“I Know Better Syndrome” Can Cost You Your Job

Posted on December 20, 2011 by Aaron Morris

I Know Better Syndrome Can Cost You Your Job

A case out of San Diego beautifully illustrates an issue that I frequently encounter with prospective clients, and provides a cautionary tale.

The fact pattern is so common that I have given it a name — the “‘I Know Better’ Syndrome”, or “Syndrome” for short.  The Syndrome arises when an employee takes a firm stand on some issue, to the point of refusing to do what they are told, believing that they have a better understanding of the law or company policies.

For example, the company policy will be that reimbursements can’t be made out of petty cash without a receipt. The boss tells an employee to reimburse another worker for a company lunch, and the employ refuses because the worker does not have a receipt. The boss writes her up for insubordination, but the employee will have none of that and goes to Human Resources to complain that she was written up when all she did was follow company policy. The next thing she knows, she is called in and terminated because her inflexible adherence to the strict letter of the policies has just become too much of an annoyance.

So it was in the San Diego case.  Here is a summary of the facts, as reported by Sign On San Diego. The Superior Court in San Diego is way behind the electronic curve so I could not review the actual court documents on file.  This summary is based on what was reported on Sign On San Diego and may not be entirely accurate. The point here is not the specific facts but the legal issue they illustrate.

Shari Watson, a Chula Vista council aide, was told to deposit a $2,400 check from Cox Communications, made out to “The City of Chula Vista/International Friendship Games”. This bothered Watson, because Cox had only agreed to a $1,000 sponsorship for the event.  Watson could not reconcile why Cox would be sending a check for $2,400.  Watson asked Deputy Mayor Rudy Ramirez if she could call Cox to see if the check was made out in error, but he told her to go ahead and deposit it and let the finance department work out any problems.

Freeze.  Right there is the moment in time that employees fall prey to the I Know Better Syndrome.  The supervisor has just given clear instructions, but the employee thinks she knows better. Continue reading →

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Judges Must be Wary of Anti-SLAPP Appeal Trap

Posted on December 15, 2011 by Aaron Morris
Anti-SLAPP Appeal Platypus

Rare North-American SLAPP Platypus

A few months back I won on an anti-SLAPP motion that I brought long after the case was filed. The thing is, I was not representing the Defendant initially, but when I was retained the first thing I saw from my review of the case was that the case was a quintessential SLAPP.  No discovery or anything beyond the complaint and answer had occurred, so I persuaded the court to allow me to bring a SLAPP motion well beyond the normal 60-day deadline.  I won the motion, the case was over, the client celebrated with champagne, and all was good with the world.

That case got some publicity, and now it seems like every attorney thinks they can file an anti-SLAPP motion at any time during the litigation, even on the eve of trial. It just happened to me today. Our case is nearly two years old, and the trial is about a month away.  All of a sudden, defense counsel decided that our action is a SLAPP, and it would be an unforgivable miscarriage of justice to allow this matter to go to trial without first bringing an anti-SLAPP motion. Indeed, this was such an emergency, that defense counsel had to go into court on an ex parte basis to ask the court to shorten the notice period to bring the motion because there is not enough time before the trial.  An ex parte application requires a showing of irreparable harm, and defense counsel so argued.

The anti-SLAPP motion, which was attached to the ex parte application, was utterly without merit, which is not surprising given that if the complaint was a SLAPP the defendant’s counsel certainly would have been able to reach that conclusion in the prior 22 months. Not surprisingly, the application DENIED.

Why would an attorney do such a thing? By Code, an anti-SLAPP motion is supposed to be brought within 60 days of service of the complaint. It can be brought later upon a showing of good cause to the court, but any delay is counterproductive. The point of an anti-SLAPP motion is to stop a SLAPP action from going forward, and stay the discovery. The discovery stay is one of its most powerful attributes, since the plaintiff is basically frozen in time and made to show his proof without the benefit of any discovery. If the motion is brought after discovery, the defendant loses the biggest advantage of the anti-SLAPP motion. And nothing changes during an action that somehow makes a complaint a SLAPP when it was not previously. In other words, discovery might reveal that an action is ripe for a motion for summary judgment, but it is very unlikely that discovery will reveal that an action was a SLAPP if that was not apparent from the complaint.

