Monthly Archives: March 2017

Mandatory Arbitration Agreements Unfairly Deny Employee Rights

It has become standard practice for employers to require that prospective employees sign a pre-employment agreement as a condition of accepting a job.

More often than not, the fine print in these agreements includes a mandatory arbitration clause, which requires the employee to give up any rights to bring a lawsuit against the employer for any wrong, including wrongful termination, discrimination or sexual harassment. Rather than file a lawsuit in court, the employee must agree to bring his or her claim against the employer before an arbitrator.

Limiting Perceived Constitutional Rights

Arbitration is a form of alternative dispute resolution. Each party presents its case and any evidence supporting its claim to an arbitrator or a panel of arbitrators. The arguments in favor of arbitration include the efficiency of the process and its lower costs.

However, unlike voluntary arbitration – in which the parties agree after a dispute has arisen to submit to arbitration rather than the courts – employees are forced to agree to submit any future dispute to arbitration. In many cases, if they don’t sign the agreement, they don’t get the job. The employer has all of the bargaining power and the employee’s only option is to agree to the employer’s terms.

Many times, employees are not even aware they have signed a contract that includes a mandatory arbitration clause. And those who do know what they signed rarely understand the full extent of rights they have forfeited by signing the agreement.

Mandatory arbitration agreements result in a loss of perceived constitutionally protected employee rights, including:

* The right to a jury trial. Under the Civil Rights Act of 1991, employees are entitled to have a jury hear their discrimination claims. In arbitration, there is no jury. The arbitrator acts in the role of judge and jury in deciding the case.
* The right to appeal. Arbitration decisions are binding, meaning final, and there are limited opportunities to appeal decisions.
* The right of access to the courts. Not just employees, but all individuals believe they have the right to have their legal claims heard in court. Mandatory arbitration provisions take this option off the table.
* Limited right to recover damages. Even in cases where the employee is successful and wins in arbitration, whether he or she can recover the full extent of damages available under the law can be limited by the arbitration agreement.

A Convenient Forum for Employers

There have been arguments made that arbitration is more favorable to employees because it gives them access to a less expensive forum than the courts, thus giving them a greater opportunity to have their grievances heard. But it is highly questionable whether the arbitrators sitting on employment arbitration panels are in fact the neutral decision-makers they are purported to be. The arbitrators and the choice of forum for the arbitration are selected by the employer. Thus, the arbitrators have an incentive to find in favor of the employers rather than the employees in order to ensure repeat business.

There are additional facts that make arbitration an unfair forum for wronged employees, including:

* Arbitrators do not have to follow the law. In Citigroup Global Markets, Inc. v. Bacon, 562 F.3d 349 (5th Cir. 2009), the Fifth Circuit ruled that courts do not have the authority to vacate an arbitrator’s decision, even if the arbitrator acted in “manifest disregard of the law.”
* Arbitrators do not have to issue written opinions explaining how they interpreted the law and applied it to the employee’s case.
* There is limited discovery in arbitration, which can fatally damage employees’ cases because they are not given the means to collect the necessary evidence to support their claims.
* Arbitration is a secretive forum, not open to the public and the arbitration agreement may require that the results be kept confidential.

As part of the arbitration agreement, employees may be required to pay all of the fees and costs of the arbitration if they lose. This can serve as a strong deterrent to employees who may be considering bringing cases against their employers, but are afraid of what will happen should they lose and be forced to pay the costs out of pocket.

Small Firm Management

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Responding to a Negative Performance Evaluation

Employers often use performance evaluations to create pretext for terminating an employee. If you believe you have been subjected to illegal discrimination or harassment, filing a response can unmask the illegal conduct and, sometimes, prolong your employment.

A negative performance evaluation without any prior warning, notice or complaint can be shocking to an employee. This is especially true if the criticisms arise after you have experienced or reported discrimination or harassment.

