New Laws Employers Must Pay Attention To For 2016 [e244]

December 21, 2015

Nasir and Matt discuss new laws that will go into effect for 2016 and how employers should adjust their practices accordingly.

Full Podcast Transcript

NASIR: Welcome to our podcast where we cover business in the news and add our legal twist. My name is Nasir Pasha. Welcoming my co-host who happens to be an expert on time travel of what’s going to happen in the future.

MATT: Yeah, Matt Staub. I guess it kind of makes sense.

NASIR: Kinda?

MATT: Well, I’m looking forward to this episode because you were just going to tell me all the new laws for 2016 and I was going to comment on them I believe was the plan.

NASIR: Let me just open this big book of new law. I mean, we’re focusing on some of the labor laws for California only. Granted, California is crazy but, if you have employees in multiple states but just if you have one employee in California, then there’s a lot of new issues you have to deal with.

MATT: Actually, that’s a question a lot of clients ask. “Are there any new labor laws that I need to be aware of for the new year?” Just a common time that new things get implemented.

NASIR: Yeah.

MATT: Obviously, there’s a whole slew of laws that get passed and are new every year but the labor laws in particular are the ones that we usually talk about and we’re going to talk about a little bit of that and then there’s some other laws – ah, I guess it relates to labor, too.

NASIR: Yeah.

MATT: Which actually is way more interesting than some of these California ones and compared to previous, you know, at least the last couple of years, because I think we’ve done this, for the couple of years we’ve done the podcast I think this’ll be the third end of the year we’ve been doing this and I think this is the third end-of-the-year we’ve done new laws for the next year.

NASIR: Yeah.

MATT: I’d say, at least from the California side on the labor law, this is definitely the tamest.

NASIR: That’s true, but there’s a lot of little things and, if someone asks what laws they need to know, there’s not a lot of laws that are passing that are really crucial to an employer but there are a lot of little things that have been passed that kind of adds a headache for us, I suppose.

MATT: Yeah, this isn’t like last year or I guess the beginning of 2015 when the paid sick leave was obviously really big in California.

NASIR: And I think minimum wage was around that time, too.

MATT: Yeah. So, there’s a couple of big things. I mean, to me, from the employer’s side, the biggest law to me is one we’ve already discussed previously this year – at least we touched on it from what I remember. I don’t know if there’s a bill – Bill 258, I don’t think that’s very helpful, whatever this is called.

NASIR: That’s how I reference it.

MATT: There’s a lot to it. One of the things is this equality in pay regardless of gender and we touched on this before and, thinking about it a little bit since then, the way it’s kind of laid out is employers are I think still are going to be able to get by on this – at least when I say “this,” I mean paying men and women different amounts despite the fact that they can’t. At least initially, just reading through some of these criteria, the idea is men and women, if they’re performing substantially similar work have to get paid the say. You know, they can’t have a difference in pay. But employers can base things on seniority – okay, that’s fine; merit system – that’s kind of vague; a system that measures earning by quantity or quality of production – quantity is much more concrete than quality of production, that’s pretty subjective; and then a bona fide factor other than sex such as education, training, experience. My point is there’s a lot there. It’s not a loophole I would say but there’s a lot of wiggle room for employers. I think it’ll help a little bit but I still can see employers can find ways around this.

NASIR: Oh, absolutely. Frankly though, I don’t think the law is going to fix that problem, right? I mean, it’s very difficult from a legislation perspective to actually fix a problem that is just kind of inherently within the culture of the workforce in the last number of decades. So, I think it’s hard to just say, “Okay, we’re going to open you up to liability if you’re treating them differently.” That’s a little bit easier but, forcing them to pay equally, again, you just can’t legislate that. It’s going to happen over time and little things like these help but probably real change is going to come from a cultural shift. But I think California, this is the first fair pay kind of act on a state-wide level that we’ve seen in the country – at least to this extent. But, at the same time, keep in mind that it’s no different than any other gender discrimination but it just kind of tweaks the language a little bit that makes it a little bit more easier for, frankly, plaintiff attorneys to meet their burden of proof.

