Editor: How has your practice grown since opening the firm's California offices a little over two years ago?
Faustman: When we opened our offices in San Francisco and Los Angeles, we had one lawyer - me. Now we have seven lawyers and two paralegals split between the two offices. As our practice grows, we are in the process of adding a Las Vegas office as a part of our western operation. Recently admitted in Nevada myself, we are looking to hire a few lawyers in Las Vegas, as well as in each of the California offices to help with our growing practice.
We represent a wide range of companies headquartered in the West. We continue to grow our representation of traditional clients of the firm in the Northeast as well.
Editor: What labor and employment law issues are getting the greatest attention from corporate counsel in California today?
Faustman: Wage and hour cases, particularly wage and hour class actions, consume a great deal of corporate counsel's attention because California law is much more difficult for employers than federal law. In addition, the California courts' dockets are filled with sexual harassment lawsuits and discrimination suits.
Editor: How does the wage and hour law in California differ from the wage and hour laws in other jurisdictions?
Faustman: California's wage and hour law differs significantly from the federal Fair Labor Standards Act. The unique features of California's law create traps for the unwary.
For example, California's wage and hour law includes what is commonly referred to as the eight-hour day. The federal wage and hour law determines when overtime must be paid by looking at the work week as a whole. The question is whether an employee worked more than 40 hours in the week. In California, employers must also determine whether the employee has worked more than eight hours during any one day. If employees work four days a week for ten hours in most states, no overtime pay is required. In California, the employer must pay two hours of overtime per day.
California's wage and hour law also mandates meal and rest periods. If the employer does not provide them or an employee does not take them, the employer is exposed to stiff penalties.
The unique provisions of California's wage and hour law can translate into millions of dollars of liability for an unwary employer.
Editor: Are there other unique provisions in California's laws that impact labor and employment practices in the state?
Faustman: Yes. California laws take a unique approach to classifying employees as exempt or non-exempt with respect to overtime. The definition of a non-exempt employee is more constrained in California than under the federal law and in other states.
Managers and assistant managers employed by grocery stores, pharmacies, restaurants, department stores and other companies are often able to claim that they have been misclassified and, therefore, entitled to overtime. This can come as a surprise to companies who are accustomed to doing business in other states.
Editor: What traps do California's laws related to employee leave have for the unwary?
Faustman: One example relates to sick leave. Employees can use half of their annual accrued sick time to care for parents, spouses, domestic partners and children. Discipline and other forms of retaliation against employees taking sick time for such purposes is prohibited, as well as maintaining an attendance policy to track such absences for disciplinary purposes.
California employees are also entitled to up to six weeks of partially paid time off to address such family issues as caring for sick parents, spouses, domestic partners or children. They are required to demonstrate that no other family member is able to cover the care obligation, and the eligible employee must use up to two weeks of accrued vacation before receiving any benefits. Leaves are taken concurrently with leaves under the Federal Family Medical Leave Act and the California Family Rights Act.
Editor: Please give an example of how California's laws that impose penalties on employers for sexual harassment differ from other jurisdictions.
Faustman: One significant difference found in the state Fair Employment and Housing Act relates to harassment of employees by customers, suppliers and other third parties. It is very significant to restaurant and retail businesses because an employer in California can be held liable for unlimited damages not only for harassment by its own employees, but also for the behavior of third parties whom the employer cannot legally control.
Editor: The defeat of the initiatives proposed by Governor Schwarzenegger on this fall's ballot received national attention. Please put the initiatives in the context of the governor's relationship with the California legislature in the period following his special election.
Faustman: Last year, the California legislature passed a number of bills that would have imposed additional burdens on employers in the state. Governor Schwarzenegger vetoed all the bills, except for a law that requires employers to conduct sexual harassment training for managers every two years.
The governor was also successful in repealing a California law mandating that employers provide health insurance for their workforce in the state. He also successfully reformed the state's workers' compensation law to remove some of its abuses. The reforms were of a fairly technical nature having to do with such matters as the use of chiropractors and the provisions of permanent disability schedules.
None of the governor's initiatives on this fall's ballot dealt with labor and employment practices of private and publicly traded companies. They all related to public employees. The state employees' unions prevailed on each of the governor's initiatives.
Editor: You mentioned that the California courts' dockets are filled with sexual harassment cases.
Faustman: One sexual harassment ruling in particular is going to be very difficult for employers to deal with. It relates to what is described as favoritism by management toward some of the employees to the exclusion of the others. Some have called it paramour preference harassment.
Here's an example. The boss is having an affair with "x," "x" gets a promotion, "y" and "z" do not. Even though "y" and "z" have not been harassed, the California court recognizes that they have a cause of action to sue.
Editor: What recommendations do you have for corporate counsel when navigating through the unique laws impacting employment and labor practices in California?
Faustman: Some employers have elected to move out of the state. If they can move one foot over the state's border, they can achieve substantial savings under surrounding states' workers' compensation and wage and hour laws. Such migration has been going on for more than 20 years. Moving out of state is obviously not an option for many employers such as retail or hospitality companies that are here servicing 35 million customers.
For employers who cannot move their workforce out of California, I recommend they seek early counsel of an expert in the state's labor and employment laws. The expert's advice can help in developing strategies to make it less risky to do business in California and to avoid costly litigation down the road.
Published January 1, 2006.