So, what possible justification could there be for this tactic of waiting until the eve of trial to bring a meritless anti-SLAPP motion? Continue reading →

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Morris & Stone Gets Triple Damages and Attorney Fees for Theft

Posted on December 10, 2011 by Aaron Morris

When is a breach of contract also fraud? When the party never intended to perform.

When do you get triple damages and all of your attorney fees for fraud? When you hire Morris & Stone (although your results could differ).

Breach of contract is easy to spot, but business owners are often confused about what constitutes fraud. Someone fails to pay all the money owed on an invoice, and the client wants us to add a cause of action for fraud. That’s probably not fraud.

The elements of fraud are (1) a misrepresentation of a material fact; (2) made with the intention that the party rely on that representation to his detriment; (3) reasonable reliance on the misrepresentation; and (4) damages. As you can see from the above elements, in the case of a contract, for there to be fraud the fraudulent intent must exist at the time of the contract. If a person enters into a contract intending to perform, if he later fails to perform, that breach will not transmute into fraud no matter now egregious and flagrant his breach. To prove fraud, you must show that at the time the defendant entered into the agreement, he had no intention of performing.

So how do you get into the mind of the defendant to determine if he intended to perform when he signed the agreement? Thankfully, California courts have held that the behavior after the contract was signed can be used to show that the defendant never intended to perform. In our case, the defendant borrowed a significant amount of money from our client, and pursuant to the agreement that money was to be invested in a business venture. The money was never repaid, and our client hired us to recovery the money.

We went her one better. We sued for fraud, because we could see no indication that the money ever went into the business venture. Continue reading →

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The Legality of the “Tip Jar”

Posted on December 10, 2011 by Aaron Morris

Back in June of 2009, I wrote about the Starbucks tipping case. Some rascally class action attorneys had won a huge payday, claiming that Starbucks was violating the sanctity of the community tip jar. You see, Labor Code section 351 states that no “employer or agent” shall take any part of the gratuity “left for an employee by a patron.” An “agent” is defined by section 350(d) as anyone who can hire or fire, or who controls the acts of the employees.”

The attorneys managed to convince a Superior Court Judge in San Diego that when Starbucks permitted “supervisors” (you know, the ones that make 25 cents an hour more because they’ve been there the longest) to take a cut of the community tips, that violated section 351. The judge awarded $105 million in damages for this outrage. Since Starbucks would need to sell like a hundred Caramel Macchiatos to cover that, it appealed.

The Court of Appeal said, “hold the foam.” The flaw in the logic is obvious (understanding that I always have perfect 20-20 hindsight with court decisions).  When I sit down at a restaurant, enjoy my meal and the service, and then leave a tip, I am leaving a tip for my specific server. However, when I order a latte at a Starbucks and drop my change into the tip jar, who am I tipping? I’m certainly not intending to tip only the barista. At that point, I don’t even know who is going to prepare my beverage (or even if it will be tip worthy). It is probably far more likely that I’m tipping the friendly cashier that accurately took my order and retrieved my scone. Or perhaps my intent was to tip the person that cleaned the washroom where I washed my hands before stepping up to the counter. As you can see, in the case of a community tip jar, we can never truly know who generated the tip, so it makes much more sense to assume that it is my intent to tip everyone working there, who have all joined to make this such a special coffee experience, from the supervisors down. Hell, I wouldn’t even mind if the owners took a cut, because after all they are the ones that hired the fine people who cleaned the restroom, who took my order, who retrieved my scone and who made the Venti, whole milk, extra hot latte that Aaron drank. Continue reading →

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California Supreme Court Rejects Virtually All Non-Competition Agreements

Posted on December 10, 2011 by Aaron Morris

Herein I violate the conventional wisdom that blog posts should be short, because I want a very detailed discussion of non-compete agreements available to both employees and employers.  But in case you have time only for a quick takeaway, I first provide a summary and then the long tome.

Summary:

In a ruling long awaited by the employment law sector, the California Supreme Court effectively rejected the use of most non-competition agreements in California.

