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Lawsuit Prevention for Employers

With new laws enacted every year, it is vital that employers focus on the requirements most likely to result in lawsuits.

These laws almost always require the employer to pay the attorneys’ fees of the prevailing party if the employer loses a lawsuit, in addition to their own. Attorneys’ fee awards frequently dwarf the amount of the original claim.

What follows is intended to provide the information employers need to avoid losing payroll-related claims.

Piece-Rate Compensation Expanded

Effective January 1, 2016, California law requires employers to pay piece-rate employees a separate hourly wage for all “non-productive” time the employee is engaged to work, in addition to requiring separate payment for rest and meal breaks.

In addition, employers must now separately itemize the hours and pay rates attributable to “non-productive” time, as well as rest and meal breaks, on employee wage statements and/or paystubs.

Employers Must Provide Written Notice of All Compensation Terms

California law requires that all non-exempt employees be provided with a written notice of eight separate items constituting terms of employment.

The statute requiring this notice is the “California Wage Theft Prevention Act.” The very title of the law aptly describes the low esteem occupied by employers in the view of the California legislature.

This law, which initially took effect on January 1, 2012, requires that all new employees be provided written notice of the following information at the time of hire:

  1. All rates of pay, and the basis thereof, including overtime rates;
  2. Specific terms of any commission arrangement;
  3. Overtime compensation rates in effect at the time of hire;
  4. The employer’s workers’ compensation carrier and its contact information;
  5. Any fictitious business names used by the employer;
  6. Allowances claimed as part of the minimum wage, such as those for meal or lodging allowances;
  7. Regular payday designated by the employer, as required by law; and
  8. The physical address and phone number of the employer’s main office or principal place of business.

Effective July 1, 2016, this notice must also include a description of employee rights to paid sick leave.

If any of the above terms are changed in any respect during the term of an employee’s employment, written notice of the change must be provided within seven days.

Written, Signed Commission Agreements Are Required

Any employee, who is compensated by commission, in whole or in part, must be provided with a written commission agreement, signed by the employer. This agreement must describe all material terms upon which payment of the commission depends, as well as a description of exactly when commissions will be paid and what must be done in order to receive them in a timely manner. It must also specify precisely how commissions are computed.

The agreement specifying this information must be provided to employees in the form of a copy, signed by the employer at the time the document is presented.


Jay G. Putnam is a Petaluma labor lawyer who has specialized in representing California employers for over three decades. His practice is devoted to preventing lawsuits against his clients, without sacrificing workplace authority or management prerogatives.

While no one can guarantee a future free of lawsuits, Putnam has compiled a remarkable record of success: Not one employer-client has been sued in 36 years with his system of precautions in place.

For those clients who have arrived with pending lawsuits, Putnam has established an excellent track record of success as well. 

You are invited to visit Mr. Putnam’s website, where you will find in-depth discussion of the most common mistakes made by California employers, and how to avoid them.


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