Why learning how to “change horses midstream” could keep you from going under

When sales stopped and revenues declined at the start of the pandemic, it wasn’t the ideal time for small business owners to change horses — but many had no choice.

Sadly, it was at this juncture that some of my clients learned the hard way that policies they’d created regarding severance packages and position elimination (particularly those that favored seniority) slowed them down as they struggled to keep their businesses afloat.

Here’s what two clients learned while navigating the first year of the pandemic.

Lesson One: Don’t Make Unnecessary Severance Promises

One of my clients urgently needed to reduce headcount in order to make the next payroll. Unfortunately, this cash-poor employer had established a written severance pay plan that promised big cash payouts based on factors such as length of service.

Despite the fact that there is no California law requiring employers to pay severance, those payments were mandatory because of their internally created formula — and my client didn’t have enough cash on hand to reduce and restructure the workforce to a sustainable level.

That’s why I advise employers to avoid creating lay-off policies that are written in stone. 

Lesson Two: Don’t Undercut At-Will Flexibility

Do you have a written policy that requires you to give all employees yearly salary and performances reviews?

I have a client that skipped that step during the early days of the pandemic. When an employee was terminated soon after, she made a claim of breach of contract. My client decided to pay damages to avoid the cost and loss of productivity that go along with litigation at a time when the

I recommend that small business owners take a deep dive into their employment practices to see if they have made other non-legally required written promises that undercut or add unnecessary costs to at-will termination.  (For example, do you have a very high cap on the amount of vacation an employee can accrue? Would non-recurring cash bonuses coupled with unpaid leaves of absence make better sense?)

Lesson Three: Legal Advice Can Save You Money

The pandemic has been hard on small businesses — and the California Legislature hasn’t made it any easier. Spending a little time reviewing how your past and current practices align with new laws can save you money and spare you litigation down the road. 

Most of my small business clients appreciate brevity — so I’m providing you with the barest possible review of 8 big changes going into effect on New Year’s Day.  

1. Employers cannot force employees to sign arbitration agreements.
2. “No rehire” provisions in settlement and release agreements are no longer permitted in most cases.
3. An ABC test created by the court has made it almost impossible to classify workers as independent contractors. That is now the law.
4. The legislature extended the statute of limitations on harassment, retaliation and discrimination from one to three years. This means you need to maintain personnel records for a long time.
5. The statute governing lactation accommodation which was already very difficult for employers to meet was made more burdensome for 2020. The law requires employers to publish a written policy on lactation accommodation.
6. On a positive, note the statutory deadline for employers with 5 or more employees to provide one hour of sexual harassment prevention training to all employees and two hours of sexual harassment prevention training to supervisors and managers was extended to 1/1/21.
7. Paid family leave was extended from six weeks to eight weeks.
8. California just became the first state to outlaw racial discrimination based on hairstyle. The law legally protects employees from discrimination based on their natural hair. The new law, which takes effect Jan. 1, 2020 prohibits the enforcement of grooming policies that disproportionately affect people of color, particularly black people. This includes bans on certain styles, such as Afros, braids, twists, cornrows and dreadlocks.

Now that I have listed most of the 2020 employment law changes that affect small business owners, let me know if you want fuller descriptions and I will provide them to you free of charge.

Happy New Year!

Exhaustion? Negativity? Hard time completing tasks? Are these occasional parts of everyone’s job or are they symptoms of a medical problem? The World Health Organization just announced that if you’re experiencing those three symptoms at work you have an occupational condition called burnout.

How does burnout impact employers?  

Consider this scenario: You’re faced with a doctor’s note stating that your employee has a diagnosis of burnout evidenced by symptoms like exhaustion, negativity and a hard time completing tasks. Here are several questions that stand out.

1. What issues arise under laws like FMLA, CFRA, FEHA, ADA?
2. What would a reasonable accommodation look like?
3. What if the employee is on a performance warning or performance improvement plan for problems such as negativity and failure to complete tasks in a timely way?
4. What if it is a senior employee who makes himself or herself available 24/7 by choice?
5. What if round the clock availability is a requirement of the job?  

Here’s some brief analysis of the questions.

Question One: What issues arise under laws like FMLA, CFRA, ADA and FEHA?

For covered employers, one major issue that will arise under FMLA and CFRA is whether burnout is a serious health condition that makes the employee either unable to work at all or unable to perform one or more essential functions of the job. For employers covered under the ADA, one major issue will be is burnout a physical or mental impairment that substantially limits “major life activities” such as walking, sitting, reading, seeing, and communicating?

