Over the past couple of months I have been dealing with a case against a major national bank on behalf of one of its former employees.  The case involves his “discretionary” annual bonus, which most employers would say is just that-discretionary.  However, the term discretionary is misleading because except in some very limited circumstances a party to a contract does not have absolute discretion.

This is because all contracts in California have an “implied covenant of good faith and fair dealing”.  This is one of the least sexy concepts in contract or employment law, so I will summarize it quickly.  This doctrine acts as a check on parties in contracts where one side has the right to exercise broad discretion that effects the other party’s rights.  The law says that in such a case when the party exercises their discretion it generally must be done “fairly”.

This is especially important in our case because on Wall Street investment bankers and other professionals are usually paid a (relatively) small salary and then an extremely large annual bonus at the end of the year.  In our case, the employee was used to making over $750,000 and suddenly his employer decided at the end of last year to give him a bonus of less than $50,000 for 2007 with no warning whatsoever and despite the fact that he was performing better than his peers.

It turns out that the employer was planning to lay him off in a few weeks, so they decided to give his usual bonus to his co-workers.  This is the classic case where the implied covenant comes up in California employment law cases.  If an employee performs acceptable work during the year with the expectation that he would receive a bonus similar to his peers and what he received in prior years, the employer does not exercise discretion in “good faith” by paying him hundreds of thousands of dollars less than they do to similar employees.

This might be an extreme case for most employees, but the same concepts can be applied to any bonus and even Christmas bonuses in certain circumstances.

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Bonuses | California Employment Law | Cases | Employment Contracts | Wages and Hours

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This past Friday I spoke with a potential client who was recently terminated by his employer.  I concluded that he did not have a case worth pursuing and any claims he did have were likely not worth pursuing if it meant giving up the severance his employer had already offered to him.

At the end of the consultation he said he was surprised at my response because he had spoken to another employee-rights firm in Southern California where they told him that he had a “great” case and wanted to pursue it for him.  While I know I may not always be right about the merits of a case, in this situation I was very confident in telling him that based on what he was telling me his case was definitely not “great” and likely non-existent.

I was suspicious about the situation, so I asked him about the other attorney he had seen and what sort of fee arrangement he was offered.  The firm had actually offered to represent him in exchange for (1) a large retainer fee (likely around $1-2,000) AND (2) an hourly fee agreement.  Of all the employee-rights attorneys I know in the California, this is the first firm I have seen that charges hourly fees.  Most other firms work on a contingency fee where the client pays nothing unless they recover damages on the client’s behalf.

This area of the law is unique in that almost all of our clients are people who recently became unemployed and wonder if they will be able to pay their mortgage and keep their house, much less substantial attorney’s fees.  We work almost entirely on contingency, although we do represent a few hourly clients, but usually just to review employment, severance and non-compete agreements.

Because attorneys in California generally charge $350-500 per hour, contingency fees are usually the only way a client can pursue these types of claims.  Fees add up very quickly and in an hourly billing arrangement clients can end up owing their attorney tens-of-thousands of dollars even if they lose.  This also creates a conflict of interest where it is actually in the attorney’s best interest financially to drag a case out, perform unnecessary work and bill more hours.  Debates over these issues are raging in the legal community, such as in the article The Billable Hour Must Die published last year in the American Bar Association Journal.

The bottom line is that if you speak to an employee-rights attorney and they offer to take your case either (1) on an hourly basis or (2) on a contingency fee but also with a large up-front retainer fee, you should be wary.  At the very least you should get a second opinion from another firm and ask how they would charge to represent you.  Our firm, as well as others in California offer free consultations that can be done over the phone.

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Attorney's Fees | Attorney-Client Issues | California Employment Law

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Some employees (and some employee-rights attorneys) believe that if they are wrongfully terminated and able to get a new job just days later, they will only be able to recover a few thousand dollars and it would not be “worth it” to pursue a claim, especially if they have to pay an attorney to get it. However, in California victims of employee rights violations can recover their own attorney’s fees in most cases, which alone could make pursuing a claim worth the effort for both the client and the lawyer.

A good example of this is Harman v. San Francisco (2007) 158 Cal.App.4th 407.  In that case, the jury ruled that the defendant had a policy of “reverse” discrimination against white males, but only awarded the employee $30,300 in compensatory damages, including lost wages, etc.  However, the court also awarded Mr. Harman over $1 million in attorney’s fees.

