• Employment Law: Management
  • The Employment Relationship
    • Employee versus Independent Contractor
    • Employment At Will
  • Government Administered Benefits
    • Unemployment Compensation
    • Workers' Compensation
    • Social Security
  • Civil Rights In The Workplace
    • In General
    • Age Discrimination
    • Discrimination Against Persons with Disabilities
    • Sexual Harassment
    • Pregnancy Discrimination
  • Other Workplace Rights And Responsibilities
    • Wages and Hours
    • Workplace Safety and Health
    • Parenting, Family, and Medical Leave
    • Substance Abuse in the Workplace
    • Privacy
    • Whistleblowing
    • Veterans' Reemployment Rights
    • Employee Access to Personnel Records
    • Non-Compete Agreements and Trade Secrets
  • Termination
    • Reasons for Discharge
    • Termination Procedures
    • Prohibitions to Firing
    • Defamation Related to Termination
  • Resources

Business owners today must be more aware than ever of the legal issues concerning employer-employee relations. Decisions on whom to hire and fire are subject to numerous state and federal laws and may subject an employer to liability. Even the seemingly simple determination of who is an employee under the law can be tricky, and mistakes can have serious and costly consequences. This chapter offers an introduction to some aspects of employment law.

Many of the rights and responsibilities of employers and workers turn on the legal relationship that exists between the worker and the employer. The distinction between employee and independent contractor status and the concept of "employment at will" are important to defining an employment relationship.

Employee versus Independent Contractor

When a worker is paid to do a task or provide a service for another person, the worker is either an independent contractor or an employee. The distinction is not always clear, but it is important for both the business and the worker. The classification determines whether a business must withhold taxes and what records it must keep, whether it should have workers' compensation and unemployment insurance, and whether it is subject to federal and state wage and hour regulations. For example, an employer who hires someone as an independent contractor does not have to pay certain taxes on the worker's income.

Whether a worker is an independent contractor or an employee is based on the work performed, not the worker's title. The more control an employer has over a worker, the more likely it is the worker is an employee. On the other hand, the more a worker acts like an independent business enterprise, the more likely the worker is an independent contractor. In some cases, the status is clear: a worker who arrives at a set time every day, is trained by the employer, uses the boss' tools or equipment, and is paid by the hour, week, or month, most likely is an employee. Someone who works for more than one company at a time, sets his or her own hours, and realizes a profit or risks a loss probably is an independent contractor.

An employer could be subject to fines if the Internal Revenue Service, the California Francise Tax Board, or the California Employment Development Department finds a worker has been an employee when the employer treated him or her as an independent contractor. An employer who is unsure about a worker's status should ask a federal or state agency for an opinion based on the agency's guidelines. Guidelines vary from agency to agency, and one agency may classify someone as an employee even though another considers the same worker an independent contractor.

Employment At Will

The state of California recognizes the traditional rule of employment at will. This means that all workers in California are presumed to be at-will unless employees the employer takes some action to create a different relationship. There are several ways an employer can alter the relationship. An employer might enter into an oral or written contract guaranteeing to employ someone for a specific period of time or promising to terminate the employee only for specified reasons. An employee handbook or collective bargaining agreement may limit the employer's right to terminate employees. Sometimes employers inadvertently limit their right to fire employees if, by their actions, the employers give the employees reason to believe their jobs will continue. For example, if an employer promises a job to someone from out of state and that person moves to California specifically to take the job, the employer probably has changed the employment relationship. The employment is not at will because the employee has gone to the trouble and expense of moving after reasonably relying on the promise of new employment.

The implications of the at will relationship are far-reaching. Unless there is an agreement to the contrary, an employer may discharge an employee at any time for any legal reason. As long as an employee is not fired for an illegal reason_such as racial or gender discrimination_an employer does not need a good reason to fire someone. Even a silly reason is enough. It also means that an employee may resign at any time, for any reason, with or without giving notice. The employee is free to leave for any reason at all, even if by doing so he or she greatly inconveniences the employer.

