Employment Law

Each employment problem is based upon a unique set of facts and requires a different response.  The purpose of this discussion is to highlight possible consequences arising from employee problems, not to provide specific advice how to avoid a lawsuit.  Each employment matter requires specific advice from a qualified attorney.

Terminating an employment relationship is often a difficult process for many employers.  Employees often make the termination process quite onerous and former employees often file litigation or administrative claims.

Employers must follow several guidelines in order to protect against wrongful termination claims.  Under the California Labor Code, employment is "at-will" if no duration has been defined.  In concept, either the employer or employee may terminate the employment relationship at any time with or without cause.  However, courts have substantially modified this legal theory.  The courts examine various factors, including employment applications and hiring practices, and may find an implied contract even when there is no specific contract.  An employee who has been employed for a long period or has received promotions and/or favorable reviews may have an implied employment contract.

Employers should avoid using a probationary or introductory period.  After the end of a probationary period, arguably the employee becomes permanent and thereafter may be terminated only for good cause.  It may be desirable to hire all employees on an at-will basis.

Employment-at-will may not apply in certain cases.  Termination must not be based upon any discriminatory reason (for example, race, sex, disability, age or other protected classes).  An employee may not be terminated because he or she exercised individual rights.  Employees are entitled to communicate with a governmental agency regarding illegal activity by the employer (known as "whistle-blowing"), serve on a jury or attend court under subpoena or cooperate in an official investigation against the employer.  Termination must not violate public policy or be exercised for retaliatory reasons.

Workers' compensation laws prohibit discrimination against employees who file workers' compensation claims.  Termination because an employee has filed a workers' compensation claim is subject to penalties under The Labor Code.

An employer must adhere to its own past precedents or policies and treat employees impartially.  If, for instance, other employees have been employed after the sick leave period, the employer may not terminate an employee for taking sick leave.

California courts have imposed certain restrictions upon punitive damage awards in certain wrongful termination lawsuits.  On the other hand, in cases involving violations of public policy, discrimination or defamation, punitive damages may be awarded.  Employees have recovered back pay for a period of several years.

Wrongful Termination Lawsuits
An employer must take precautions to avoid a wrongful termination lawsuit.  There are several preventative measures that may be taken.  The employer should implement policies and procedures in all employment practices, including job applications, interviews, employee handbooks and performance reviews.  These practices may affect the prospects of a wrongful termination claim.  An employer which has implemented proper preventative measures will have a better opportunity to successfully defend or avoid these claims.

Employers should maintain personnel files on all employees, including documentation indicating that the employer implemented a progressive discipline program, gave the employee proper performance evaluations, monitored the employee's attendance problems and made efforts to accommodate the employee's reasonable needs.

It is essential that employee termination does not even appear to be based upon a discriminatory reason.  An employee in a protected class may be terminated after all precautionary measures have been taken.  The employer must have all the documentation to establish that the termination was based on lawful, non-discriminatory reasons.

All managerial staff should receive careful training on hiring, promotion, discipline, review and termination procedures.  Managers and supervisors should understand how to manage troublesome employees, to avoid sexual harassment claims and to avoid implied employment contracts.

Termination Issues
Several issues must be reviewed before making a decision to terminate an employee because there may be negative results arising from a termination.  First, the company should comply with its policies and procedures in its handbook or employment contract during the period prior to the decision to terminate.  Second, the company should follow a program of progressive discipline.  Any company dispute resolution processes should be completed.  The required notice period under company policies must be given. 

The company's treatment of this employee must be consistent with its treatment of other employees.  An employee should not be terminated for the same negative conduct which other employees were permitted to practice without being discharged.  If the employee is a member of a protected class based on race, sex, national origin, extra precautions should be taken.  It is essential to document a lawful, non-discriminatory reason for terminating an employee if other employees were not terminated for identical conduct or performance problems.

Termination of the employee must not violate public policy.  If an employee has filed a workers' compensation claim or the employer anticipates such a filing, the employer must rely upon other lawful reasons for termination.  The termination must not even appear to be related to the reporting of illegal activity by the company to any governmental agency or to the employee's participation in any governmental investigation against the employer.

The termination must not appear to be in retaliation for exercising personal rights such as freedom of speech or political activity.  The employer must make reasonable efforts to accommodate any disability that interferes with the employee's ability to perform the job.

The termination must not breach an employment contract.  If the employee has worked for the company for a lengthy period or has received a promotion, it is particularly important to document the reasons for termination, including any negative review of poor performance leading up to the termination.  It is important to recognize any management actions which could potentially give rise to a condition that termination be based on just cause.

Good Cause
An employee may have good cause for voluntarily leaving work when a substantial motivating factor of the leaving, whether or not work related, is real, substantial and compelling and would cause a reasonable person to leave work under the same circumstances.

The employee may be at fault if he or she made a substantial breach of a material duty owed to the employer.  The breach must have amounted to a willful disregard of the duty and it must have injured or tended to injure the employer's interests.  If the employee was merely unable to perform his or her duties, that fact alone would not have constituted misconduct.

Unemployment Insurance
Employers do not want to pay unemployment insurance benefits after terminating an employee.  An employee will be eligible for unemployment insurance benefits upon specified conditions.  The employer should object to any claim that is not meritorious.

Eligibility for unemployment insurance benefits depends upon several conditions.  The claimant must make a claim for benefits in accordance with the regulations.  He or she must be unemployed through no fault of his/her own.  The employee must have earned wages above certain quarterly minimums.  The claimant also must be available and able to work and be actively looking for work and must have registered for work and conducted a search for suitable work as directed.  A claimant will be ineligible for benefits if he or she voluntary quits without good cause or was discharged for misconduct or refused to perform suitable work.

