Do you know what the most common, important advice lawyers who represent employers give to their clients? “Document, document, document“. These lawyers know that detailed, contemporaneous notes and memos permit witnesses for management to be more detailed, clear, and credible. Employees should follow that advice, too. Employment disputes are not like car accidents: they don’t happen all of a sudden. Almost always, the worker sees problems coming. As soon as the employee has this feeling, they should start keeping a journal. The journal should be worked on every day. Events, conversations, confrontations – anything the employee feels is suggestive of the problem that is arising, should be recorded in detail. With a journal containing detailed, contemporaneous descriptions of the events that occur, the employee will be a better witness. The employee will be able to refresh their recollection by referring to the entries. The entries will corroborate the employee’s testimony. And, the entries will provide a valuable tool for the worker’s lawyer to seek through discovery documents and testimony that corroborate the account of the worker. In wage disputes, detailed entries regarding time can be used to demonstrate that the records the employer relies upon are wrong. In a sexual harassment case, the many incidents that cumulatively add up to a hostile work environment can be recorded in detail, and the witnesses to them identified. In a performance case, incidents of good performance, and supervisory comment on them, can be recorded and preserved, even though the supervisor may later forget them. Various documents that the employee sees at work but is unable to “capture” by copying can be described in detail so that, later on, the worker’s attorney will be able to request them specifically, and pursue their production aggressively if the employer refused to hand them over. Perhaps most importantly, such a record will be of invaluable assistance to the employee in the process of looking for a lawyer, which entails explaining a lot of information in a short period of time. Remember, this document is going to be seen by everyone involved in the case: the opposing counsel, the judge, and, if it is going to do you any good, the jury. So stick to the facts. Don’t ruin your credibility by making things up or exaggerating. And don’t put people off by saying things that are offensive, engaging in name-calling, or giving vent to anger. I’ve published a Legal Guide on this subject, “When you see the handwriting on the wall, start putting it down on paper”. Here is a link https://www.avvo.com/legal-guides/ugc/when-you-see-the-handwritting-on-the-wall-start-writing-it-down-on-paper If you have this feeling at work to such a degree that you think you should start journaling, give me a call. Let’s talk about your problem. Maybe I can help.
I get a lot of calls from people who have lost their jobs, either because they were fired or they quit, and they want help obtaining unemployment benefits, because their former employer has challenged their eligibility. I’m always happy to talk to people about that, and I do my best to help them understand the unemployment application and appeals process, and to see what issues are going to be important (and what will NOT be important). The EDD unemployment application and appeal process is put together in a way that permits applicants to tell their side (when the employer challenges eligibility) without the benefit of a lawyer. That is a good thing because, practically speaking, for an applicant to “lawyer up” for the process is not really practical. Any lawyer would have to spend 10-20 hours to prepare for and attend a hearing, for example, and that would mean something like $5000-7000 in attorney’s fees, and that is just not realistic. But, with about half an hour on the phone, I can usually help the applicant put their best foot forward either in the written response they file or at a hearing. I’m happy to do that as part of a free phone consultation. Sometimes, these conversations lead to me agreeing to represent these same applicants in employment cases. For example, a man who had recently been fired for supposedly refusing to provide a urine sample in connection with his visit to a doctor for what the employer erroneously THOUGHT was an on-the-job injury initially contacted me for help getting his unemployment benefits. And I helped him get them. They had initially been denied; but the Administrative Law Judge at EDD ruled in his favor, after learning the facts at the hearing. THEN, I helped the discharged employee by contacting his former employer, explaining the facts to their lawyers, and pointing out that their policies violate California privacy laws. He received a substantial settlement, in addition to his unemployment benefits. So, don’t hesitate to call me to discuss unemployment benefit eligibility. Also, I have written a legal guide about the unemployment benefits process. Here is a link to that legal guide, “Ten Tips to Getting the Unemployment Benefits Your Deserve”. https://www.avvo.com/legal-guides/ugc/top-10-tips-for-getting-the-unemployment-benefits-you-deserve
I just published a new legal guide on AVVO, “Who you gonna call? Contacts for workers with employment problems.” https://www.avvo.com/legal-guides/ugc/who-you-gonna-call-contacts-for-workers-with-employment-problems The guide features links to federal and state agencies charged with responsibility for most employment issues. If you hear from someone with an employment problem, please pass along the link to them.
I’ve had some time now to review the US Supreme Court’s Quality Stores opinion, in which the court recently ruled that payments pursuant to severance agreements are “wages” within the meaning of the Federal Insurance Contributions Act, and therefore subject to social security taxes, which must be withheld from the payments. That means severance payments will now be 7.65% less valuable to departing employees (because social security taxes of 6.2% and Medicare taxes of 1.45% will be deducted), and cost former employers 7.65% more (because employers must match those tax payments).