The case lasted almost eight years between the trial and appeals, but in the end the employee prevailed.  When a client wins and is entitled to attorney’s fees, the court evaluates how much time the attorney spent on the case and sets an hourly rate comparable to similar attorneys in the community.  Unless the attorney performed substantial, time-consuming tasks for the case which were clearly unnecessary, all of the time will be reimbursed by the defendant.

Although several management-side employment attorneys were outraged by this decision, the employee (and his attorney) should not be penalized for spending the necessary time on the case to win.  While our firm does a great deal of litigation and we do not mind “fighting”, we start almost every case with a good-faith attempt at exploring informal settlement options with the defendant employer.  Both sides should want to do this for the simple fact that once attorney’s fees start accumulating, both sides become more adversarial and “invested,” so they feel they have to “win”.

Most savvy employment defense counsel are aware that where a claim appears to be valid, it is very much in their client’s best interest to at least try and resolve the case quickly.  This case is a prime example of a situation where the defendant likely could have settled for a fraction of what they ended up paying, yet they instead chose to “fight” and paid the price.

I am not suggesting that employees (or attorneys) should pursue (or refuse to settle) cases solely to rack up substantial attorney’s fees, but if a case has merit the employee should not have to wonder if their lawyer’s bill will be more than what they actually recover in the case, which is the case is many other parts of the country.

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Attorney's Fees | California Employment Law | Discrimination | Policy : Opinion

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This post is part of our ongoing series dealing with “family status” discrimination.  Family status claims implicate several employment laws, depending on the facts of a given case.  For example, the federal Equal Pay Act (”EPA”) and also California law mandate “equal pay” between men and women.

The fact that women disproportionately care for children in the United States is likely a direct contributor to the fact that women still tend to make less money for doing the same work, despite the EPA and other laws.  This is because such discrimination is often subtle.

For example, a woman might take time off to care for children and when she returns to work make less money than her male counterparts because they have more “seniority”.  While this might be legitimate, “seniority” is sometimes used as a synonym for “loyalty” or “dependability” in reference to the possibility of the woman leaving again to have another child or as punishment for leaving before.

Additionally, mothers who remain in the workforce after having children often start working part-time hours and the other employees often receive a higher rate of pay for “full-time” work.  Reducing a part-time worker’s salary is not per se illegal, but there are certainly pitfalls.  For example, if mothers who switch to part-time have their salary reduced, then it still must be comparable to part-time male workers.  Also, if a woman cuts her hours by 50% and her pay is reduced by 70%, then it can be argued she is being “penalized” for working less.

While not always illegal, an employer would likely have to prove that this is the same rate ALL part-time workers have their wages reduced by and/or that there is a legitimate business reason for doing so.

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California Employment Law | Family Status Discrimination | Gender Discrimination | Pregnancy Discrimination | Wages and Hours

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This is our third post in our series on “family status” discrimination. The last post dealt with examples of “moral stereotyping” where an employer’s belief on what women should do motivates their discrimination. This post deals with what I call “assumption” stereotyping, which deals with instances where an employer is motivated by their beliefs about what women will do, given their family status.

In these situations, the employer’s concerns about how an employee or job applicant’s home life could affect their job performance are often valid in theory, but not in application. In cases such as these the employer only assumes that the employee will not be willing or able to do the job and has no reason (other than stereotypical views of women) to make their assumptions.

One common example is where an applicant is not hired because the employer assumes she will not be willing or able to work the long hours the job requires because of her (assumed) duties at home. However, it is quite possible that the husband/father or another family member has taken on some of the childcare duties to allow her to work more. Because this decision relies on the employer’s stereotypical assumptions about women, this could constitute illegal discrimination.

It is true that it might be valid in certain cases not to hire an employee because she cannot perform the job due to family responsibilities, but the employer would have to have some actual proof on which to base their decision. For example, if during the interview the employer mentioned the job would require her to work no less than 80 hours per week and the applicant responded that she could not possibly work more than 40 hours with two kids at home, then this could be a valid reason not to hire her.

One oft-cited case of this type is Trezza v. Hartford, Inc., 1998 WL 912101 (S.D.N.Y.). In that case, an attorney was not even considered for a promotion because it would have required extensive travel. Her employers simply assumed that she would not be interested in the position because of her family and promoted a less-qualified man instead.

The employee was also told that once her husband made enough money she would be “sitting at home eating bon bons” and the company’s vice president commented on the “incompetence and laziness of working mothers”.

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California Employment Law | Discrimination | Family Status Discrimination | Gender Discrimination | Harassment | Marital Status Discrimination | Pregnancy Discrimination

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