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Guide to California Employment Law: 10 Things Employers Should Know

Has your company found success, and the many more employees (and potential employment law issues) that come with growth? The list of terms and potential pitfalls that you now need to know is large and complicated. Mistakes in these areas are easy to make and can be quite costly. Thankfully, avoiding these problems is often as simple as quick action and good documentation.

Here are 10 actions you can implement today to protect yourself and your staff.

1) Make sure your hiring standards reflect business necessity.

Protected classes are ethnicity, nationality, citizenship, gender, age, disability, family status (including pregnancy), Veteran status, and genetic information. How can you prove that you are NOT hiring based on one of these protected classes? This can be clear and easy when you are hiring doctors who must have appropriate licensure, but may be difficult for a call center where one of the job requirements is a subjective statement like “speaking clearly.”

Maintain good records for your hiring practices that can justify your decision making based on factors applicable to the job (knowledge, experience, and education). There are laws for records retention with regard to hiring: all hiring process materials (resumes, applications, pre-employment testing, and reference or background checks) must be kept for one year.

2) Pay for worker’s compensation insurance.

The requirements for worker’s compensation insurance can vary from state to state, but nearly all states require it. California requires worker’s compensation insurance for all employees, with rules and regulations set by the Workers Compensation Insurance Rating Bureau of California (WCIRB).

No business is too small to be exempt. Employers in California must obtain worker’s compensation insurance with their first employees. California employers can choose between private insurance companies or the State Compensation Insurance Fund (SCIF). Employer premiums are based on the employee’s salary.

3) Be careful not to compromise the at-will nature of your employment.

An at-will employee can be dismissed at any time, without an employer having to document or otherwise establish good cause. Want to be sure your staff knows they are at-will employees? At-will employment should be documented in new employee paperwork or your employee handbook.

A contract for employment through a certain length of time or circumstances can alter the nature of at-will employment. This does not have to be written! Verbal comments as seemingly innocent as, “You will always have a job with us as long as you are bringing in numbers like these!” can imply terms of employment other than at-will. This can lead to employees making claims in cases of termination.

4) Protect your proprietary information even if a former employee becomes competition.

Restrictive covenants, also commonly known as, “non-competes,” are easy to create and hard to enforce in court. You want to protect your company, but you also cannot impose requirements that would make it impossible for a past employee to compete fairly. Thankfully, confidential and proprietary information to your company can be protected, but it must be clearly defined in a contract that your employees must sign.

5) Never treat a contractor like an employee.

Those working for your company as 1099 contractors are just that—contractors. They are not employees, and should never be referred to as such. Using 1099 contractors to perform duties that should be done by W2 employees is very risky. Check the IRS rules and discuss with your counsel if you have questions.

This is an important consideration to keep in mind as companies grow, and the duties performed by (and the resources provided to) your contractors may change.

6) Pay final wages on an employee’s last day and keep good records.

Wage violations, such as not paying final wages due after a resignation, are serious crimes with serious repercussions. Pay is always sacred! California employees must receive their final pay on their last day of work, as required by California Labor Code, Section 202. If this does not occur, the employee is entitled to a penalty equalling the amount of a day’s wages for each day the employee remains unpaid, up to a total of 30 days.

How far back can former employees make this claim? Statute of limitations exist to keep someone from being charged with a crime that occurred more than a set number of years in the past. As of 2010 the statute of limitations law on wage violations is three years. If you are in an industry with a lot of turnover, make sure that your payroll and record-keeping actions in this area are top-quality.

7) Prevent sexual harassment.

The State of California’s Fair Employment and Housing Act states that harassment because of sex includes sexual harassment, gender harassment, and harassment based on pregnancy, childbirth, or related medical conditions. All employers in California must prevent sexual harassment in the workplace, and can be held liable even if they were unaware.

Your obligation as an employer is to show that you have taken steps to prevent harassment. An educational poster and a brochure (both available from the Department of Fair Employment and Housing) must be made available to all.

Larger employers have additional obligations. The state of California requires mandatory sexual harassment training for companies with more than 50 employees. This training must consist of,

… at least two hours of classroom or other effective interactive training and education regarding sexual harassment to all supervisory employees who are employed as of July 1, 2005, and to all new supervisory employees within six months of assuming a supervisory position. Thereafter, covered employers must provide sexual harassment training and education to each supervisory employee once every two years.

8) Understand your liability for your employees.

Your delivery driver employee causes an accident with injuries, but he was going to a restaurant for his own lunch at the time. A nurse on your staff gives a patient the wrong medication causing a dangerous allergic reaction. Both of these situations are quite serious, but what are your obligations as an employer?

Vicarious liability (or respondeat superior) can hold an employer responsible for the actions of their staff. How liable are you for negligent actions of your employees? For an employer to be liable, the employee must be:

  • On the clock for the employer (the driver was not, the nurse was)
  • Performing an action they were hired to do (the driver was not, the nurse was)
  • Performing an action that benefits the employer (the driver was not, the nurse was)

9) Avoid constructive termination.

Constructive termination, also called constructive dismissal or constructive discharge, occurs when an employee resigns due to a hostile work environment. This hostility does not have to be personal harassment—it can also be in the form of dramatic changes in pay, status, working hours, or duties.  It is viewed as a termination due to the resignation not being voluntary for the employee. If evidence of a constructive dismissal can be produced, the employee can make claims against the employer.

10) Make sure privacy protects are adequate.

A lot of best practices for employee privacy are complicated staff training issues, such as understanding confidentiality and taking action against breaches. A lot of them are also simple physical safeguards. All employee files (whether physical or electronic) should be kept under lock and key, with separate sections for confidential information. Management wanting to review files for performance should only given access to the relevant sections.

In small businesses, the employee handling HR and/or payroll may perform other duties as well. HR employees should be able to work in an area with a private printer and fax, as well as sufficient privacy for phone calls and to prevent passers-by from viewing their computer screens. Also consider the procedures you have in place for ancillary staff such as cleaning, IT, and external payroll agencies. What do they have access to?

Protect Your Business

There are a lot of variables to protecting your business and employees from the time, stress, and expense of litigation (or just unfair treatment). From your in-house HR, payroll, and management staff, to your external counsel, there are many people that you can depend on to help and educate you. Solid contracts, good record keeping, and above all compliance with the laws will keep your business running smoothly for generations to come.