FEHA prohibits disability discrimination in all aspects of employment. It also states that an employer cannot take any type of adverse action because the employer perceives that the employee is disabled or based in whole or in part on the employee’s disability. Another relevant requirement is that the employer make reasonable accommodation of an employee’s disability absent undue hardship

Question Two: What would a reasonable accommodation look like?

The same issue arises regularly when an employee’s doctor sends a note that the employee is “stressed.” For both stress and burnout, it’s difficult for employers to assess to what degree is all work inherently stressful or is there a way that individual stress triggers can be removed from the job and still get the whole job done?

Question Three: What if the employee is on a performance warning or performance improvement plan for problems such as negativity and failure to complete tasks in a timely way?

Analysis of this issue starts with the job description. Does it require an employee to maintain stable performance in times of opposition or adversity? Is the employee required to meet deadlines and commitments? Then the issue arises of whether the requirements of the performance document discriminate against disabled individuals with burnout diagnoses.

Question Four: What if it is a senior employee who makes himself or herself available 24/7 by choice?

What if round-the-clock availability is a requirement of the job? That begs the question of whether there a defense of undue hardship if your business is just like all off he businesses in your area? An example might be most of the companies in the Silicon Valley.

We’ve all seen studies that conclude that 24/7 availability—whether by choice or command— is a source all kinds problems including headaches, sleeplessness, irritability, exhaustion and failure to meet the requirements of the job. We’ve also listened to the stories of Silicon Valley entrepreneurs and millennials who thrive on pressure and long hours. If it is the latter, employers could seek to defend their workplace and argue it would be undue hardship to reduce the characteristics of work that most Silicon Valley employees say they thrive on.

How are you preparing for burnout notes from physicians? Thoughts welcomed.

ARE YOU READY FOR AN ECONOMIC SLOWDOWN?

Although economists have been wrong in the past, this time it seems as if the majority of market observers are predicting a slowdown in the economy. What should business owners be doing to get ready for a potential downturn in business?

Historically, downturns often mean layoffs. One of the most important steps you can take now is catching up on performance feedback. Why the emphasis on documenting performance feedback?

If you’re going to use performance as a factor in determining who’s going to lose a job, you have to be able to demonstrate that performance issues have been documented. It’s a major defense against the discrimination charges that are often filed post-RIF’s.

Lack of documentation is a major problem

When preparing a defense, employment lawyers complain that 80% of the time there is no supporting evidence in the personnel or manager’s file. How can you show the appropriate performance designation if you don’t have any written records? Sometimes verbal records can be useful, but it is much more difficult to win with verbal records.

When you think about it, you can see why individuals file charges when they are told they were selected based on poor performance—yet they believe they were never given any negative feedback.

Performance documentation made easy

If your employee records don’t currently include performance documentation, here’s a technique you can use to augment them quickly:

1. Hold a performance assessment meeting with your managers.
2. Designate someone to take notes as each manager cites specific examples of both positive and negative performance for each employee.
3. Managers should then sit-down with each employee to give the feedback coming out of those assessments.
4. Senior management should follow up to make certain the feedback was given and understood by the employee.

Smart policy in good times and bad

The benefit of applying this process isn’t limited to avoiding lawsuits. Employees who receive positive feedback are often inspired to do even better. Clients who have followed this recommendation report improved performance all around.

 

Think that dads deserve the same amount of time for parental bonding leave as moms? If you answered “no,” it’s time to review your parental bonding policy. The EEOC recently announced that that practice of giving moms more bonding time is discriminatory.

Employers are required to grant fathers equal amounts of paid parental leave.

Many employers grant more leave to mothers based on the generally held assumption that mothers need more time to bond after the birth of a child. There’s no science to justify that belief.

This announcement also discussed modified work schedules—given to ease the transition to work after the arrival of a new child— and said that when such schedules are only offered to mothers, the employer violates the law.

Mindy E. Weinstein, acting director of the EEOC’s Washington Field Office said, “This settlement ensures that {the Employer} will provide equal opportunities for time off to new dads and new moms, which is what the law requires, and what makes sense for families.”

So, take a look at your parental leave policies and practices to see if you are giving moms and dads equal treatment. If not, take the time to update your company documents so that you are meeting this standard. Questions? Contact me by calling 650.518.0327 or by email at judypearce@hrlegalresults.com.

How the California Supreme Court Leans

If you’ve been reading recent HR and employment law newsletters, you know that the California Supreme Court just cracked down on employers who classify individuals as independent contractors­—as opposed to hiring them as employees.