In Edwards v. Arthur Andersen, the unanimous court held that Business and Professions Code § 16600 gives California workers great freedom to switch jobs, to compete against old employers and to solicit former clients. “In sum, following the Legislature, this court generally condemns noncompetition agreements,” Justice Ming Chin wrote. “Under the statute’s plain meaning, therefore, an employer cannot by contract restrain a former employee from engaging in his or her profession, trade, or business unless the agreement falls within one of the exceptions to the rule.”

Although the business litigation attorneys at Morris & Stone have long advised that this ruling was coming, this ruling finally creates a brighter line distinction by the state’s highest court. Any non-compete agreements that don’t fall under one of the statutory exemptions are void.  Previously there was still a potential loophole by which a non-compete agreement could be found enforceable. The Federal Ninth Circuit had ruled that section 16600 contained a “narrow restraint” exception that allowed companies to use non-compete agreements so long as the pacts only restricted “a small or limited part” of their employees’ future ability to work. Continue reading →

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Deviant Employees Protected from Termination

Posted on December 10, 2011 by Aaron Morris

As you know, Megan’s Law set up a website that lists registered sex offenders.  Before extending an offer of employment, one might think that checking that website would be a quick way to make sure a sex offender is not being hired, especially if the job involves contact with children.  One would be wrong.

California is an at-will employment state, meaning that employers can terminate employees for any reason or no reason at all. Although there are statutory exceptions prohibiting employers from taking adverse employment action on the basis of race, gender, and other protected groups, a loophole in Megan’s Law serves to make sex offenders a protected group giving them rights that other employees do not have.

Sex offenders are filing claims for wrongful termination, utilizing Megan’s Law as the legal grounds to secure and retain employment. The Megan’s Law Statute, set forth in California Penal Code Section 290.46, states that a person is authorized to use information disclosed pursuant to the statute — that a person is a registered sex offender —  “only to protect a person at risk.”  California Penal Code § 290.46(1).  The statute specifically “prohibits, except as authorized to protect a person at risk or pursuant to another provision of law, the use of any information that is disclosed through the statute for purposed related to any of the following: health insurance, insurance, loans, credit, employment, education . . ., and housing and accommodations.” California Penal Code § 390.46(2)(E).

In other words, California employers may not discriminate in employment of an employee on the basis of his or her status as a registered sex offender, if such status is discovered through the Megan’s Law website, unless it is to protect a person at risk or pursuant to some other provision of law.  One such provision of law is Labor Code section 432.7, which addresses what questions an employer can ask an employment applicant.  Labor Code section 432.7 allows an employer to ask and use the fact of a “conviction” in determining any condition of employment; however, legal practice guides have interpreted it to apply only to hiring.  As such, California employers may discriminate in “hiring” sex offenders if that information comes from a questions about convictions.  However, if the employer fails to ask whether the applicant has any convictions, and later discovers through the Megan’s law website that its employee is a registered sex offender, the employer is liable for wrongful termination if it terminates the sex offender employee based on that information.

This serves to put the employer in an unenviable position: it may be held liable for the sex offender employee’s negligent conduct (for instance, if the sex offender employee physically abuses a co-worker) or face a claim by the sex offender employee for wrongful termination if it fires said employee.

Further, it is nonsensical that an employer can learn this information through other sources (i.e. public records search) and legally terminate the employee on that basis, yet is liable if obtained on the Megan’s Law website.  I suppose an employment attorney could suggest to clients that they check the Megan website to see if the employee is listed as a sex offender, and if so, then find the same information from some other source so the termination or rejection would not be based on what was found on the Megan site.  But that would circumvent the absurd result intended by our fine Legislature that sex offenders receive special protections, and I would never suggest such a thing.

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How the “Hands-Free” Cell Phone Law Impacts California Employers

Posted on December 10, 2011 by Aaron Morris

California’s “hands free” cell phone law took effect on July 1, 2008.  The law prohibits all California drivers from using a hand-held cell phone or similar hand-held devices while driving a motor vehicle, unless configured to permit “hands free” talking and listening.

The new law, Vehicle Code Section 23123, provides that “a person shall not drive a motor vehicle while using a wireless telephone unless that telephone is specifically designed and configured to allow hands-free listening and talking, and is used in that manner while driving.”