Three programs administered by the state and federal government are of interest to employers: unemployment compensation, workers compensation, and Social Security. Each of these programs provides benefits to a worker based on the terms and conditions of his or her employment, and the cost of the benefits is paid, at least in part, by the employer.

Unemployment Compensation

Unemployment compensation provides benefits to employees who are laid off, fired, or otherwise forced to leave their jobs. Most employees are covered by unemployment insurance, a program administered by the state and funded by employer contributions. The Corporate Tax Law Chapter discusses the unemployment tax more fully.

Unemployment benefits are not automatic; the worker must apply for them from the California Employment Development Department (EDD). After gathering information about an applicant, the EDD makes an initial determination whether the person is eligible to receive benefits. If the EDD's decision is that the employee is eligible, it informs the former employer. Because the former employer pays the benefits, the employer has the right to some of the information given by the former employee to the EDD and has an opportunity to present information.

An applicant will not receive benefits if the applicant:

• Is an independent contractor or a commission-only salesperson

• Is a student hired by the educational institution in which he or she is enrolled

• Is fired for misconduct

• Quits for any reason other than an illegal or intolerable work environment

• Participates in a labor strike

• Refuses an offer to work again for the former employer

• Fails to seek, apply for, or accept suitable work

Because employers and employees often have different ideas of what constitutes a reasonable work environment, the issue in most disputed unemployment claims is whether the employer created an intolerable workplace environment. Only certain kinds of employer actions give someone a legitimate reason to quit a job and still collect unemployment benefits. Some of these valid reasons include:

• Sexual harassment by an employer or inaction by an employer who was informed of instances of sexual harassment

• A substantial cut in pay or benefits

• Drastic changes in working conditions or hours without an employee's consent

• Requiring an employee to break the law or work under obviously unsafe conditions

Demotions, modest decreases in wages or benefits, disagreements over management policy, and reasonable changes in workplace hours or employee regulations are conditions of employment that do not create an intolerable working environment for purposes of eligibility to collect unemployment benefits.

Workers' Compensation

Workers' compensation provides benefits to employees injured in the workplace. With few exceptions, all California employers must cover their employers with workers' compensation insurance. This program is administered by the California Division of Workers' Compensation (DWC). In some cases, California employers are self-insured to cover employees' job-related injuries.

Under California's workers' compensation law, all employers in California are required to purchase insurance against compensation claims from a company authorized by the state. Any insurance broker should be able to help a business obtain workers' compensation insurance. An employer also may seek help by contacting the DWC. The cost of premiums for compensation insurance is determined by factors such as the number of employees a business has, how safe the record of the workplace proves to be, and how much employees are paid. Generally, the greater the payroll or the higher the risk, the higher the premium. However, an employer may be able to lower premiums by establishing programs to provide for a safer workplace and by working with injured employees to minimize lost work time.

Every employers is required to post a notice in the workplace entitled "Notice of Compensation Carrier and Expiration of Coverage," which informs workers of their right to workers' compensation. If an employee is injured, the employer must report the injury immediately to the insurance carrier. The form "Employer's Report of Occupational Injury or Illness" should be sent to the insurance carrier within five days of the occurrence. Filing this form does not mean that the employer is admitting that the injury is covered by workers' compensation or that the injury even occurred. However, if the injury will result in medical treatment or lost time on the job, the employer must provide the injured worker or his or her family with a claim form and a notice about potential eligibility for benefits. If an employee dies on the job, there are additional specific requirements the employer must follow.

The benefits available to workers include death benefits, permanent or temporary total disability, permanent or temporary partial disability, and medical and related expenses. The benefit amount is determined by state guidelines and usually is two-thirds of a worker's salary at the time of the injury. It is illegal for an employer to discriminate or retaliate against someone for filing a claim for workers' compensation benefits. An employer may not refuse to hire an individual because he or she has a disabling condition from a prior injury. However, employers who hire workers with pre-existing conditions are protected from some liability. If an employee suffers an injury that is more serious because of a pre-existing condition at the time of hiring, the employer's liability is limited.

Employers' obligations under the workers' compensation law are discussed more fully in the Workers' Compensation Defense Law Chapter.

