Join San Francisco labor and employment attorneys Jason Brown and Annie Lau for an interactive presentation and discussion about employment law and managing risks in the startup workforce. It is never too soon to have this discussion. As your startup grows your risk will grow with the increasing number of hiring, firing, promoting, and disciplining decisions you need to make. Often, employment risks lie unaddressed in the context of rapid workforce growth, or equally so with rapid workforce reduction. The startup world is unmatched in this volatility, and likewise in the level of risk a volatile workforce presents. And yet many startups focus so much on growth and culture that they miss evaluating the employment risks inherent in that growth, and of that culture. The resulting lawsuits are damaging, but often they are also avoidable, or at least mitigated. What tools do you have to protect your startup against them? And more importantly, can you maintain both your culture, and a culture of compliance? Come with your questions, concerns and scenarios.

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Employment Issues for Startups:
Managing Risks and Avoiding Pitfalls

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Wage and Hour

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Federal Exemption Changes Effective December 1,
2016
• Under the FLSA’s executive, administrative and
professional exemptions, the new minimum salary required
is $47,476 (up from $23,660).
• The total-annual-compensation threshold for the “highly
compensated employee” exemption will increase from
$100,000 to $134,004.

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Federal Exemption Changes Effective December 1,
2016
• These amounts will now be “updated” every three years (meaning
that it will likely increase with each “update”), beginning on January
1, 2020. USDOL will announce these changes 150 days in
advance.
• Employers will be able to satisfy up to 10% of this new thresholds
through nondiscretionary bonuses and other incentive payments,
including commissions, provided that the payments are made at
least quarterly. This crediting will not be permitted as to
the salaries paid to employees falling under the “highly
compensated” exemption.

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What to do?
• Audit compensation status (and duties status) of all exempt employees.
• Re-classify employees who fall below DOL compensation threshold from
exempt to non-exempt.
• Alternatively, increase compensation of exempt employees to meet DOL
threshold.

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California Minimum Wage Increase
• California’s Minimum Wage increased to $10 per hour beginning
January 1, 2016.
• What else does this affect?
• Minimum salary for those white collar exemptions is now
$41,600 (until December 1, 2016; then federal minimum will
apply).
• Tool rate is now $20 per hour.
• Inside salespersons must earn at least $15.01 per hour to be
eligible for overtime exemption.

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Other Bay Area Minimum Wage Laws
Berkeley, CA Effective October 1, 2016 = $12.53
Emeryville, CA Effective July 1, 2016 = $13.00 to $14.82
Mountain View, CA Increase likely in 2017
Palo Alto, CA Increase likely in 2017
Richmond, CA Increase likely in 2017
Santa Clara, CA Increase likely in 2017
Sunnyvale, CA July 1, 2016 = $11.00

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The Private Attorney General Act
• Employees (well…their lawyers) bring claims on behalf of the State
of California for penalties for non-compliance.
• The Attorneys recover their attorney’s fees, so they have a
motivation to keep going, even if the clients aren’t that interested.

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Equal Pay Act
• Underlying premise of the law remains the same: pay should
not be lower for one gender versus the other
• However, the comparison is no longer limited to the same
“establishment” and new test is “substantially similar work”
• Comparison may be to employees at other facilities of the
company, even in other states (but pay differentials based
upon different costs of living are permissible)

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SB 358: Equal Pay Act
• Wage differentials may be justified where based on:
• A seniority system
• A merit system
• A system that measures earnings based on quality or quantity of
production
• A bona fide factor other than sex, such as education, training or
experience

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EEOC Guidelines and Mission
• October 17, 2016:
Specifically will be targeting gig economy
Specifically will be targeting alternative or algorithmic
based hiring processes.
Specifically will be targeting temporary workers, or
independent contractors from a discrimination angle.

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SB 358: “Freedom of Speech” REGARDING Wages
• May not prohibit employees from:
• Disclosing their own wages,
• Discussing the wages of others, or
• Inquiring about wages of another employee.
• No obligation on part of employer or other employees to disclose
wages.
• May not retaliate against employees for disclosing or discussing
wages.

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Class Actions: Got an Arbitration Provision?
• Ninth Circuit says it doesn’t matter in Morris v. Ernst & Young;
violation of National Labor Relations Act.
• The Second Circuit reached the opposite result interpreting the
same agreement.
• California Supreme Court says yes in Iskanian.
• Morris involved an employee who was required to sign class
waiver; a different result might apply if it were voluntary.

