Employment Law Bulletin | February 2019

Terminating Employees – A Ten Factor Test

A client recently asked, “How can I know when it’s safe to terminate an employee?” What a great question!

In the union context, there is a well-known Seven Factor Test (developed by Labor Arbitrator Carroll Daugherty in 1962) for determining whether there is just cause for termination. In the non-union context, and even though California is an “at-will employment” state, the exceptions tend to swallow the rule. Given that reality, the list below is a combination of the Seven Factor Test along with three additional important factors we recommend you consider before terminating an employee.

THE TEN FACTOR TEST (Just Cause: Seven + Three = Ten Factors)

1. Notice: Did the Employer give the Employee forewarning or foreknowledge of the possible or probable consequences of the Employee’s conduct?
2. Reasonable Rule or Order: Was the Employer’s rule or managerial order reasonably related to (a) the orderly, efficient, and safe operation of the Employer’s business, and (b) the performance that the Employer might properly expect of employees?
3. Investigation: Did the Employer, before administering the discipline to the Employee, make an effort to discover whether the Employee did in fact violate or disobey a rule or order of management?
4. Fair Investigation: Was the Employer’s investigation conducted fairly and objectively?
5. Proof: In the investigation, did the “judge” obtain substantial evidence or proof that the Employee was “guilty as charged?”
6. Equal Treatment: Has the Employer applied its rules, orders and penalties even handedly and without discrimination to all employees.
7. Penalty: Was the degree of discipline administered by the Employer in this particular case reasonably related to (a) the seriousness of the Employee’s proven offense and (b) the Employee’s record of service with the Employer?
8. Protected Status: Are there protected status issues that impact the timing?
9. Documentation: Does the Employer’s documentation clearly prove Factors 1 – 8?
10. Are there any other issues to address prior to termination? For instance, does the Employee have confidential information, Employer property, keys, credit cards, passwords, etc., in his/her possession that should be retrieved, changed or disabled? Are there unresolved wage issues or other complaints? Does the Employee pose any likely safety or violence concerns? Is there anything else the Employer has not anticipated that should be considered?

This may look like it will take too much time, effort and diligence to deliver in every single situation but, to paraphrase my Mom, if you don’t have time to do it right, you don’t have time to do it over (or to defend a lawsuit about something you could have done right the first time). We are here to help you with this sometimes challenging process, so please feel free to call.

Jan Gabrielson Tansil

Piece Rate Pay Update

Back in 2015, the Legislature adopted a two-part statute (Labor Code section 226.2) that included sweeping new rules about how to pay workers on a piece-rate basis. The first version of Section 226.2 is in effect from 1/1/2016 through 12/31/2020; it will be repealed and replaced by the second version of Section 226.2 as of 1/1/2021.

Section 226.2 added a requirement that rest break time be paid in addition to the piece rate pay earned based on production and that all piece rate earnings be properly reported as such on pay stubs. The statute was explicitly stated to be a codification of the current case law, making the “new” statute retroactive. The first version of Section 226.2 included a “Safe Harbor” opportunity for piece rate employers to calculate and pay piece rate back pay following strict rules and meeting strict deadlines.

Many of our clients seized that opportunity to clean up their piece rate practices consistent with the Section 226.2 Safe Harbor, thereby avoiding significant statutory penalties and interest. Congratulations to all who did so.

Some employers (very large agricultural, trucking and construction employers) chose not to do so, and instead challenged the constitutionality and enforceability of Section 226.2 by filing a lawsuit. A California Appellate Court recently issued a decision denying all of the challenges raised in the case Nisei Farmers League v. California Labor and Workplace Development Agency. This decision of the Fifth District Court of Appeal will likely be appealed to the California Supreme Court for a final decision. In the meanwhile, liability for interest and penalties continues to accrue as to those employers who chose to file a lawsuit rather than participate in the Safe Harbor option.

The plaintiffs in the Nisei case made a decision to fight the law rather than comply with a law that seemed unfair and too cumbersome and expensive to them. We can all understand the frustration that sometimes accompanies a new law, regulation or interpretation of existing law that seems unreasonable, expensive and burdensome. Frankly, we have nearly continual examples of that in California employment law. And, it may be that the Nisei case will be appealed and the California Supreme Court will side with the large farmers, truckers and construction companies in the Nisei case. In the meanwhile, we are glad and grateful that many of our clients chose to use the Safe Harbor back in late 2015 and no longer have this expensive, unresolved issue looming over their businesses.

If your workplace pays any employees on a piece rate basis, it’s a good idea to check to be sure you are in compliance with the piece rate rest break and pay stub requirements, and monitor that on an ongoing basis. As always, stay turned for future developments in this complex law.

Jan Gabrielson Tansil

No Se Habla Español?

SMT’s employment attorneys can provide your company with employment policies, forms and employee disciplinary documentation in Spanish.  Providing such important information to employees in the language they understand is critical to employee performance, providing a welcoming diverse work environment, and protecting your company against employment claims.  Contact an SMT attorney today to get started.

Spaulding McCullough & Tansil LLP
Employment Law Group

Jan Gabrielson Tansil  | Lisa Ann Hilario | Kari Brown