Social Security

Social Security provides workers and their dependents with retirement and other benefits. Social Security benefits are financed through taxes on wages paid by both employers and workers. Under the Federal Insurance Contribution Act (FICA), an employer is responsible for withholding the appropriate taxes from an employee's pay, in addition to submitting its own share of FICA taxes. Withholding requirements are discussed in more detail in the Business Tax Law Chapter.

Four major federal laws--the Civil Rights Act of 1964, the Civil Rights Act 1991, the Age Discrimination in Employment Act of 1967, and the Americans with Disabilities Act of 1990--protect the rights of workers to be free from workplace discrimination in the United States. California workers have additional protection under California law. For example, while the Civil Rights Act of 1964 prohibits pregnancy discrimination, the California Fair Employment and Housing Act contains provisions that prohibit certain employer actions based on a worker's pregnancy status and that specifically apply to employers who are not covered by the federal laws. In addition, the California laws cover more types of discrimination than the federal laws.

In General

Most employment discrimination is outlawed by the two major civil rights acts passed by Congress in 1964 and 1991 and by the California Fair Employment and Housing Act. Through a combination of these laws, California workers are protected against discrimination based on ancestry, color, creed, disability, marital status, medical condition, national origin, race, religion, or sex. Other laws protect workers from discrimination based on age or sexual orientation.

People frequently refer to "Title VII" rights when they are talking about a particular section of the Civil Rights Act of 1964. Title VII prohibits discrimination in a wide variety of employment areas, including advertisements for jobs, apprenticeship programs, benefits, firing, hiring, layoffs, promotions, recalls, recruitment, testing, training, and transfers. Title VII also prohibits retaliation against a person who files a charge of discrimination, participates in an investigation of discrimination, or opposes an unlawful employment practice.

Under certain extremely limited circumstances, an employer may base employment decisions or practices on a person's marital status, race, sex, etc., if the employer can demonstrate a truly legitimate need. For example, it is legal to hire only women to be attendants in women's locker rooms. Religious institutions may refuse to hire individuals based on their religious beliefs, but only for positions that are directly related to the performance of religious duties; they generally are not allowed to discriminate when hiring individuals for secular tasks, such as secretarial or janitorial work.

Certain employers, such as police departments, may base some employment decisions on an applicant's physical abilities. Other types of hiring criteria are allowed if they measure skills that are truly essential for an applicant to have in order to perform a particular job, and if they are not applied in a selective or discriminatory way. For example, an employer may require applicants for administrative jobs to pass typing or computer skills examinations.

California courts apply a test created by the United States Supreme Court to determine whether there has been discrimination in the workplace. The employee must show:

• He or she is a member of a protected class of people

• The employee or applicant was qualified for the job from which he or she was fired or for which he or she was not hired

• The termination or rejection happened even though the employee or applicant was qualified

• The position was filled by a person who is not a member of the protected class

A person who believes that he or she has been unfairly discriminated against or harassed in the workplace should file a complaint with the California Department of Fair Employment and Housing (DFEH) or the federal Equal Employment Opportunity Commission (EEOC). The DFEH enforces California laws prohibiting discrimination in employment, and the EEOC enforces federal civil rights acts that apply to the workplace. Any California employee who thinks he or she has suffered discrimination at work in the specific areas prohibited by the California Fair Employment and Housing Act must file a complaint with the DFEH before pursuing a claim in court against the employer. A complaint filed with the DFEH is cross-filed with the EEOC. A charge filed under the Fair Employment and Housing Act must be filed within one year of the discriminatory action. Both agencies are required to notify the employer of the charge of discrimination, and the employer is given the opportunity to present information as part of any investigation.

Age Discrimination

The Age Discrimination in Employment Act (ADEA) expands Title VII prohibitions against age discrimination. Most employers may not enforce mandatory retirement policies, except under a few very specific circumstances in which age is a valid qualification for doing a particular job, such as firefighting, police work, or flying airplanes. Anyone age 40 or over who works for an employer with 20 or more employees is protected by the ADEA and may not be retired against his or her will, regardless of age, as long as he or she can do the job. The California Fair Employment and Housing Act contains similar provisions. Other federal and state laws prevent discrimination based on age, with some exceptions allowing employers to force an employee age 70 or older to retire.