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So What is Next for Mandatory Class Waivers?
• The U.S. Supreme Court will likely have to decide the issue, but
that may take two or more years.
• It is unclear whether California courts will enforce class waivers
in the meantime.
• Employers with class waivers run the risk of an unfair labor
practice charge before the NLRB.
• For employers who want to continue using class waivers, it may
be worth having an “opt-out” provision for the class action
waivers or generally non-mandatory arbitration agreements.

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Local Laws, Leaves, and Doing
Business In California

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Where are the Paid Sick Leave Laws in CA?
• California
• San Francisco
• City of Los Angeles
• City of San Diego
• Oakland
• Emeryville
• Santa Monica (effective 1/1/17)
• Note: Long Beach and the City of Los Angeles also have laws
applicable to hotel workers only.

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Who Is Covered? (California)
• Most employees who work 30 or more days within a year in
California
• Includes part-time and temporary employees
• Limited exclusions for:
• Probably not for you.

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Who Is Covered?
• San Francisco
• Works within the geographic boundaries of the City of San Francisco,
including part-time and temporary employees
• Oakland
• Performs at least two hours of work in a workweek in the City of
Oakland
• Emeryville
• Performs at least two hours of work during calendar week within
geographic boundaries of the City of Emeryville, including part-time
and temporary employees
• Qualifies as an employee entitled to payment of a minimum wage
from any employer under the California minimum wage law

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How Much Paid Sick Leave?
Jurisdiction Annual Sick Leave Requirement/Total Accrual Cap
California 24 hours / 3 days for use
48 hours / 6 days for total accrual cap
San Francisco 40 hours (small businesses)
72 hours (all others)
Los Angeles 48 hours for use
72 hours for total accrual cap
San Diego 40 hours for use
80 hours for total accrual cap
Oakland 40 hours (small businesses)
72 hours (all others)
Emeryville 48 hours (small businesses)
72 hours (all others)
Santa Monica 2017: 32 hours (small businesses)
40 hours (others)
2018: 40 hours (small businesses)
72 hours (others)

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Front Load Available?
Jurisdiction Annual Sick Leave Requirement/Cap Front-Load Available?
California 24 hours / 3 days for use
48 hours / 6 days for total accrual cap
Yes, 24 hours
San Francisco 40 hours (small businesses)
72 hours (all others)
Yes, starting Jan. 1,
2017
Los Angeles 48 hours for use
72 hours for total accrual cap
Yes, 48 hours
San Diego 40 hours for use
80 hours for total accrual cap
Yes, 40 hours
Oakland 40 hours (small businesses)
72 hours (all others)
No
Emeryville 48 hours (small businesses)
72 hours (all others)
Yes
Santa Monica 2017: 32 hours (small businesses)
40 hours (others)
2018: 40 hours (small businesses)
72 hours (others)
Yes

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When Can Employees Begin Using Paid
Sick Leave?
On the 90th Day of
Employment
• California
• Los Angeles
• San Diego
• Santa Monica
• Oakland
• Emeryville
As Time Accrues
• San Francisco

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Permissible Uses - California
• Diagnosis, care, or treatment of an existing health condition
of, or preventive care for, an employee or an employee's
family member.
• A child (regardless of age or dependency status), parent (incl. step-
parents and parents-in-law), spouse, registered domestic partner,
grandparent, grandchild, or sibling
• For an employee who is a victim of domestic violence, sexual
assault or stalking to seek aid, medical attention, obtain
services or counseling, or participate in safety planning

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Permissible Uses
• San Francisco
• Effective 1/1/2017, purposes related to employee who is a victim of
domestic violence, sexual assault, or stalking
• Effective 1/1/2017, purposes related to donating the employee’s bone
marrow or an organ of the employee to another person, or to care for family
member donating bone marrow or organ to another person
• Oakland
• Medical need of employee or employee’s family member
• Emeryville
• Definition of “family member” to include a designated individual (if employee
has no spouse or registered domestic partner). In addition, may provide
care for guide dog, signal dog, or service dog of the Employee, Employee’s
family member, or the person designated by employee.

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And More…and more…and more…
• Accrual with varying time on and off the job
• Verification of being sick or not
• Strong anti-Retaliation Provisions

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The DLSE

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The DLSE
Agency with whom the Employee files a wage
claim. Doesn’t need a lawyer, is fast, and
against Employers.

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The EEOC
Agency with whom the Employee files a
discrimination claim, and they may or may not
investigate it. Can lead to federal subpoenas,
and should be treated more like a police
investigation. Lawyer up!

