Elimination of Vacation and Sick Day Accruals. Can that be Legal?

According to a November 17, 2014 article in LAobserved.com highlighted by the Los Angeles Business Journal, exempt non-union Los Angeles Times employees as of January 1, 2015 will no longer be able to accrue vacation days, sick days or floating holidays. Instead, a new Discretionary Time-Off policy will reportedly allow those employees time off, “subject to their professional judgment and to the performance expectations of their supervisor that apply to their job.” In theory, says the article, an employee can take more time off than under an accrual system, but Times’ employees are wary.

From some who caught this story, we have been asked if this kind of policy is legal. Well, in short, it can be.

Private employers generally do not have to provide paid vacation, sick or holidays under California Law. Those benefits are so customary that many think they must be required. An employer can lawfully end accruals for the future; but, it must allow use or pay out of vacation (or PTO) that has already been accrued. This is because California law treats accrued vacation as a form of wages that cannot be taken away once earned. By contrast, California law has not treated sick day accrual as wages and sick day accrual can be lost if not used. Collective bargaining agreements often lay out different rules for union employees.

The Times policy reportedly ends future vacation accruals and allows exempt employees time off (with their regular pay continuing) if their supervisors approve the time off. Employers go with a no accrual policy to save costs, particularly at termination of employment when unused vacation accruals must be paid in cash to the exiting employee. This strategy works legally and it can eventually end vacation accrual financial liability; but, it can be a morale problem to a workforce who may be wary that management may only infrequently approve time off. Management does, however, have an incentive to handle requests fairly if it wants to attract and retain great employees.

A no accrual policy needs to be integrated with state and local laws in California which require minimum paid sick day accruals. Effective July 1, 2015, for example, AB 1522 requires that most employee be provided at least three paid sick leave days. Cities such as San Francisco already have similar laws.

Before changing to a no accrual policy, employers should, with the help of counsel, plan a policy that is both compliant with the California wage and hour laws and takes into account the impact it may have on the existing workforce and on recruiting.

How Safe Are Your Company’s Trade Secrets?

In a world where employee mobility is a business reality, companies should be taking proactive measures to guard trade secrets, retain competitive advantage and be ready for court if it comes to that. Click below to launch a video and hear from Labor & Employment partners Mark Terman and David Woolf on what they, and our other Labor & Employment group lawyers, are doing every day to protect companies.

Mark Terman Interview on BYOD Policies Picked Up by TV Stations Around the Country

Mark Terman, Labor & Employment partner in the Los Angeles office, was recently interviewed for a story on Bring Your Own Device (BYOD) policies for employers. As more and more employees use their own personal devices for work purposes BYOD policies are quickly becoming important for employers to have in place. The story was picked up by news outlets around the country, including in Miami, FL, Seattle, WA, Jacksonville, FL, Toledo, OH, Milwaukee, WI, Spokane, WA and Orlando, FL. To view the story that was carried by CBS 4 in Miami click here. To view posts from LaborSphere on BYOD considerations for employers click here.

President Obama Signs Two Executive Orders to Limit Workplace Discrimination

On April 8, 2014, at an event commemorating National Equal Pay Day (an annual public awareness event that aims to draw attention to the gender wage gap), President Obama signed two executive orders designed to limit workplace discrimination. The first prohibits federal contractors from retaliating against workers who discuss their salaries with one another, while the second instructs the Department of Labor to establish new regulations requiring federal contractors to submit summary data on compensation paid to their employees, including breaking down the data by gender and race.

The protections offered by the anti-retaliation Order overlap with many already existing under state and federal law. For example, the NLRA protects employees’ right to engage in “concerted activities” and thus already prohibits employer discipline against employees who discuss their wages. Further, some state laws, such as California Labor Code §232, already preclude an employer from disciplining an employee who discloses the amount of his or her wages. Nonetheless, the Order may add to these protections, such as by expanding them to management employees (who are not protected by the NLRA), and providing an alternative option for bringing retaliation claims (i.e., through the Office of Federal Contract Compliance Programs rather than the NLRB).

The effects of the Order requiring the collection of compensation data will be unclear until the regulations themselves are formulated. Based on the Order’s mandate to “avoid new record-keeping requirements and rely on existing reporting frameworks to collect the summary data” and to develop regulations that “minimize, to the extent possible, the burden on Federal contractors and subcontractors,” it is possible that the federal government will require that the data be submitted along with a federal contractors’ annual EEO-1 Report.

The President’s signing of these Orders appears to tie into the White House’s previously announced plans to accelerate change in areas it believes are within the authority of the Executive Branch, without the need for legislation. Indeed, the Orders’ provisions mirror parts of the Paycheck Fairness Act (“PFA”), a proposed piece of legislation that would add procedural protections to the EPA and the FLSA to address male–female income disparity. (The PFA came up for a vote in the U.S. Senate on April 9, 2014, where it was blocked by a Republican filibuster). Similarly, in February 2014, President Obama issued an Order raising the minimum wage for federal contractors, at a time when Sen. Tom Harkin (D-Iowa) and Rep. George Miller (D-Calif.) were urging a bill to raise the federal minimum wage to $10.10 per hour and index it to inflation. Then, in March 2014, President Obama directed the Labor Department to revamp regulations governing which types of employees business may classify as overtime-exempt “executives” or “professionals.” With regard to the Order requiring the collection of compensation data, the OFCCP has been working internally on releasing a proposed compensation data collection tool for the past three years. See http://www.dol.gov/ofccp/Presentation/Compensation_Data_Collection_Tool.htm (publicizing the OFCCP’s August 10, 2011 Advance Notice of Proposed Rulemaking regarding a new compensation data collection tool).

The high profile nature of the Orders provides yet another impetus for employers to evaluate their existing policies, and plan for the future.

Unpaid Internships – Opportunity or Liability?

Editor’s Note: The following post by Los Angeles Partner Mark Terman appeared in the latest issue of the California HR Newsletter. To view the entire newsletter click here. To sign-up to receive the California HR Newsletter see the instructions below.

Unpaid Internships – Opportunity or Liability?

By: Mark E. Terman

The Issue: How can employers reduce risks of the sharp increase of class action litigation by unpaid interns and adverse publicity for companies and key executives over failure to pay wages?

The Solution: Employers should evaluate and correct their unpaid internship practices or, alternatively, treat interns as minimum-wage employees who, if properly classified as part-time or a short-term temporary employee, may not be eligible for certain employee benefits.

Analysis: Unpaid internships have long been used by students and newcomers to build a resume, launch a career or simply land a paying job. Employers can capitalize on this to teach their business and find talent; but, they should not use interns just to cut labor costs.

If the intern is closely supervised and taught a curriculum that can be applied to multiple different employers, is not primarily doing work that regular paid employees do, has no guaranty of becoming employed, and an advance writing specifies that there will be no pay, odds are that intern can lawfully be unpaid in California. If a school or college will give course credit, the odds further increase. The overarching theme is that unpaid internships must be educational and predominantly for the benefit of the intern, not the employer.

Non-compliant employers risk expensive class action and regulator’s claims to reclassify interns as employees and to recover unpaid minimum wages, overtime pay, interest, multiple penalties, and attorney’s fees. “Warning bells” include: use of unpaid interns to minimize labor costs or provide extended job interviews; no supervised education and training beyond what the intern might observe; and a predominance of clerical or “go-fer” duties.

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