Discrimination Against Persons with Disabilities

The Americans with Disabilities Act of 1990 (ADA) is a federal law that prohibits discrimination based on a person's physical or mental ability. The ADA makes it illegal to fire or to refuse to hire someone because that person lacks physical or mental abilities that are not essential to the job; the ADA does not change an employer's right to employ only people who have the skills to perform the "essential duties" of a job. For example, an employer may not refuse to hire as a daycare provider a person with epilepsy simply because the employer thinks the employee should be able to drive to a hospital in an emergency, if driving is not an essential duty of the job. If it is not an essential duty, it is not a valid reason to discriminate against the epileptic applicant who is prevented from having a driver's license by his or her epilepsy.

The ADA requires employers to make "reasonable accommodations" for applicants or employees with disabilities. The employer must do whatever is reasonable to accommodate a person's disability, including modifying work schedules, providing special training, changing the work environment, buying special-equipment, modifying equipment, or reassigning to another position an employee who no longer is able to do the "essential duties" of a job. A reasonable accommodation is one that does not place an undue burden on the employer. Using pre-employment tests that identify and exclude applicants with disabilities is permissible only if the tests are unequivocally job-related.

The ADA only protects from discrimination people with permanent conditions that limit a major life activity. Thus, the ADA does not cover an employee who has a sprained ankle that is expected to heal fully, even though that employee is disabled for a period of time. A person with a permanent disabling condition that is controlled by drugs, physical therapy, or by some other treatment is covered by the ADA, such as an epileptic whose seizures are controlled by medication. The ADA also prohibits discriminating against individuals with AIDS or HIV, or people who have completed or are still participating in drug rehabilitation programs. However, an applicant or employee currently using illegal drugs is not protected by the ADA.

The ADA is administered by the EEOC. Discrmination against persons with disabilities or certain medical conditions also is prohibited by the California Fair Employment and Housing Act. Under the California law, the provisions of the ADA apply to employers 15 or more employees. The state currently is studying whether mandatory compliance by employers of fewer employees would be beneficial and reasonable.

Sexual Harassment

Sexual harassment in the workplace is prohibited by the California Fair Employment and Housing Act and is punishable as an illegal form of sex discrimination under Title VII of the Civil Rights Act of 1964. Sexual harassment can take many forms:

• Sexual or sexist comments about a coworker's appearance

• A mandatory dress code that provokes others to make sexually explicit comments

• Unwanted sexual contact or touching

• Sexual suggestions or pressure to have sexual contact

• Sexual jokes or explicit sexual comments that embarrass a coworker

• Sexual or pornographic pictures displayed or passed around

Sexual harassment is illegal if participation in any of the above activities is required to get or keep a job, to be promoted, or to qualify for benefits, or if it makes it harder for a worker to do his or her job by creating a hostile environment. The law requires that the behavior be unwelcome, undesirable, and offensive to be considered sexual harassment. The law uses the "reasonable person" standard to determine what is offensive: if a reasonable person would find an action offensive, then it is offensive under the law. In California, every employer must post an information sheet about sexual harassment, including a statement that it is illegal, a definition and description, and information about the complaint procedure and legal remedies available.

Determining what kind of behavior constitutes sexual harassment may depend on the circumstances. However, some general descriptions of sexual harassment can be made. A single, or occasional, sexual joke or sexual comment is not sexual harassment unless the comment unequivocally offers workplace advancement in return for sexual favors. Unwanted touching of someone else's body is sexual harassment. Someone who repeatedly tells lewd or obscene jokes that make other employees uncomfortable may be committing sexual harassment, especially if the person has been told that he or she makes the workplace uncomfortable. A case for sexual harassment in this example would be weakened if the person claiming harassment participated in the joke-telling.

In addition to civil laws designed to prohibit workplace sexual harassment, criminal laws provide remedies against the most serious forms of unwanted sexual contact. Anyone fired or forced to leave a job because of sexual harassment may be entitled to receive unemployment insurance benefits while searching for a new job.