If the claimant is disqualified for any of these reasons, the employer should reply to the Employment Development Department's Request for Separation Information (DE 1101C) within 10 days of the date of the form.

The Unemployment Insurance Section 1089 Notice requires the reason the employment status has changed.  The reasons conform to the factors considered by the EDD to determine an applicant's eligibility for unemployment insurance benefits.

The employer should review the factors affecting eligibility for unemployment insurance.  The employee's misconduct, refusal to perform suitable work remove his or her eligibility.  The employee may be eligible if the termination resulted from the inability to perform the duties of the job or from the lack of work.

The employer must immediately give written notice to an employee of his or her discharge, layoff or leave of absence under Section 1089 of the California Unemployment Insurance Code.  The employer must give the employee written notice of unemployment insurance benefit rights by providing the DE 2320 pamphlet on or before the termination date.

Written notice regarding the change in employee status must be given on or before the termination date.  The notice must include the names of the employer and the employee, the Social Security number of the employee, a description of the type of action (e.g., a discharge, layoff, leave of absence or a change in status from employee to independent contractor).

Voluntary termination
An employee who voluntarily resigns is not entitled to receive the UI notice.  However, it may be useful to deliver it because the termination notice may substantiate the reason for separation.  In case a voluntarily resigning employee applies for unemployment insurance benefits, the employer may utilize the notice to object to the UI claim.  A successful appeal of the UI claim will avoid assessment against the company's unemployment insurance account.

When an employer discharges, lays off or places an employee on leave of absence, written termination notice should be given to the employee.  The employer must give the employee the DE 2320 pamphlet and written notice of termination no later than the effective date of the action.

The Notice to Employee as to Change in Relationship should be completed carefully and accurately by a supervisor or human resource specialist.  It is essential to ensure proper completion of the form, particularly the lawful reasons for termination.  An improper reason could result is substantial cost and liability to the company.

An employee who voluntary resigns is generally ineligible for unemployment insurance compensation unless the employee can establish good cause or compelling personal reasons.  A resigning employee may be eligible for unemployment insurance if good cause was a substantial motivating factor in the resignation.  The motivating factor may not necessarily be work related but must be real, substantial and compelling and be a factor that would cause a reasonable person to resign under the same circumstances.

In the case of a layoff (i.e., when available work ends temporarily or permanently through no fault of the employee) general the employee will be eligible for UI benefits.  In the case of a leave of absence due to health, pregnancy, discipline or sabbatical, the employee may be eligible for UI benefits.  When an employee is discharged for cause within the parameters of company policy, the employer must establish misconduct to avoid paying UI benefits.      Eligibility for UI benefits may be removed if an employee refused available work, refused to perform work appropriate to the individual's health, safety, morals and physical condition, consistent with the individual's prior experience and earnings; and a reasonable distance from the individual's residence.

Notice of COBRA Rights
Any employer with a group insurance plan who has 20 or more employees must give COBRA ("Consolidated Omnibus Budget Reconciliation Act of 1985") notice rights to continued benefits under the group insurance plan to all qualified beneficiaries.  The 20 employee minimum includes all full-time and part-time employees, even if they do not participate in the plan.  An employer is normally deemed to have employed fewer than 20 employees during a calendar year if it had fewer than 20 employees on at least 50 percent of the working days that year.  Multi-employer plan should be checked to determine COBRA applicability.

An employer must offer COBRA coverage to qualified beneficiaries who would lose coverage under the employer's group health insurance plan due to certain qualifying events.  The qualified beneficiary usually is required to pay the cost of the continued health coverage.  The employer may charge the qualified beneficiary an administrative fee.  A qualified beneficiary is defined as: (a) a covered employee who has been terminated or had his or her hours reduced;  (b) the spouse or dependent child of a covered employee;  and (c) a retired covered employee and his or her spouse and dependents when an employer files for bankruptcy.

A covered employee is any individual who had employee coverage under a group health.  A qualifying COBRA event is one that would otherwise result in the loss of coverage by a qualified beneficiary. The following events may be qualifying events if they cause a loss of coverage:  (a) death of the covered employee;  (b) termination other than by reason of such employee's gross misconduct, or reduction of working hours;  (c) divorce or legal separation of the covered employee from the employee's spouse;  (d) the covered employee becomes entitled to Medicare benefits;  (e) a dependent child ceases to be a dependent child under the plan;  (f)  an employer's bankruptcy which causes loss of coverage for retirees and their dependents.

Any person receiving notification of COBRA rights should be requested to sign to acknowledge that he or she has received the notice. A mailed notification should be sent by certified mail. COBRA notification must be given to beneficiaries within 14 days after the employer receives notice of a qualifying event.

Notice of COBRA rights must be given when an employee is terminated (excluding termination for gross misconduct), or when an employee's hours are reduced so that he or she is no longer eligible for the group health plan. Termination includes resignations, layoffs or job abandonment.  The employer is obligated to provide notice of COBRA rights at the time of any qualifying event.

Company managers and supervisors must have properly documented all procedures prior to the termination.  These actions are essential in a case involving an unemployment insurance claim or involving a wrongful termination claim.

This Newsletter is published for our clients, personnel and other interested persons.  Due to the continuing and rapid changes in this area, we strongly recommend readers to consult appropriate legal advisors regarding specific needs and topics of concern.

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