MATT: Yeah, I guess that’s a way to summarize it from the beginning is what you just said there.

NASIR: But, honestly, that’s how I look at it. I mean, as we know, a lot of this law is written by attorneys. At the end, that’s going to be the most immediate effect – literal private enforcement of gender discrimination. I think that’s exactly what this law is designed to do. Critics will say that it’s just another way to make it more difficult for employers and that this is not the right way to make change and I’m sure others are saying this is just another reason why California is very pro-litigant and encourages litigation. In a lot of ways, I think that’s all true. The question is, “Is that a good thing or a bad thing?” I think proponents would say, “Well, we want private enforcement in order to keep employers in check, so to speak.” That’s one law – one law down, checkmark.

MATT: Part of it too is this expansion of what employers can prohibit or restrict employees from disclosing. I think, previously, employers cannot prohibit employees from discussing or disclosing their wages or refusing to agree to disclose their wages. Now, in addition to that, employers cannot require that an employee refrain from disclosing information about the employer’s working conditions or require an employee to sign an agreement that restricts an employee from discussing their working conditions. I don’t know. This is a little bit kind of weird to me. I think it hits on the disclosing the wages thing too or at aiding or encouraging others to disclose wages. All this does is open things up on the employee’s side. It’s saying, “Employers, you can’t prevent employees from talking to employees.” You know, that’s really what it is. It’s not a huge deal but a small win for employees, I guess.

NASIR: It’s true. Basically, that’s what it’s saying. And, in a way, if you’re an employer that kind of has that attitude where you kind of have this strict stranglehold over your employees and they can’t talk to each other about certain things, it’s hard for an employer to really defend that kind of culture. It’s understandable but, in the long run, I don’t think that’s good for anyone – even from a business perspective, really.

MATT: No.

NASIR: You know, also, professionalism still counts, right? I mean, it’s not professional to talk about your salary with your co-workers and things like that and creating that kind of culture is perfectly fine. I don’t think that’s prohibited by this statute.

MATT: Yeah. I mean, there’s some TV show or movie that I saw where that caused problems but I can’t think of what it was.

NASIR: It’s probably one of those reoccurring plot things that pretty much every show has. You know, one of the other laws that I like that came out, I think it’s one of the very few that were more on the employer’s end was this new statute that basically said that, if your itemized wage statements are incorrect, typically, that may be a penalty by the employer and that can happen in many ways and that’s why basically no California employer or non-California employer for that matter should really be doing their own pay stubs or their own payroll. I mean, they really should have a payroll company be doing that. But, if there’s some inaccuracies to it, this law now provides a requirement for the employee to give notice to the employer so that they have an opportunity to actually correct those statements instead of this kind of “gotcha!” kind of thing. This is often. I’ve seen it a lot of times kind of thrown in amongst a bunch of other lawsuits which basically adds to penalty. So, one act will all of a sudden calls all these other issues because, obviously, if you’re not paying overtime correctly or whatever, the itemized wage statement will be incorrect as well.

MATT: I was wondering where you were going with choosing that law because it seemed pretty boring and I skipped over it.

NASIR: It’s the most boring and benign thing but it’s the only one that’s actually going on the employer’s side that I can think of and there’s probably a couple of others but that’s the one that stuck out to me.