Pregnancy Discrimination

Title VII and the California Fair Employment and Housing Act protect pregnant workers and job applicants from discrimination. Employers may not refuse to hire a woman because she is pregnant, fire a woman because she is pregnant, take away benefits or accrued seniority because a woman takes maternity leave, take away benefits from a single woman who has a baby, or fire or refuse to hire a woman who has an abortion.

Generally, an employer must treat pregnant women the same as other workers who cannot perform their jobs for short periods of time. Thus, if an employer allows employees to take a leave for a broken leg or short-term illness, the employer must allow pregnant women to take a leave under the same terms and conditions. Employers also are required to transfer a pregnant employee to a less hazardous or strenuous job during the pregnancy, if the employer makes such provisions for other workers with temporary disabilities. Pregnancy leave is also protected under the Family and Medical Leave Act (discussed below).

The workplace is governed by a number of additional laws.

Wages and Hours

The federal minimum wage for adult workers age 18 and over is $4.25 per hour. Employers must pay at least the minimum wage, even to employees who earn tips, and employers may not force employees to share their tips with other workers or managers, although employees may do so voluntarily. Workers under 18 years of age must be paid a minimum wage of $3.75 per hour. Generally, employers also must pay hourly employees one-and-a-half times their regular rate for every hour over 40 hours worked in a week.

There are some exceptions to the minimum wage law. For example, certain salaried workers are exempt from minimum wage standards and overtime regulations. To be exempt, an employee must be in an executive, administrative, or professional position and receive at least $250 each week in salary or fee. The employee must supervise at least two other workers, manage an office or a business operation, be a skilled artistic performer or a teacher, or work in a profession requiring advanced knowledge, such as engineering.

Employment laws also regulate child labor. For example, in California employers may not employ children under age 16 without a work permit issued by a school superintendent in accordance with California labor laws. Even when it is permitted, minors may work only certain hours during the day. Under no circumstances may a child under the age of 16 work in a manufacturing job or in any other job that includes hazardous tasks, such as working on potentially dangerous machinery. Employing a minor in violation of these laws is a misdemeanor.

Workplace Safety and Health

Workplace safety issues in California are governed by the California Occupational Safety and Health Act. Under this law, an employer is responsible for ensuring that working conditions are safe and healthful. More specifically, an employer must provide working conditions free from recognized hazards that cause, or are likely to cause, death or serious injury. The Act is enforced by the Occupational Safety and Health Standards Board within the Division of Occupational Safety and Health. All places of employment are subject to routine inspection for compliance with the Act. Additionally, authorities may investigate any serious exposure, occupational illness, or industrial accident, and they may respond to any employee complaint. Penalties for noncompliance or other violations may be assessed.

Employers have rights under the Act. For example, an employer may request a variance from a standard in some situations, may participate in the process of developing or revising standards, or may go before the Occupational Safety and Health Appeals Board to request that a citation or penalty be reviewed and changed. In addition, trade secrets or privileged communications are protected under the Act.

Parenting, Family, and Medical Leave

California and federal law require certain employers to provide parenting, family, and medical leaves to qualified employees. The federal Family and Medical Leave Act of 1993 (FMLA) allows qualified employees to take up to 12 weeks of unpaid leave to attend to family matters, including health emergencies. Under the Act, a qualified employee may take an unpaid leave following the birth or adoption of a child, after acquiring a foster child, to care for an immediate family member with a serious health condition, or to care for his or her own serious health condition.

Men and women are equally entitled to this leave, but not every worker is qualified. A person must be a full-time government employee, or an employee of a company with 50 or more employees who has worked for the company at least 12 months and at least 1250 hours during the 12 months immediately prior to taking the leave.

Under most circumstances, an employee may elect or the employer may require the use of any accrued paid leave for periods of unpaid leave under the FMLA. When the leave is foreseeable, an employee must provide the employer with at least 30 days' notice of the need for the leave. If the leave is not foreseeable, the notice must be given as soon as it is practical. An employer may require medical certification of a serious health condition from the employee and may require periodic reports of the employee's status and intent to return to work during the leave. In addition, in appropriate situations an employer may require a fitness-for-duty certification upon return to work.

