DLSE Opinion Letter re Reducing Salary and Workdays

The California Division of Labor Standards Enforcement agreed that temporarily reducing an exempt salaried employee's workweek to 4 days did not violate the salary basis test. The employer was free to proportionally reduce the employee's salary. This is consistent with a long line of federal authorities.

In a prior letter, 2002.03.12, the DLSE said that exempt employees would not be subject to salary reductions for a furlough. It appears DLSE has reversed that position. The new DLSE opinion is here.

Unfortunately, DLSE did not address another, separate, furlough question re exempt employees: can the employer "force" payout of vacation / PTO for furloughs / shutdowns of less than a full workweek? It's not a controversial proposition that the exempt employee is not entitled to any salary if the furlough is a full workweek. Therefore, there should not be any problem in paying out PTO/vacation for full workweek absences.

But what about partial week, ad hoc furloughs? Normally, the exempt employee is entitled to a full salary for any workweek in which s/he performs any work. There are exceptions, but involuntary absences of a day or more for lack of work are not one of them.

The new letter does not fully address this issue. I understand a prospective announcement reducing exempt employees' responsibilities to work with a concomitant reduction in salary. But if the employer says "we're going to shut down three days before Christmas," is that covered by this letter? If so, then it would be OK to pay required PTO for the three day furlough because the salary was reduced prospectively. If the opinion letter does not apply to this scenario, then it probably remains improper to force payout of PTO because the employee was already entitled to full salary. If you're confused, join the club.

This is a California-only issue, because the FLSA does not consider vacation / PTO to be vested. Also, there is an FLSA provision for public sector furloughs for economic reasons, so the question does not apply to the public sector.

Any wage-hour gurus who want to debate, send me an email / comment / wine.

Ninth Circuit: Commute in Employer's Vehicle Not Compensable Time

Lojack, the car security company, required employees to use a company vehicle between home and the first work assignment of the day. Analyzing the FLSA and California law, the court held such time is not compensable. The employee did not have sufficient work responsibilities over and above using the company car. This part of the opinion was decided 2-1 with one dissenter.

The district court had rejected the employee's claim that time spent washing his uniform, the car, and other incidental work was not compensable "preliminary" activity under either federal or California law. The employees did not appeal that conclusion.

But the court of appeals held that mapping out his route, prioritizing his jobs for the day, and receiving instructions on the day's jobs were non-compensable either because they are part of the commute, or because they did not take up sufficient time and, therefore, were "de minimis." This decision was 2-1 with one dissenter.

The test for "de minimis" work that is not compensable includes three factors:

(1) the practical administrative difficulty of recording the additional time; (2) the aggregate amount of compensable time; and (3) the regularity of the additional work.

The court of appeals found, however, that employees may have to be compensated for a "postliminary" activity: uploading his data in his handheld computer to the company's system. The court found that doing so was integral to his job, required attention if the upload was unsuccessful, and was performed every day. The court said that the record was unclear as to whether the work was "de minimis," but concluded that it was not based on the facts before it. This decision was 2-1, with one judge dissenting.

The court also declined to adopt the "continuation of the workday" principle that other courts have adopted. Under that standard, even commute time is compensable if the employee performs substantial work at home and then heads out to work somewhere else.

So, the postliminary activity survived summary judgment. Everything else was rejected.

The opinion is Rutti v. Lojack Corp., Inc. and the opinion is here.

No More Non-Solicits?

Looks that way. Mostly. The Court of Appeal held in The Retirement Group v. Galante, opinion here, that contractual agreements not to solicit customers are not enforceable because of California's unfair competition statute, Bus. and Prof. Code section 16600.

TRG sued a bunch of ex-employees for stealing trade secrets and violating a non-solicitation agreement. TRG obtained a preliminary injunction and the employees appealed. The Court of Appeal in essence held that if a former employer proves misuse of trade secrets under the Trade Secrets Act or Unfair Competition Law, the former employee may be enjoined from misusing those trade secrets. But no court can enjoin a non-solicitation clause merely because it appears in an agreement. Here is the money quote:

We distill from the foregoing cases that section 16600 bars a court from specifically enforcing (by way of injunctive relief) a contractual clause purporting to ban a former employee from soliciting former customers to transfer their business away from the former employer to the employee's new business, but a court may enjoin tortious conduct (as violative of either the Uniform Trade Secrets Act and/or the Unfair Competition Law) by banning the former employee from using trade secret information to identify existing customers, to facilitate the solicitation of such customers, or to otherwise unfairly compete with the former employer. Viewed in this light, therefore, the conduct is enjoinable not because it falls within a judicially-created "exception" to section 16600's ban on contractual nonsolicitation clauses, but is instead enjoinable because it is wrongful independent of any contractual undertaking.