MATT: Yeah. Well, we talked some California. To me, not that exciting. I think some of these multi-state issues are more intriguing and way more important, you know. I don’t want to spend too much time piece by piece. I’ll lay a couple out and you tell me which one you want to talk about.
Let’s see. There’s some scrutiny with choice for forum clauses in all these different states meaning let’s say you enter into a contract and you say, if there’s a lawsuit or a dispute – arbitration, et cetera – it needs to be done in a different state. You know, something that you’re trying to gain the system against public policy. That’s becoming a bigger issue.
This is one you’ll like. Non-compete agreements and I don’t want to think too much about these in California just because we’ve had the same conversation a million times but there’s some increased scrutiny with non-compete agreements with current employees in the sense that more states – Illinois for example had this big case – about adequate consideration in order for the employees to agree to these non-compete agreements. This is even for new hires, I believe. You basically can’t have somebody come in a new hire and make them sign a non-compete without giving them some kind of consideration in return. Now, this is very new so we don’t know what that consideration is. I think one example has employers forbearance and exercising its right to terminate the at will employee – you know, I guess that’s just delaying the at will. There was another one, too. I think there was some exception if they worked under two years, it’d be an issue as well. But this is shifting more towards California for some of these because California, if you don’t know, if you’ve never listened to this podcast, it’s very difficult to enforce non-competes.

NASIR: Nearly impossible, really.

MATT: Yeah, and it’s an interesting shift for employers trying to enforce these, at least in some of these states.

NASIR: No, absolutely. You know, I can speak about Texas a little bit. A lot of these states that do have non-competes over the last 20 or so years, non-competes basically, a lot of the law surrounding it has been about how expansive can it be. What are the limits, right? And so, obviously, every state – including especially California – has this public policy that people have a right to work but also companies and businesses have a right to protect their trade secrets, intellectual property, et cetera. If their employee can just jump ship to the competitor, it’s nearly impossible to have that protection. So, most states who tolerate or will allow non-competes have basically said, “Okay, so long as you are restrictive in scope of the non-compete including time, geography, and even the scope as far as what you can work it, then it will be okay.” But what you’re talking about, this extra consideration, that actually exists in some ways in Texas already for example with physicians. In physicians, not only is there a separate consideration which can also sometimes be combined with the hiring process – it’s not a big burden. But, for example, in Texas, for physicians, you actually have to have a buy-out clause where you can get out of the non-compete and so long as it’s reasonable and a lot of times, it’s a year salary and that’s been found to be a reasonable thing. For a doctor, $100,000 or $200,000 at least can basically buy them out of their non-compete and sometimes that’s worthwhile because maybe the competitor may be willing to pay that amount as a signing bonus, so to speak. Different states have handled it differently but independent consideration for allowing a non-compete is definitely not unusual but it’s expected to see those kinds of more restrictions coming with states that are still dealing with all these non-compete issues that really haven’t refined their law yet.

MATT: Yeah, and I do want to clarify that too – your statement I made or expand on it, I guess – not clarify it. There’s a split in districts in Illinois but the first district appellate court held that consideration in exchange for non-compete or the employment of an existing employee must continue for at least two years even if the employee leaves voluntarily. You know, Day 264 of Year 2, they employee could leave. I mean, it’s just kind of crazy. It’s a split. There’s another district that has kind of gone against that but it’s just the idea that it’s that two-year number is thrown out there. That’s a long time for an employee.

NASIR: Yeah, absolutely, but I like Texas’ approach and many other states’ approach of just making it a nice and simple. There has to be a reasonable accommodation. Lawyers don’t like it because there’s ambiguity because, of course, when we’re writing contracts or working with the clients, they’re like, “Okay, well, can we make it one year, two years, three years, four years, is that fine? Or five years?” and then the only judge we have is like, by looking at cases and there’s only a few that’ll say this was held reasonable but this was not held reasonable and there’s no bright light rule for that but, at the same time, I think what’s going on in Texas and other states is that the market is driving some of these non-competes. Now, for lower-level employees, non-competes are going to be hard to enforce but, if have you have a more upper-level employee where they have access to trade secrets, maybe they’re a sales person or they are an executive, these kinds of positions where the employer has a very strong interest in protecting their rights, of course, are going to be more likely to enforce non-competes. But, in the same way, those types of people have more bargaining power so, in a way, the market kind of takes care of itself in the sense that, when you enter into an employment contract in Texas, you know that part of negotiating points is, “Okay, if there’s a non-compete, how long and what mile radius and under what circumstances am I restricted?”