If the driver is a minor under age 18, the law is more restrictive and prohibits the use of any “mobile service device” at any time the minor is operating a motor vehicle. A mobile service device is defined to include not just cell phones, but a variety of electronic devices.

How does this affect you as a California employer?

It will probably never even occur to most California employers that this seemingly innocuous law can expose them to liability if violated by an employee.  If you are one of the many California employers that routinely issues cell phones to its employees, or permits employees to use their cell phones to conduct business on your behalf, you could be liable for your employee’s violation.  Many small business owners are simply unaware that an employer can be held vicariously liable for resulting injuries and property damage if its employee causes an accident while talking on a cell phone for business purposes in violation of the new law.

Taking these simple precautions can reduce an employer’s potential liability for damages relating to employee violations of the new law:

(1)        Draft and distribute a clear policy on the new law in employee handbooks, and have your employees sign an acknowledgment of receipt of the new policy or new handbook incorporating such policy.

(2)       When issuing a cell phone to new employees, provide a copy of the new law, the company’s policy on such law, and again have the employee sign an acknowledgment of receipt of such material. You should also routinely issue “hands free” devices with each cell phone and require the employees use of the device. Continue reading →

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If I Can’t Fire Him, Can I At Least Demote Him?

Posted on December 10, 2011 by Aaron Morris

Under California Labor Code Section 2922, an employee can be terminated at the will of the employer, absent an express or implied contract to the contrary (and assuming the termination does not violate public policy). Logic therefore dictates that if an employee can receive the ultimate demotion — termination — then the employer should also be free to impose lesser forms of demotion.

However, logic also dictates that if an implied contract to terminate only for cause can defeat the at-will presumption of Section 2922, then isn’t it reasonable that there might also be enforceable implied contracts not to demote except for cause? Based on the decisions of California’s appellate courts, this second part of the syllogism does not seem to have wide support.

For some inexplicable reason, both trial and appellate courts tend to lose all memory of basic contract law when the case arises in the employment context. When confronted with claims that an implied contract existed not to demote without cause, the courts have insisted on going outside simple contract analysis. Turner v. Anheuser-Busch, Inc., is a typical example. In that case, the plaintiff was demoted and given a pay cut. He sued, claiming that his demotion was a breach of contract. Apparently feeling that it had to raise the plaintiff’s demotion to the level of a termination before it could even consider the matter, the California Supreme Court based its entire analysis on whether the demotion and pay cut rose to the level of a constructive discharge. From that perspective, the court determined that no constructive discharge had taken place, and that the demotion was therefore a sacrosanct business decision.

Why is this sort of deference given? Continue reading →

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To Drug Test or Not To Drug Test — An Employer’s Dilemma

Posted on December 10, 2011 by Aaron Morris

Nine percent of current employees and 12% of job applicants test positive for illegal drug use, the U.S. Department of Labor has reported. Given these numbers, and the fact that drug abuse is estimated to cost business $100 billion per year in lost profits, it is no wonder that many businesses are considering drug testing.

But recent rulings by California courts have created a slippery slope for employers who wish to utilize drug screening. Unjustifiable drug tests have resulted in major damage awards to objecting employees. In light of these risks, is drug testing still a realistic option?

Answering that question requires a little history.

In 1972, Californians voted to add a “Right to Privacy” clause to the California Constitution. While originally envisioned to only bar privacy intrusions by the state, in 1989 a California Court of Appeal held that the right to privacy also applies to private employers.

That ruling sprang from the pre-employment drug testing that was being used by the publisher Matthew Bender & Co. Under Matthew Bender’s program, applicants that Matthew Bender had decided to hire were given a conditional offer of employment, subject to a final medical exam. During that exam, a urine test for drugs was conducted on all applicants. The clinic that performed the exams would then issue each applicant a medical rating based on the results of the exam. A positive drug test resulted in an automatic failing rating, but since other medical conditions could also result in such a rating, Matthew Bender itself never knew with certainty why an applicant was rejected.

The test was ultimately challenged when one of these “conditional employees” brought suit, claiming the test violated his right of privacy.