First, such payments have always been “income”, so the decision does not lessen or increase income tax liability, nor create any new obligation to withhold income taxes from severance payments.
Second, employers and employees who are negotiating severance packages will want to take the decision into account. If the departing employee has already reached the Social Security earnings cap of $113,700, there will be no additional tax obligation on the severance pay paid in the same year; but delaying such payments into the following year will cause those payments to be subject to the social security taxes. Conversely, realizing the severance payments in the current year will mean that the severance payments may be taxed at the marginal income tax rate, while, if payments are delayed to a new tax year, in which the former employee anticipates less income (owing to being out of a job), overall taxes might be lower. So, tax planning in such negotiations will be more complicated. Also, many severance packages provide for modest amounts; perhaps the same money would be better spent, more valuable to the departing employee, and less expensive to the employer, in the form of continued employer contributions to health insurance benefits post-termination (during the COBRA period).
Third, the court stressed that the severance payments were keyed to time in service and position, and were paid in connection with the company’s layoffs. So the decision does not mean that settlements of claims that arise after termination, or even those in connection with ongoing employment, are necessarily subject to the tax. Common practice in employment claim settlements is to make a good faith determination of what portion of the recovery can fairly be attributed to “back pay” and treat that portion as “wages” subject to withholding, while making separate payments of what amount to non-wage payments (e.g., compensation for emotional distress or attorney’s fees), and made the subject of a 1099 (and which may or may not comprise “income”).
Last, there’s no profit in arguing that a Supreme Court decision was “wrong”; especially one, like this one, that was unanimous. But, as the Court observed in its opinion, at one time, severance payments were among those items listed in 26 U.S.C. Sec. 3121(a) expressly excluded from the definition of wages (and the repeal of that express exemption suggested, the court reasoned, that Congress didn’t intend for severance payments to be excluded any longer). Common sense, it seems to me, counsels in favor of amending Section 3121 to restore that exemption. “Wages” are paid by employers to employees. Severance payments are paid by former employers to former employees. “Wages” are paid to employees in exchange for work. Severance payments are paid to former employees in exchange for waivers of various claims (You don’t agree? Ask any employer if they will make the severance payments if the former employee crosses out the waivers from the severance agreement). Workers who have lost their jobs need 100% of whatever their former employer is willing to provide to tide them over until they can secure new employment; social security doesn’t provide any benefit to them during this period of hardship, and the fund ought not to be financed with any portion of severance payments.
The US Supreme Court issued an important decision on March 25, 2014, US v. Quality Stores, Inc., et al. (No. 12-1408). Quality Stores, Inc., closed down and made severance payments to 3100 of its former employees. The amount of the payments was keyed to position and time in service. Originally, Quality Stores treated the payments as “wages”, and withheld social security taxes (and made the employer’s matching contribution). In the bankruptcy setting, however, Quality Stores concluded that the severance payments should not have been treated as “wages”, and asked for refunds of the withheld SS taxes on behalf of itself and the employees. The IRS considered the claim, but had not acted; so Quality Stores petitioned the bankruptcy court for an order on the subject, and the bankruptcy court held that the severance payments were not “wages” and that the withheld amounts should be refunded. The Six Circuit Court of Appeals upheld that Order. The US Supreme Court, though, reversed the decision, and has held that the severance payments were properly treated as “wages” and that the withholding was required (so, no refund). The Supreme Court cited the broad definition of “wages” in the Federal Insurance Contributions Act (26 USC 3101 et seq). The applicable provisions very broadly define “wages” for FICA purposes, and afford only narrow exceptions that no longer include severance payments (the court observed that, at one time, severance payments were specifically exempted from FICA taxes). Employers and employees (and their lawyers, including me) will carefully scrutinize the decision to judge how its impact can be limited or distinguished; but, initially, it looks like employers will be forced to treat severance pay as wages and withhold Social Security taxes (and make the employer’s matching contribution). The immediate impact of that is to marginally reduce the value of the severance payments to the former employees while increasing their cost to the employer (while benefiting the SS trust fund). Will it be practical to specify portions of severance agreements not to be treated as wages? Will the obligation to withhold be extended to other items, such as income taxes? Will the decision affect payments pursuant to settlement agreements? I’ll post again after I’ve examined the decision more closely.