Recent decisions have said as much, albeit less concisely. The point is that a non-solicitation agreement is now legally unnecessary to create substantive rights because the Trade Secret Act does not require such an agreement for an employer to come within its provisions. However, a non-solicitation clause, which is usually found in a confidentiality agreement, may be part of the evidence showing that the employer takes reasonable measures to maintain the secrecy of trade secrets. Therefore, it may not be a good idea to abandon such contractual provisions.
At the same time, it remains to be seen whether such clauses will be attacked as "overreaching" and, therefore, unfair competition.

FEHC Updates FMLA / CFRA Comparison Chart

California's anti-discrimination agency just updated its chart comparing the FMLA and California's CFRA. It's posted here.

Court of Appeal: Breach of Contract Against Employer for Breach of Settlement Confidentiality

Sanchez was a county labor relations manager for San Bernadino County. She became romantically involved with a union official, Erwin. Their respective employers negotiated labor relations memoranda of understanding. At some point, their relationship became known and unacceptable to the county's brass. The County thought a romance between labor negotiators on opposite sides of the table might constitute a conflict of interest. So sensitive! For her part, Sanchez denied the conflict of interest, but admitted the appearance of impropriety. So, the county gave Sanchez the chance to resign with a separation agreement.

The separation agreement contained a strict confidentiality requirement. But immediately after Sanchez resigned, the newspapers picked up on the story and quoted county officials. She sued the county and individual defendants for a variety of claims, including breach of contract. The county successfully "SLAPPED" most of the causes of action. The trial court eventually granted summary judgment on the rest of them. The court dismissed the breach of contract claim because the confidentiality agreement was contrary to the county's legal duty to disclose such facts to the public.

On appeal, the court of appeal reinstated the contract claim. The county's primary argument was that it was bound to disclose Sanchez's affair. After analyzing the various legal theories (including the Public Records Act and the First Amendment), the court said there was a triable issue of fact on the contract claim because the county did not have to disclose the affair to the papers. Had the settlement agreement been disclosed under the Public Records Act, the court might have come down the other way.

The court rejected the county's argument that Sanchez waived the confidentiality agreement by speaking with her parents and showing the agreement to Erwin. The court found it significant that Sanchez did so only after learning of the county's breach.

Regarding the issue of damages, she presented significant evidence it was harder to find a job after the disclosure of the affair to the newspapers. Therefore, the court rejected the county's contention that there were no damages available for the breach of confidentiality.

Typically, employers do not advertise their settlements with employees. So, this case may be an anomaly, particularly in the private sector. But to the extent employers needed motivation to maintain confidentiality, the prospect of a breach of contract claim should provide it. Employers should ensure they honor confidentiality provisions in separation agreements.

The case is Sanchez v. County of San Bernardino and the opinion is here.

CA Supreme Court: No Invasion of Privacy

The Supreme Court unanimously held that an employer did not invade the privacy of employees when it set up video surveillance in the employees' offices. We first blogged about Hernandez v. Hillsides here.

So, Hernandez and Lopez worked at Hillsides, a residential treatment center for children. The administration determined that someone was using one of the computers to view porn at night. The computer was in a private office - used by Lopez and Hernandez during the day. Administration did not suspect Lopez or Hernandez, but rather one of the night time workers.

Management set up a hidden camera in Lopez/Hernandez's office, which was activated after they left, and which was turned off in the morning. The camera never taped Lopez or Hernandez. On one occasion, the boss forgot to turn the camera off in the morning, but it did not tape either Plaintiff. They did not catch the person who was viewing the porn either.

Despite the seemingly insignificant injuries, Lopez and Hernandez sued Hillsides for invading their privacy. The trial court threw out the case, but the court of appeal reinstated it.