In upholding Matthew Bender’s drug testing procedure, the court stressed two important factors. Continue reading →

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How to Interview Prospective Employees

Posted on December 10, 2011 by Aaron Morris

With no discriminatory intent whatsoever, many interviewers get themselves and their companies in trouble by asking seemingly innocent questions. Taking a few steps to avoid improper questions can save your company from litigation and legal fees. Questions such as “How old are you?” “When did you graduate high school?” and “Do you have any disabilities?” can get you into hot water with the law.

Inquiries regarding an applicant’s race, color, age, sex, sexual orientation, religion and national origin are illegal under Title VII of the Civil Rights Act and the California Constitution. Age discrimination is also banned under the Age Discrimination in Employment Act, and discrimination against qualified individuals with disabilities is forbidden by the Americans with Disabilities Act, or ADA, as it is commonly known, as well as California’s version of that law.

Many interviewers think, consciously or subconsciously, that since they have no evil intent their questions will ultimately survive judicial scrutiny.  But the goal should always be to avoid litigation, not just prevail. Asking illegal interview questions can result in an applicant having sufficient grounds for filing a discrimination lawsuit. At then end of the day, whether the interviewer’s intent was evil or not, the company may find itself settling a lawsuit just to avoid the hemorrhaging of legal fees.

Stick to Job Related Subjects

Even when you are making small talk just to be friendly, you can be asking problematic questions.  For example, the applicant mentions the picture of your daughter’s softball team on your desk, so you ask, “Do any of your children play sports?”  You just said a mouthful.  With that question, you could conceivably find out whether she has kids, intends to have kids, is a single mom, her sexual preferences, perhaps even her religious beliefs.  All with a question that had nothing to do with the job.  It sounded innocent when you said it, but she could truthfully say in court the the first thing you asked her during the interview was whether she had any children.

The guiding principle is whether you can demonstrate a job-related necessity for asking the question.  Is the information truly necessary to assess the applicant’s ability, qualifications or job skills?  If a discrimination case was filed, the federal Equal Opportunity Employment Commission (EEOC) would want to know the interviewer’s intent in asking the question as well as how the information was used.

Potentially Improper Questions

Here’s a look at what you legally can and can’t ask prospective job candidates.

Gender: Unless you’re hiring locker-room or restroom attendants, steer clear of gender.

Marital or parental status: One of the most common mistakes made by interviewers is asking, “Are you married?” even though many managers see the question as an conversational icebreaker. You may, however, ask candidates if they have outside responsibilities that would prohibit them from fulfilling job requirements or if they are available to work overtime.

Race and nationality: Just about the only appropriate question that relates to race or nationality is whether the applicant is eligible to work in the United States. Even the simple question of one’s native tongue should be replaced with queries about the languages the interviewee speaks and writes fluently.

Age: As a general rule, stick to asking if your interviewees are over 18.

Religion: Unless your organization is a religious institution, you may not legally inquire about religious beliefs. Another mistake is asking hypothetical or situational questions that may elicit the candidate’s religious or other beliefs.

Sexual orientation: While laws vary between states and municipalities, the general rule is that no questions pertaining to an applicant’s sexual orientation are appropriate.

Arrest or conviction records: The laws are especially tricky here. Employers may ask for a list of convictions other than misdemeanors, but may not inquire whether a prospective employee has been arrested.

Military record: You may ask if the applicant served in the military, the period of service, rank and type of work experience and training received. However, it’s illegal to ask about the type of discharge the applicant received.

Disability: Focus exclusively on whether the applicant can perform specific job-related functions, rather than particular disabilities. Asking prospective employees if they have been injured on the job or filed for worker’s compensation is also prohibited. The easiest thing is to give someone a job description that includes the physical requirements. Tell them things they will be required to do and ask if they can do them.

Height and weight: Unless these physical attributes directly affect job performance and the tasks that can be clearly defined, don’t go there. Follow the same guidelines as with candidates with disabilities.

Financial status: It is common in many industries to use credit reports as part of an application process, but it is important that this be done in compliance with the Fair Credit Reporting Act of 1970, as well as the Consumer Credit Reporting Reform Act of 1996. Asking applicants if they own a home or car, even if only to determine how the prospective employee will get to and from work, is prohibited.

Affiliations: Asking about clubs or social organizations your candidates belong to can get you in trouble, as well. Instead, inquire if candidates belong to any professional or trade organizations they consider relevant to their professional experience or their ability to perform the job.

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