion of settlement value or other disposition of the dispute- a style that is tantamount to that employed by a pro tem settlement conference judge in the California court system. In addition, “distributive, integrative, therapeutic, narrative and transformative” styles are among some of the others in vogue but are beyond the parameters of this overview that focuses on the facilitative mediation process, one of those in which clients are most likely to participate. Participation in the facilitative process is consensual, the disputants having agreed to participate and make a good faith effort to resolve their differences.

The mediator’s role is to facilitate a settlement agreement between the parties by assisting each party to understand the positions of their opponent, to analyze their own positions and to modify those that are unrealistic. The mediator’s goal is to bring the negotiations of the parties to a point at which settlement is achieved. The mediator, however is not a substitute for a judge and has no decision making authority; is not a negotiator, the role of whom is to negotiate the best result possible for her or his client; and does not act as an attorney or give legal advice as, for example, does not suggest to the parties what a judge might hold with respect to issues but can quite properly, in an effort to get the parties to change a position, ask of them or their counsel that which she or he believes a judge might hold.

Counsel for each party should present the client’s case in a straightforward manner and not in a confrontational manner as may be employed in court. The effort should be to present information helpful to persuade the opponent that settlement is a better option than going to trial. Some attorneys use “trial advocacy” in mediation but by and large this is counter-productive.

Submission of written briefs to the mediator before the commencement of the proceeding is helpful to assist the mediator and educate the other party. Counsel often prefer to submit confidential briefs. This is entirely appropriate if counsel so choose. The critical point is that the dispute cannot be resolved unless each party has a full understanding of the arguments and interests of the other and the opportunity to evaluate their merits.

Counsel should carefully prepare the client for the mediation so that she or he will have an appreciation of the costs and risks in litigating the dispute, be patient with the process, have possible concessions in mind and be able to maintain an open mind, taking into account the interests of the other side and focusing on settlement in an objective manner. Counsel must assure the presence of someone with full settlement authority at the mediation session. Mediations “aft go awry” in the absence of someone with such authority.

While currently there is some opposition to an opening session in which all parties and counsel participate, most agree that the opening session serves a very important, effective and helpful part of the mediation process. Here the mediator, counsel and parties have the opportunity to introduce themselves, and the mediator can outline the ground rules for the proceeding and assure the parties and counsel of her or his neutrality. Most importantly each side has the opportunity to address the other party in a non-argumentative manner to explain critical positions and interests important to that party. In this way, the session then can focus on finding solutions in an objective manner and, with help of the mediator, formulate solutions that will accommodate the interests and satisfy the needs of all parties so as to bring the negotiations to the point at which closure and a settlement agreement are achieved. Some mediators prefer to permit the parties to address each other in the opening session; however, the risk in doing so is that if the parties become highly emotional and confrontational in doing so, the entire process may be endangered. The mediator can minimize this risk by asking questions of parties in opening session and encouraging counsel to do so as well. When the mediator is certain that the facts, issues and interests have been as fully discussed as need be, he adjourns the open meeting and separates each side into private caucus rooms where she or he may confer privately with each side.

In private caucus the mediator again will assure each side that the confidentiality of information disclosed to her or him will be maintained and not disclosed to the other side unless given express permission to do so. Maintaining confidentiality is critical to the process, because it provides a setting in which the party can be open with the mediator. Key to the success of a mediation is that all sides understand the interests and positions of the others so that the door is open for all sides to devise meaningful ways in which to satisfy the needs of the others and, thus, forge solutions and achieve closure and a settlement acceptable to all sides. Often there are emotions involved giving rise to concerns that may stand in the way of settling the dispute. The mediator must see that the parties recognize and dispel these emotions so that they can consider resolution of the controversy logically and in a manner that is conducive to settlement. When the parties accept the mediator’s assurances of neutrality, the mediator is better able to obtain information regarding the parties’ interests in order to define their weaknesses, help the parties understand where the other sides are coming from and formulate settlement strategy. At this point in the process, the mediator employs “shuttle diplomacy,” moving back and forth between the caucuses, imparting and gaining information until the point at which offers and counteroffers of settlement are formulated, delivered back and forth and an acceptable offer is achieved.

When the private caucuses have concluded and terms of settlement achieved, the parties and counsel most often reconvene with the mediator to confirm their settlement agreement in open session, unless there is lingering animosity that could threaten the settlement in which case the mediator convenes separately with each side to do so. At this point in the process, in order to avoid next morning “buyer’s remorse,” it is imperative that the agreement be reduced to writing by counsel and signed by the parties before adjournment of the session, If an action involving the matter in dispute is pending in the California court system at the time of the execution of the agreement, it is prudent and advisable that counsel insert an express provision in the agreement providing that enforcement of the agreement may be sought by either party by motion to the court pursuant to California Code of Civil Procedure section 664.6 and also providing an express request that the court retain jurisdiction over the parties to enforce the settlement until performance in full of its terms. If such an action is not pending, then it is prudent and advisable in any dispute over which the California Court system has jurisdiction over the parties and the subject matter of the dispute or over which counsel for the parties determine that it is prudent and advisable that the California court system have jurisdiction over the parties and the subject matter of the dispute, that counsel expressly include a provision in the agreement that should any party to it refuse to perform, any other party to it may file an action in the California Superior Court (specifying the County), seeking performance of its terms, serve such action on the non-performing party and file and serve a motion to enforce it pursuant to the aforesaid California Code of Civil Procedure Section 664.6. Whether or not an action is pending in California and the California court system has, or the parties and counsel desire that it have jurisdiction over the parties and the subject matter of the dispute, it is prudent and advisable also to insert language in the agreement conforming to any one or more of the conditions enumerated in California Evidence Code Section 1123, subdivisions (a), (b) or (c) so as to assure its admissibility in any proceeding relating to the mediation and settlement.