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Many employers proceed on the basis of a dangerous, but understandable, misconception.  It goes like this:  “I treat my employees very well.  We’re like a family here.  Besides, if I don’t do anything wrong, I have nothing to worry about.  Right?”

My response:  “Let me tell you a little story.”

“Nice Guys…

If a present or former employee sues you, he/she will be dependent on a plaintiffs’ employment lawyer to navigate the legal system.  That lawyer will be paid, not by the hour, but on a percentage of any eventual out-of-court settlement or award at trial.  This means that if no settlement or award results, the lawyer goes uncompensated. As a result, plaintiffs’ lawyers will normally not accept employment cases unless they are certain it is a winner.

The best, most successful lawyers can afford to be the most selective.  Consequently a plaintiff seeking high-quality representation will be required to “sell” the case to the lawyer, i.e., convince the lawyer that the employer engaged in blatantly unlawful conduct which resulted in serious injury to the prospective client.  Rough translation:  “The case is a sure winner and a huge award is certain.”

During the initial consultation with a prospective client, the lawyer will be asking tough questions designed to identify any weaknesses in the story the client is “selling.”  At the same time, the lawyer will be gauging the legal vulnerability of the employer. A common way of doing this is by reviewing the employee handbook to determine if the employer has incorporated the most sophisticated protective provisions allowed by California law.  If the employer has failed to do so, the lawyer may conclude the employer is vulnerable, and he/she will be encouraged to take the case.  If, on the other hand, the handbook includes these provisions, the lawyer will likely conclude that “there are easier pickings elsewhere,” unless the client’s story is so compelling as to overcome this hurdle.

For this reason, employers are well-advised to develop, and to maintain with annual revisions, the most potent employee handbook California law will allow.  If there are any employees who speak a primary language other than English, employers are well-advised to have the handbook translated by a court certified translator.  One example of the many nuanced protections included in a state-of-the-art handbook will provide that, if there are any conflicts between the English and translated version of the handbook, the English version will control.

Perhaps the most important provision to include in the handbook is a mandatory arbitration policy.  This is a technical, legal document and must be drafted and distributed with great care to be enforceable according to the latest court of appeals decisions.  The advantages of arbitration to employers are obvious.  First, it removes the often-insurmountable obstacle presented by the fact that juries are always comprised of employees, not business owners or managers. Employers, not surprisingly, lose the vast majority of jury trials in California.  Second, taking an employment case through a jury trial can often exhaust the better part of a million dollars in the employer’s defense costs alone.  As a result many employers, to stem the hemorrhaging, are forced to settle before trial on terms dictated by the plaintiff. Arbitration solves this problem by reducing this defense by as much as 90 percent.

Because the lawyer has to be “sold” on the case, he/she will dictate the claims brought and the legal strategy to be pursued.  The client may arrive seeking to bring a wrongful discharge suit, only to sign off on a completely different claim before the first meeting is concluded.  This may occur if the lawyer concludes that a discharge case is weak, but that another kind of claim would be more lucrative.

…finish Last”

A common example involves California’s requirement that itemized wage statements (pay stubs) be distributed with each pay check, and include nine separate pieces of information. The failure to include any of these is a violation of statute, and forms the basis for a lawsuit under Labor Code, section 226. The most common mistake made by employers (or their payroll company) is the failure to include both inclusive dates of the period for which the employee is being paid.  Because this oversight typically appears on multiple pay stubs, this violation presently forms the most common basis for class action lawsuits in California, with more than ten class actions filed every day.  A violation entitles the plaintiff (and class members) to attorney’s fees, which increase exponentially for class actions.  With a three-year statute of limitations, these cases often involve millions of dollars in exposure.

By law, employers cannot escape liability by relying on third party payroll companies, even if the employer was not directly involved with the mistake giving rise to the violation. Who said anything about doing something wrong?


Jay G. Putnam is a Petaluma labor lawyer who has specialized in representing California employers for over 37 years. His practice is devoted to preventing lawsuits against his clients, without sacrificing workplace authority or management prerogatives. He has a remarkable record of success: Not one employer-client acting on his advice has been sued in over 37 years.

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.

This Newsletter is not intended as a substitute for legal advice and its content is provided for discussion purposes only.  Any suggestions or recommendations must be assessed by competent legal counsel to be sure the unique requirements of each workplace are properly considered.

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