The newsletters describe the new stringent “ABC “test necessary for employers to prove to defend their classification of an individual as a contractor.

Under this new ABC test, a worker will be presumed to be an employee unless the employer provides proof of all the following prongs:

• (A) That the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact;
• (B) That the worker performs work that is outside the usual course of the hiring entity’s business; and
• (C) That the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.

Evaluating the Risk

The government’s interest is in collecting taxes and protecting employees by requiring workers’ compensation insurance. That is why the presumption is that an individual is an employee. Given the new stance of the Court, now it will be far more difficult to prove the independent contractor classification.

In the past, when asked if an individual could be classified as an independent contractor, I answered that the person was probably an employee. In light of this ruling, that advice is doubly true.

Whatever savings you achieve in benefits, overtime, and taxes, they pale in comparison to the fines and legal costs you’ll face if you don’t have the “ABC” proof necessary to defend your decision.

If you’ve ever dealt with litigation over workplace stress, you’ll be glad to know that the court doesn’t always side with the employees. Here are a couple of examples:

• Some times referred to as the “Goldilocks decision”, the first case involves a plaintiff who requested an accommodation of a less stressful job. The transfer was allowed. The employee didn’t find the transfer to be interesting enough so asked for the accommodation of a transfer to a middle-of-the-road stress job. The court held that it was not reasonable to ask for a “just right amount of stress” job.
• In November of last year, a Florida District Court decided that an employee cannot immunize herself or himself from stress and criticism in general. In this case the employee had requested an accommodation from a supervisor’s “hostile confrontations.” The court commented that the obligation to make a reasonable accommodation does not extend to providing an “aggravation-free” or “peaceful calm” environment.

Yet, it’s not all good news. California employers continue to deal with hostile environment and constructive discharge claims arising out of what is described as “bullying.”

The courts have made it clear that the manner of conducting discipline rises to the statutory definition of abusive conduct when the discipline is “harshly and constantly criticizing” of one individual. Public criticism of an employee often is seen as unprofessional and stress producing.

On the other hand, most states have uniformly found that stress claims arising out of disciplinary action or performance improvement plans are not covered under workers’ compensation law.

A Case in Point: An employer recently allowed an employee who was the vice president of finance to work at home. The VP’s job required her to be available for on the spot determinations regarding cash flow. The employee said that she suffered from an anxiety disability and requested an accommodation that she be given 15 minutes time before responding to telephone requests for cash flow estimates. It would seem that this would not be a reasonable accommodation because it would reduce the company’s ability to compete. Nonetheless the employee filed a lawsuit.

Although this seemed like a frivolous claim, the company narrowly avoided bankruptcy given the huge legal fees they were forced to pay.

Clearly these doctrines are in conflict. How are employers supposed to navigate these murky waters when legal authority is uncertain?

So, what is learned from this? It’s important to train managers to run to the HR department whenever the word “stress” crops up. Additionally, managers should be trained that discipline should always take place in private. In our society, yelling at an employee in front of coworkers is thought to be abusive.

Reduce risk by always engaging in an interactive process when an accommodation is requested. At these sessions, employees can learn what the rules require—and what they don’t­—in terms of reasonableness of requests. Make sure they know that a Goldilocks accommodation is not reasonable.

Finally, in job interviews and in job descriptions it should be clear that some jobs involve pressure. Employees should be aware that the ability to handle pressure and ambiguity is a requirement of the job.

With the best of intentions many employers craft, edit and perfect culture statements full of noble principles, only to then have them ignored or used as the butt of ongoing jokes. Why?

There are a variety of reasons. Some of them include:

• Employees know the HR consultant wrote it. Senior management hasn’t really bought in and won’t play by the same rules.
• The values promoted don’t transfer into actual behaviors employees have seen in action.
• Employees whose workplace behaviors fall short of the cultural ideal get rewarded with bonuses and promotions anyway.

What to do? Start by making sure your values are framed in terms of well-defined behaviors. For example one company has the Core Value “Embrace Change.” In behavioral terms this could be phrased “Deals successfully with ambiguity and change.”

To be sure your values are put into action, make sure all performance feedback includes implementation of core values and behaviors. Then, don’t reward performers who aren’t walking the cultural talk.

Finally, develop your culture statement within your management team with input from a task force of employees. If you just slap standards designed by an outsider into your handbook, it is often received with skepticism—as it should be. It doesn’t take a lot of time to develop a cultural behavioral statement, so why not put in a couple of hours to have a culture your employees will respect?