With the prohibition on requiring  new employees to submit to mandatory arbitration, effective January 1, 2020, it is more important than ever that employers maximize the substantial legal protections that employee handbooks afford them.

This starts with developing a state-of-the-art handbook which provides as much protection as the law allows, and revising it annually to be sure that the incessant influx of new laws and court-imposed legal obligations are properly addressed in that document.

Supervisors-R-Us

Since the conduct of supervisors is treated as that of the business owner(s) for the purposes of most labor laws, the failure of managers to enforce company policies and practices consistently, to comply with applicable legal standards or to adhere to commitments made to employees can result in potentially-enormous legal exposure.

As an example, the failure of supervisors to enforce company policies consistently between employees often results in claims of unlawful discrimination, harassment or both.  Properly-drafted employee handbooks minimize this problem by promoting uniformity in the application of the various policies they describe.  However, these benefits are only applicable to handbooks that are properly drafted in accordance with the myriad of laws that apply to the workplace.

A perfect example of how professionally-drafted handbooks can protect employers is illustrated in the December, 2019 case of Cacho v. Eurostar, Inc.  In that case, former employees filed a class action lawsuit against Eurostar, Inc., alleging that it violated California law by failing to provide employees with required meal breaks and rest periods, and by allowing employees to work off the clock at its retail facilities.

Class Actions or Class Warfare?

By way of background, class action and representative action lawsuits have become a major feature of California employment law in recent years. Such lawsuits enable multiple employees, and sometimes the entire workforce, to participate in the same lawsuit if each participant was impacted by the same alleged violation.  These lawsuits are very attractive to plaintiffs’ lawyers, because the potential damages can be exponentially-greater than claims involving individual employees.

As an example, Labor Code, section 226 requires that nine separate items of information be included on itemized wage statements, otherwise known as “pay stubs.”  These include the inclusive dates for which wages are being paid.  The failure of employers to include both dates has become the most common source of class actions in California. Approximately 10 such lawsuits are filed every day based on this highly-technical violation alone.

Two particularly alarming features of class/representative actions are as follows.

First, if an award in any amount results, the employer must pay the plaintiffs’ attorney’s fees, calculated at the prevailing local hourly rate for attorneys with like experience.  Obviously, the fees generated in representing multiple employees, whether 10 or 500, can be enormous.

Perhaps even more disturbing is the fact that these actions tend to turn the entire class of current employees against the employer, as potential recipients of a monetary award. This often makes it difficult or impossible to find witnesses to support the employer’s defense.

Thus, class actions are a major concern which, in the author’s opinion,  warrant the focused attention of all employers. This starts with ensuring that employee handbooks are scrupulously consistent with applicable laws, for the reason that handbook policies frequently become the primary focus of plaintiffs’ legal challenges, as follows.

In the Eurostar case, the trial court denied the plaintiffs’ motion for class certification on the basis that the employees failed to show common issues of law or fact and that their claims were typical of the class generally.  The employees contended that Eurostar maintained uniform break and overtime policies, in its employee handbook, that were facially inconsistent with California law.

The Court’s decision denying class certification, which was upheld on appeal, included a painstaking analysis of the employee handbook, and its treatment of the meal/rest break issue.  For example, it held that Eurostar’s break policy, while it complied with the applicable Wage Order, failed to address various requirement of state law, but that this omission did not support certification of the class in the absence of evidence of a uniform unlawful policy or practice.

The plaintiffs sought to support class certification of the rest period claim by pointing to an outdated policy on this subject included in a 2013 edition of the handbook. They pointed to language providing for a rest period after four hours, instead of three and one-half hours, arguing it was unlawful on its face.  The Court agreed that the 2013 policy was inconsistent with the applicable Wage Order, but held that this did not necessarily require the conclusion that Eurostar had a uniform practice of denying rest breaks for employees who worked fewer than four hours.

This case illustrates the intense scrutiny that employee handbooks are often subjected to in employment litigation, and how vital it is that these documents are reviewed annually to ensure that they can withstand such a demanding examination.

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Jay G. Putnam is a Petaluma labor lawyer who has specialized in representing California employers for over 38 years. His practice is devoted to preventing lawsuits against his clients, without sacrificing workplace authority or management prerogatives. He has a remarkable record of success: Not one employer-client acting on his advice has been sued in over 38 years.

For those clients who have arrived with pending lawsuits, Putnam has established an excellent track record of success as well.

You are invited to visit Mr. Putnam’s website, where you will find in-depth discussion of the most common mistakes made by California employers, and how to avoid them. http://www.jaygputnam.com/newsletter/ 

This newsletter is not intended as a substitute for legal advice and its content is provided for discussion purposes only. Any suggestions or recommendations must be assessed by competent legal counsel to be sure the unique requirements of each workplace are properly considered.