Employers can use negative performance assessments as a means to put an employee on probation and/or terminate the employment relationship while avoiding

the costs of unemployment insurance or policy severance. While it may be difficult to rebut subjective feedback, a written response to a negative assessment is a means for an employee to identify accomplishments and document discrimination or harassment concerns.

Ignoring a negative evaluation leaves the subjective critiques in the employee’s personnel file with no documented evidence of rebuttal. At the same time, criticisms can evoke strong emotions and an employee should be careful to address the substance of the evaluation rather than engage in personal attacks. The employee should provide specific examples that refute pretextual criticisms and highlight the employee’s contributions.

If an employee is unsure about a supervisor’s motivation for negative feedback, the employee should also be cautious about making unsubstantiated claims of discrimination or harassment without speaking with an employment attorney.

California Wage and Hour Update

DLSE Approves Salary Reduction For Furloughed Exempt Workers

With the economy in flux, businesses are looking for ways to reduce payroll without losing talent. Some companies have put their hourly workers on a “work furlough” by reducing the number of hours or days in a weekly schedule. But can the same be done for salaried exempt workers? Normally, salaries cannot be adjusted based on the number of hours worked in a workweek.

The answer is yes, according the California’s Division of Labor Standards Enforcement (“DLSE”). Although the rules for salaried exempt workers are strict in California, in a recent opinion letter, the DLSE endorsed a salary reduction commensurate with a workweek reduction.

A Temporary Work Furlough

In an August 19, 2009 opinion letter, the DLSE considers the following scenario: A company has experienced significant economic difficulties due to the present severe economic downturn facing California and the nation. Though the employer has already laid off employees, it must further cut costs until the business conditions improve.

The employer would like to reduce the number of its employees’ scheduled work days from five days to four days per week. In implementing this reduction, the employer would not pay non-exempt employees for the day that they were not required to work and would reduce the salaries of the exempt employees by 20%. As soon as business conditions permit, the employer intends to restore both the full five-day work schedule and the full salaries of its exempt employees.

The General Rules

In California, there are three so-called “white collar” exemptions: executive, administrative and professional. (There are a handful of other exempt categories as well.) A properly classified white collar exempt employee must perform certain types of exempt duties (passing the “duties test) and must also be paid on a salary basis.

The salary basis test, found in California Labor Code § 515(a) and in California wage orders (which apply to your specific industry or occupation), provides that a white collar exempt employee must be paid a monthly salary equivalent to no less than two times the minimum wage for full time employment (40 hours per week).

Generally, an employer may not reduce an exempt employee’s salary based on the number of hours worked. For example, if an employee works only six hours in one day, when he was expected to work eight, the employer may not dock part of his salary. There are some narrow exceptions.

Work Furlough Rules

The DLSE determined that there is no express restriction in California law to having a fixed reduction in a salary during a period when the company operates a shortened workweek due to economic conditions.

Looking to federal labor law for an analogous rule, the DLSE noted that the U.S. Department of Labor concluded long ago that the salary basis test does not preclude a bona fide fixed reduction in the salary of an exempt employee to correspond with a reduction in the normal workweek so long as the reduction is not designed to circumvent the requirement that the employees be paid their full salary in any week in which they perform work.

The DLSE acknowledged that in an email letter issued in March 2002, the agency had concluded to the contrary, deciding that a salary reduction during a furlough was not legal. However, the federal court decision upon which the DLSE had based this conclusion was subsequently negated by a higher court ruling. Accordingly, the DLSE now states that the 2002 opinion letter can be disregarded.

Caveats

The DLSE’s opinion letter may not be the last word. The DLSE is California’s labor law enforcement agency, but it does not make law when it issues an opinion letter; it only interprets it. The California legislature could pass legislation to the contrary (though our current governor would likely veto it). Moreover, one of the many California appellate courts, or the California Supreme Court, could issue a contrary opinion.

However, the letter is well-reasoned and is consistent with federal law. It seems plausible to expect that the rule will take hold here in California.

Nevertheless, making the wrong call could be costly, so it is prudent to check with an employment law attorney prior to implementing a work furlough/salary reduction for salaried exempt employees.