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My Employee Just Switched Genders!
Now What?

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Laws Protecting Transgender Employees
California Law Prohibits:
• Discrimination against transgender applicants
or employees.
• Harassment of transgender employees.
• Application of dress codes to prohibit an
employee from dressing or grooming consistent
with his or her gender identity.

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Laws Protecting Transgender Employees
California Law Prohibits:
• Requiring an employee or applicant to
disclose whether he or she is
transgender.
• Rejecting an applicant for indicating a
gender on the job application different
from the applicant’s assigned sex at birth.

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Laws Protecting Transgender Employees
California Law Prohibits:
• Using a gender, name or pronoun to refer to or
identify an employee other than the employee’s
preferred gender, name or pronoun.
• You may, however, require proof of a court order
changing name or other evidence of legal name
change before changing employee’s name in
payroll and benefits records.

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Which Restroom?
• You must allow employees to use restrooms,
locker rooms and changing rooms that
correspond to their gender identity or gender
expression.
• You may not require transitioning employees
to undergo or show proof of medical
treatment in order to use facilities designed
for use by a specific gender.

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Which Restroom?
• You may make a unisex restroom available for
transgender employees to use but you may not
require such use.
• Objections by other employees to a transgender
employee’s use of gender-conforming restroom is
not a basis for prohibiting such use.

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Which Restroom?
• Inappropriate conduct in a restroom by a
transgender employee may be disciplined the
same as if it were committed by a non-
transgender employee.
• Anti-harassment policy applies to all
employees using restrooms, locker rooms and
changing rooms.

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Religious Beliefs:
• You may not segregate or exclude a
transgender employee because of a religious
objection by co-workers or customers.
• This is consistent with the rules that
employees may not impose their religious
beliefs on others, and that “customer
preference” will not justify discrimination.

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Transgender Employees – Best Practices
Policies and Training:
• Ensure that policies against harassment and
discrimination include gender identity and gender
expression.
• Include gender identity and expression and
gender transition issues in AB 1825 training.

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Transgender Employees – Best Practices
Dealing with Gender-Transitioning Employee:
• Address employee by preferred name and pronoun
and require that all employees do so.
• Change payroll and benefits information when
proper documents are presented.
• Report gender change to health plan.

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Transgender Employees – Best Practices
Dealing with Gender-Transitioning Employee:
• Meet with employee and determine how best to
notify co-workers and customers (if applicable) of
gender change; honor employee’s preference if
feasible.
• Allow employee to use restroom/locker room that
conforms with new gender.

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Transgender Employees – Best Practices
Dealing with Gender-Transitioning Employee:
• If co-workers express religious objection to
presence of, or restroom use by, transgender
employee, explain that the company is not
requiring anyone to change or abandon their
religious beliefs but that it must provide a
workplace that is inclusive and open to all
employees without discrimination.

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Transgender Employees – Best Practices
Dealing with Gender-Transitioning Employee:
• Hold transgender employees to the same
performance and conduct standards as other
employees.
• If transitioning process becomes a distraction for
employee or co-workers, address conduct and
performance as you would for other employees.

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Worker’s Comp. and More

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Workers’ Comp Leave: The Basics
• Employee who is unable to work as a result of
industrial injury is entitled to leave of absence
while recuperating.
• No time limit on leave; it lasts until the employee
is medically able to return to work.
• Employee is paid disability benefits by WC
carrier, not state disability.

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Workers’ Comp Leave: The Basics
• Labor Code sec. 132a prohibits discrimination
against employees who file WC claims.
• You may “replace” an employee on WC leave but
you may not terminate him/her as a matter of WC
law until permanent and stationary and unable to
return to old job.
• Disability discrimination laws apply too, though.

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What About FMLA/CFRA?
• Eligible employees may take up to 12 weeks of
leave per year.
• Is employee eligible?
• Employed for at least a year
• Has worked at least 1,250 hours in last 12 months
• Works at a location where employer employs 50 or
more employees in a 75 mile radius

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What About FMLA/CFRA?
• You may designate WC leave also as
FMLA/CFRA leave.
• If you do not, employee could return from a long
WC leave and then take a 12-week FMLA leave.
• Be sure to send FMLA/CFRA notification letter to
employee.

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Can We Replace Employee After FMLA/CFRA
Leave Expires?
• No. You must consider whether additional leave
must be provided as a “reasonable
accommodation” under the ADA and state law.
• Additional leave must be provided unless it would
be an “undue hardship.”
• You are not required to provide indefinite leave,
though.