The Supreme Court on review first held that setting up a secret camera was enough to constitute an "intrusion" - an element of the invasion of privacy tort. Here are some quotes on this point:

defendants [are] a private employer accused of installing electronic equipment that gave it the capacity to secretly watch and record employee activities behind closed doors in an office to which the general public had limited access. As we discuss later with respect to the “offensiveness” element of plaintiffs' claim, an employer may have sound reasons for monitoring the workplace, and an intrusion upon the employee's reasonable privacy expectations may not be egregious or actionable under the particular circumstances. However, on the threshold question whether such expectations were infringed, decisional law suggests that is the case here.* * *

Finding an intrusion, the Court took into consideration that this was a private office, that cameras were surreptitious, and case law and statutes regarding monitoring:

Plaintiffs plausibly claim that Hillsides provided an enclosed office with a door that could be shut and locked, and window blinds that could be drawn, to allow the occupants to obtain some measure of refuge, to focus on their work, and to escape visual and aural interruptions from other sources, including their employer. Such a protective setting generates legitimate expectations that not all activities performed behind closed doors would be clerical and work related. As suggested by the evidence here, employees who share an office, and who have four walls that shield them from outside view (albeit, with a broken “doggieflap on the door), may perform grooming or hygiene activities, or conduct personal conversations, during the workday. Privacy is not wholly lacking because the occupants of an office can see one another, or because colleagues, supervisors, visitors, and security and maintenance personnel have varying degrees of access. . . .

Regarding another relevant factor in Sanders, supra, 20 Cal.4th 907, 923, the “means of intrusion,” employees who retreat into a shared or solo office, and who perform work and personal activities in relative seclusion there, would not reasonably expect to be the subject of televised spying and secret filming by their employer. As noted, in assessing social norms in this regard, we may look at both the “common law” and “statutory enactment.” (Hill, supra, 7 Cal.4th 1, 36.)
Now, a policy permitting such monitoring might have killed the employees' expectation of privacy and, therefore, the intrusion. But there was no such policy in place:

plaintiffs cannot plausibly be found to have received warning that they would be subjected to the risk of such surveillance, or to have agreed to it in advance. We have said that notice of and consent to an impending intrusion can “inhibit reasonable expectations of privacy.” (Hill, supra, 7 Cal.4th 1, 36; accord, Sheehan, supra, 45 Cal.4th 992, 1000-1001.) Such factors also can “ „ “limit [an] intrusion upon personal dignity” ‟ ” by providing an opportunity for persons to regulate their conduct while being monitored. (Hill, supra, at p. 36.) Here, however, the evidence shows that no one at Hillsides told plaintiffs that someone had used Lopez‟s computer to access pornographic Web sites. Nor were they told that Hitchcock planned to install surveillance equipment inside their office to catch the perpetrator on television and videotape.

Moreover, nothing in Hillsides' written computer policy mentioned or even alluded to the latter scenario. As noted earlier, the version in effect at the relevant time made clear that any monitoring and recording of employee activity, and any resulting diminution in reasonable privacy expectations, were limited to “use of Company computers” in the form of “e-mail” messages, electronic “files,” and “web site” data. Foster performed this administrative function when he used the network server to produce the list of pornographic Web sites accessed in both the computer laboratory and Lopez‟s office, and showed such computer-generated data to Hitchcock. There is no evidence that employees like plaintiffs had any indication that Hillsides would take the next drastic step and use cameras and recording devices to view and videotape employees sitting at their desks and computer workstations, or moving around their offices within camera range.

In sum, the undisputed evidence seems clearly to support the first of two basic elements we have identified as necessary to establish a violation of privacy as alleged in plaintiffs‟ complaint. Defendants secretly installed a hidden video camera that was both operable and operating (electricity-wise), and that could be made to monitor and record activities inside plaintiffs‟ office, at will, by anyone who plugged in the receptors, and who had access to the remote location in which both the receptors and recording equipment were located. The workplace policy, that by means within the computer system itself, plaintiffs would be monitored about the pattern and use of Web sites visited, to prevent abuse of Hillsides‟ computer system, is distinguishable from and does not necessarily create a social norm that in order to advance that same interest, a camera would be placed inside their office, and would be aimed toward a computer workstation to capture all human activity occurring there. Plaintiffs had no reasonable expectation that their employer would intrude so tangibly into their semi-private office
Next, the court considered whether the intrusion was sufficiently "serious" or "offensive" to constitute a tort. Here is where the employer won. The court considered factors such as the degree of the intrusion, the workplace setting, and the employer's justification. The Court concluded that the intrusion was justified and was slight under the circumstances. As such, the court of appeal had it wrong.

Finally, the court held that the employer does not have to prove there is no "less intrusive alternative" to prevail.

The key takeaway is that that notice to employees regarding employer procedures will defeat these claims in most cases by destroying the reasonable expectation of privacy.

The case is Hernandez v. Hillsides and the opinion is here.