MATT: Very well said.

NASIR: Well, thank you very much. That’s what I do.
I mean, what other laws are there? You mentioned the forum clauses, right? The enforceability of choice of law and choice of forum clauses. I mean, that is pretty tough working with that in a non-compete and confidentiality agreement, especially if you’re working in multiple jurisdictions. From a general sense, the trend of the law there is that the default is where the employee is at. And so, even if you have a confidentiality agreement for a particular employee – and we’ve had instances where an employee would move from state to state – oftentimes, it’s the state that the person’s living in and sometimes it can be a race to the courthouse but you always want to take the most conservative approach and assume the law that is most restrictive is going to be enforced.

MATT: We just got our movie idea.

NASIR: Okay.

MATT: 90 minutes at most. It’d be a short movie between 70 and 90 or 80 and 90. Some sort of dispute happens and we have two sides that are literally racing to the courthouse, Too Fast Too Furious style, lots of things ensure, and there’s a lot of action that happens between. It all takes place in one day or a short period of time. Movie idea which will lead into our last episode of the year which also has to deal with a movie idea I came up with that somebody stole from me that actually just got released.

NASIR: Actually, there are a lot of movies like that – the whole movie is a race, a long race, right?

MATT: What’s the one? Is it Bruce Willis maybe? It might actually be called “90 Minutes” or “60 Minutes” or something like that.

NASIR: Bruce Willis?

MATT: Is it Bruce Willis?

NASIR: What is it called? 60 Minutes? I think that’s a new show. It’s not Star Wars, right? Because I am excited about our Star Wars episode coming up in a couple of days. Definitely check it out.

MATT: Yeah, that’s what I said. That’s a movie someone stole from me – my idea.

NASIR: I’ve been preparing basically all week by watching Star Wars over and over again. So, I’m ready to talk about it.

MATT: Yeah? I’ve done the opposite.

NASIR: I haven’t seen the new one yet but we’ll talk about it later.

MATT: What I’ll guarantee is I’ll put the movie in the show notes and someone can click on the link because I can’t figure out… Hold on, this might be it.

NASIR: Are you watching every movie since movies started in order to determine which movie it is?

MATT: It’s Bruce Willis has to get this person from one part of the city to the other within a certain period of time.

NASIR: Oh, you must be thinking about Die Hard with a Vengeance.

MATT: It’s not Die Hard.

NASIR: No, With a Vengeance – it’s the one where he’s in a taxi and he has to get place to place. It’s with Samuel L. Jackson.

MATT: 16 Blocks.

NASIR: Oh, okay, was that with Bruce Willis?

MATT: Uh, yes, it is.

NASIR: Okay, he is in there, okay.

MATT: It’s Bruce Willis and the rapper, Mos Def. See, I wasn’t crazy. That’s my idea, basically, but a better version.

NASIR: Okay. The question is should we just cut everything out and just you saying 16 Blocks with Mos Def and Bruce Willis?

MATT: It might not be the worst idea ever.

NASIR: All right. Well, let’s end this show and come back and join us for Wednesday’s Star Wars episode.

MATT: All right, last one of the year. Keep it sound and keep it smart.

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Legally Sound Smart Business

A business podcast with a legal twist

Legally Sound Smart Business is a podcast by Pasha Law PC covering different topics in business advice and news with a legal twist with attorneys Nasir Pasha and Matt Staub.
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Fractional General Counsel Services

Pasha Law Select offers the expertise of a high-end general counsel legal team for every aspect of your business at a fixed monthly rate. Pasha Law Select is deliberately designed to allow our legal team to be proactive, to anticipate, and to be comprehensive in serving our clients. To be great lawyers, we need to know our clients. We can’t know our clients unless we represent a select number of clients in the long-term. This is Pasha Law Select.

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