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Can We Terminate An Employee Who Is
Declared Permanently Disabled?
• No. You must engage in the interactive process
to determine whether the employee is qualified
and medically able to perform another job that is
vacant or will soon become vacant.
• You must attempt to accommodate restrictions.
• You may not have a “100%” healed” policy.

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Do We Have to Continue Paying for Insurance for
Employee On A Long Leave?
• It depends. You must continue paying insurance
for FMLA/CFRA period, if eligible.
• Look at policy language re coverage of
employees on leaves; if coverage is limited to
FMLA leave, consider a COBRA notice.
• ACA may require that you continue insurance,
however.

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If We Replace the Employee on Leave With a Temp
Who We Like Better, Can We Keep the Temp Instead?
• No. This will guarantee that you will be sued.
• Unless you can show that the employee is on an
indefinite leave or that holding the job open would
be an undue hardship, you must keep the job
open until the employee returns.

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If We Have A Layoff, Can We Include
Employees On WC Leave?
• It depends. If they would have been laid off had
they not been on WC leave, then layoff is OK.
• Using a layoff/reduction in force to get rid of
employees on workers’ comp will get you sued.
• Deciding you really did not need an employee
who went out on leave will get you sued.

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Summary: Employees on WC Leave Are Covered
By Three Sets of Laws
• Workers’ comp leave law.
• FMLA/CFRA.
• Disability discrimination laws (ADA & FEHA).

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Retaliation

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Retaliation
An examination of
behavior after the allegation

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Retaliation
There are three essential elements of a retaliation
claim:
1) protected activity -- opposition to discrimination or
participation in the statutory complaint process;
2) adverse action;
3) causal connection between the protected activity
and the adverse action.

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Retaliation
Worker finds out a male peer makes more than she does for the same job.
She asks her manager for a raise so they are at the same level.
Or:
Worker finds out a male peer makes more than she does for the same job.
She does not ask her manager for a raise, instead, she says that under the
Equal Pay Act she feels entitled to a raise under the act, and that the
company would violate the law if they don’t give it to her.

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Retaliation
Opposition to perceived discrimination does
not serve as license for the employee to
neglect job duties.

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Retaliation
1. Suspicious timing;
2. comparative evidence of a similarly
situated employee;
3. falsity of the employer's reason for the
adverse action
4. Witness Statements, and other Evidence

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Avoiding Pitfalls
Layoffs and RIFs
Termination for poor performance without analysis of similar
treatment
Usage of non-objective criteria
Any decision by anyone interested in the outcome of an
underlying complaint.
Hierarchies that include the complainer the individuals involved
in the complaint.

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ALL OF THESE HAPPEN TO
STARTUPSLayoffs and RIFs
Termination for poor performance without analysis of similar
treatment
Usage of non-objective criteria
Any decision by anyone interested in the outcome of an
underlying complaint.
Hierarchies that include the complainer the individuals involved
in the complaint.

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ALL OF THESE HAPPEN TO
STARTUPS
“I don’t get mad, I get even.”
Hierarchical structure
Channels of advancement
“Get in line” mentality
Complaint and grievance openness vs. repression.
Egos

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The Adverse Action
There’s a right way, and a wrong way. The Wrong way is a
pitfall, and litigation generator. You can only be sued by
employees in our field, and employees sue when they are
disgruntled. Employees get disgruntled through adverse
employment action: Discipline, poor write-ups, demotions, etc.

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The Adverse Action
So which will the lawyer recommend?
Be complete and include everything
Or
Be careful and keep out the bad things

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The Adverse Action
Avoid vague language
Use facts not labels
E.g., “Insubordination” or “Bad Attitude” are vague

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The Adverse Action
Be truthful!
Don’t sugarcoat it
Don’t say it was a downsizing if it wasn’t
Don’t say anything you wouldn’t testify to in court

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The Real World
Unlimited Vacation Policy: We don't need to track
medical leaves

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The Real World
I got a DLSE Complaint, I can handle it myself, and if
things go south, I’ll get a lawyer then!

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The Real World
Everyone's an Exempt Employee: We don't need to
track hours

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The Real World
I don’t need a written contract with the other founders,
we know our roles. Except stock, we have a written
agreement about stock, so we are fine there.

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The Real World
They're Independent Contractors: We don't need to
worry about their complaints

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The Real World
It’s not working out with the new guy. We flew him
and his family up here from Southern California for this
job, but he knew it was probationary, so its fine that we
let him go. He doesn’t fit the culture.

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Questions