The employee is not entitled to accrue benefits such as vacation time or sick leave during a leave under the FMLA. Any benefits accrued by the employee at the time of the leave, however, stay with the employee. During the leave, the employer must maintain the health benefits the employee was receiving at the time the leave began, at the same level and in the same manner as if the employee had continued to work.

When an employee returns from a leave under the FMLA, the employee is entitled to be restored to the same job the employee left when the leave began. If the same job is not available, the employer must place the employee in an equivalent job with equivalent pay, benefits, duties, and responsibilities. Under the Act, employers are prohibited from discriminating against or interfering with employees who take FMLA leaves.

Substance Abuse in the Workplace

California law mandates that workplaces be drug-free, but balances this policy with the employee's right to privacy in employment. California's constitution has been interpreted as allowing employers in California to ensure a drug-free environment through drug testing under certain limited circumstances. The California Court of Appeal has said that pre-employment drug testing does not violate a potential employee's right to privacy, as long as the applicant knows the job offer is conditioned upon consent to drug testing, the test is minimally intrusive, and all applicants are treated uniformly.

Additionally, various federal laws govern drug use or drug testing in certain employment situations. For example, the Federal Drug Free Workplace Act of 1988 requires that recipients of federal grants as well as most federal contracts have comprehensive substance abuse policies. Rulings by the National Labor Relations Board, regulations promulgated by the Department of Transportation, Department of Defense rules, and judicial interpretations of the federal Constitution and civil rights laws also have considered the issues of substance abuse or rehabilitation in the workplace. Some California cities_such as Berkeley and San Francisco_also have ordinances that regulate an employer's drug and alcohol testing.

Generally, an employer may test for drugs and alcohol only under certain conditions, such as when there are employees in safety-sensitive positions that directly affect the safety of other workers or the general public, or when an employee unmistakably violates workplace rules on drugs or alcohol while operating an employer's machinery, equipment, or vehicle.

Employees are guaranteed privacy in matters of substance abuse and rehabilitation. Private employers of 25 or more employees are required to accommodate an employee who wishes to voluntarily participate in alcohol or drug rehabilitation. The identity of an employee participating in such a program may not be disclosed by the employer or by a health care practitioner without the employee's consent. There are some limits to these guarantees. The accommodation of an employee who is participating in rehabilitation may not impose an undue hardship on the employer. An employer is not required to hire or retain someone who is unable to perform a task or who endangers others because of current alcohol or drug use.

Privacy

An employee's right to privacy at work is a hotly debated issue today as increasing numbers of employers are using searches, surveillance, and eavesdropping in an attempt to better monitor their employees' activities. The law in this area is evolving and is largely unsettled, but it is fair to say that an employee surrenders some of his or her right to privacy at the workplace door. Employers have more of a legal right to monitor employees than governments have to monitor citizens. However, the number of employees who are challenging employer practices is growing.

When a court must determine whether an employee's right to privacy has been violated, it looks at whether the employee's expectation of privacy in a particular situation was reasonable. For example, the expectation of privacy is more reasonable for items in a locked desk drawer than for items left out on a desk. Similarly, it is more reasonable to expect privacy during a personal phone call made on a pay phone than for a work-related call on the employer's phone.

The reasonable-expectation standard is not a very strong guarantee of employee privacy. An employer can expand his or her right to search or monitor simply by giving notice to employees. Once an employee receives notice that the employer reserves the right to monitor calls, search offices, read electronic mail, or film the workplace, there is very little reasonable expectation of privacy.

In addition to surveillance and search activities, areas in which the right to privacy is an issue include lie detector tests, smoking in the workplace, free speech, dress and personal appearance, and disclosure of employee records.

Whistleblowing

It is illegal for an employer to fire a worker in retaliation for reporting a violation of a law or for refusing to participate in an activity the employee believes to be illegal. If an employee acts in good faith and reports suspected illegal activities to the employer, a governmental agency, or a law enforcement officer, the employee may not be fired or treated adversely. An employee who is terminated for whistleblowing may sue the employer for retaliatory discharge.