A new case from the Ninth Circuit is, well, kind of disturbing in view of the recent loss of the Malaysian Airlines flight. Although we don’t know what caused that plane to crash, “pilot gone whack-o” is one of the theories cited as credible, and there have been instances in which commercial pilots evidently took a plane full of passengers to their own judgment. In Ventress v. Japan Airlines, et al, 2014 DJDAR 3996 (3/28/14), pilot Martin Ventress claimed that JAL retaliated against him for raising safety concerns regarding another pilot, including submitting two safety reports to the FAA. Ventress says JAL responded by requiring him to submit to psychiatric fitness for duty examinations. Evidently, these examinations did not go well, and Ventress was fired (or constructively discharged). Ventress brought an action in which he contended that his employer retaliated against him for making the safety complaints about another pilot. The district court ruled that the claim had to be dismissed because the Federal Aviation Act, the federal law regulating, among other things, pilot certification, “preempted the field”. The federal law provides a system, the court observed, for evaluating pilot fitness. If claims like Ventress made could go forward, the court observed, the courts would have to be involved in evaluating the fitness of both Ventress and the other pilot Ventress claimed was unfit. Since that would intrude on the FAA’s system, the claim had to be dismissed.
Now, the Ninth Circuit is generally considered friendly, or at least not hostile, to plaintiffs, including employment plaintiffs. So, I’m not suggesting the decision was wrong on the law. The court decided that Congress wants it this way, and that’s the end of it as far as the court is concerned. So, the question is whether the federal law is wise. Is it a good idea to say, “if a pilot says another pilot is unfit, it’s OK for the employer to fire him; it doesn’t matter if the pilot was right or wrong, or whether the pilot made the claim in good faith – looking into that would cause us to second guess the FAA’s pilot certification decisions”? I don’t think so. I’d like pilots to feel very secure in making such allegations, even at the cost of baseless allegations being made. Because, really, if a pilot is unfit, who is in the best position to observe that before something makes that unfitness painfully and deadly obvious? The court’s decision doesn’t say anything about what the FAA provides, if anything, in the way of protecting airline personnel from retaliation for raising concerns about the fitness of pilots they work with. I’m guessing, “not much”. But, whatever protection there is, it’s the only protection available, because this decision means that state whistleblower laws don’t apply.
When the California Department of Industrial Relations, acting through the “Labor Commissioner,” enters an Order requiring an employer to pay wages and penalties, the employer has only a brief time to seek judicial review of that Order. A Notice of Appeal of the Order must be filed in Superior Court within 10 days of service of the Order. Labor Code § 98.2(a). As amended in 2010, Labor Code § 98.2(b) provides that “As a condition to filing an appeal pursuant to this section, an employer shall first post an undertaking with the reviewing court in the amount of the order, decision, or award.” Until recently, the requirement to post a bond concurrent with filing the notice of appeal in Superior Court was not considered jurisdictional. Rather, the impression prevailing in the legal community was that the employer could safely file the notice of appeal within 10 days, while filing the bond at a later date. 2 Chin, et al, Employment Litigation, ¶11:1420 at 11-156 (Rev. #1 2011). In a recent decision, the California Court of Appeal (First District) has made clear that the bond must be filed within the 10-day deadline. Paligan v. Paniagua Construction Company, Inc. (2013) 222 Cal.App.4th 124. In that case, the employer filed a timely notice of appeal unaccompanied by a bond. Later, the trial court issued an order requiring the employer to post the bond within 10 days of the trial court’s order, which the employer did. After trial de novo, the trial court vacated the Labor Commissioner’s Order, finding that the plaintiff was not an employee of the defendant company. The employee appealed, and the Court of Appeal ruled that the bond requirement means what it says: as a condition to seeking review of the Commissioner’s Order, the employer must post the bond. The trial court, said the Court of Appeal, had no power to extend the deadline, and thus no jurisdiction to consider the appeal once the statutory deadline for filing the bond had passed. The Court of Appeal reversed the judgment and ordered that judgment be entered in favor of the Commissioner. Id. at 140.
The employer has sought review in the California Supreme Court (January 23, 2014). Nevertheless, unless the Supreme Court grants review and vacates the opinion, failing to file a bond with the notice of appeal should now be deemed too risky. Accordingly, attorneys who represent employers should prepare to file the necessary bond in Superior Court along with the notice of appeal. Because employers seem always to consult counsel regarding an appeal as the 10-day period is about to expire, preliminary arrangements with a bonding company may be a good idea.
I have launched a new web site, in which I emphasize my work on behalf of employees in employment disputes. If you know someone who is having trouble at work, and who would like to speak to a lawyer about that, I hope you will remember me and let them know about this website. www.youremploymentcounsel.com Thanks!
I just published a new AVVO legal guide, “Ten Tips For Getting the Unemployment Benefits You Deserve”, https://www.avvo.com/legal-guides/ugc/top-10-tips-for-getting-the-unemployment-benefits-you-deserve
I just published a new a new AVVO legal guide, “The Woes of At-Will” https://www.avvo.com/legal-guides/ugc/the-woes-of-at-will