Veterans' Reemployment Rights

Some veterans returning from active duty are entitled to be reemployed in their pre-service jobs. A veteran must meet the following five requirements to be covered by the Veterans' Reemployment Rights Act:

• Held an "other than temporary" (not necessarily "permanent") civilian job

• Left the civilian job for the purpose of going on active duty

• Was on active duty for no longer than four years, unless the period beyond four years (up to an additional year) was "at the request and for the convenience of the federal government"

• Was discharged or released from active duty "under honorable conditions"

• Applied for reemployment with the pre-service employer within 90 days after separation from active duty

Reinstatement must be within a reasonable period of time to a position of similar pay, seniority, and status. In addition, the seniority level must be set at the point it would have been at had the veteran kept the position continuously during military service.

Employee Access to Personnel Records

California law gives employees the right to inspect personnel records. The right to inspection means each employee may review records kept about him or her regarding employment qualifications, promotions, transfers, compensation, discharge, and disciplinary actions. Employees may not access reference letters or information regarding criminal investigations. The employer is required to make the employee's record available to him or her at the workplace at reasonable intervals.

Non-Compete Agreements and Trade Secrets

A non-compete agreement is a type of restrictive covenant that limits an employee's right to work in a particular industry after he or she leaves a company. The former employee may be prevented from doing one or all of the following:

• Working for a competitor of the former employer

• Starting a business that competes with the former employer

• Contacting former or current customers or employees of the former employer

A non-compete agreement generally is enforceable only if executed when the worker is initially hired or at a time when the employee receives a raise, broader sales territory, or new or expanded responsibilities. The chances of enforcement are enhanced if the agreement is limited to the geographic area in which the employee actually worked; at most, it may cover the employer's trade area. The possibility of enforcement also is improved if the activities the former employee is prevented from doing are specified and if the agreement expires within six months to one year of termination. Non-compete agreements are assignable upon the sale of a business.

Another type of restrictive covenant prevents an employee from using trade secrets and other confidential or privileged information learned on the job after termination. Factors in the enforceability of confidentiality agreements include the ability of the former employer to prove that the information truly is confidential, the precautions that were taken to guard the information, and the reasonableness of the time and geographic limitations imposed.

Firing a worker may be emotional for both the employer and employee. Employers should recognize that an involuntarily terminated employee may seek legal action. Treating an employee fairly during the termination process may benefit the employer in helping to prevent such legal action.

Reasons for Discharge

Recognizing whether an employee was hired at will is critical to proceeding properly with termination. As stated earlier, if a worker has been employed at will, he or she may be discharged at any time for any reason other than an illegal one. If the employment relationship is not at will if an employer has promised to employ the worker for a specific period of time, for example--termination must be "for cause." The power to discharge an at-will employee is limited by public policy and the employer's responsibility to act in good faith and to deal fairly. Causes that justify job termination include habitual lateness or absence, theft of the company's or a co-worker's property, and falsifying records.

Termination Procedures

When a written employment contract exists, it may include requirements that relate to termination. A common requirement is that an employee be notified at least 30 days in advance of the termination. The discharge of an employee may not be a secret process; in other words, the employee has the right to know that he or she is being discharged. If an employee belongs to a union, the negotiated contract governs the process for involuntary termination.

Rights and protections given to employees through an employee manual may be enforceable against an employer in a post-termination lawsuit as an "implied contract." For example, some courts have found that company retirement, sick leave, and fringe-benefits plans described in employee manuals were enforceable promises of compensation. Oral promises made at the hiring interview also may be recognized as implied contracts.

As stated earlier, fired employees usually are eligible for unemployment benefits. Because the unemployment tax for some businesses is based on their experience with unemployment claims, it can be important to know how and when to contest claims. Unemployment claims may have ramifications for any discharge-related lawsuits a former employee may file. For example, if a company chooses not to oppose a former employee's claim for unemployment benefits, the company could be found to have waived a legitimate reason for the firing or to be tacitly admitting wrongdoing. A former employee who wins an unemployment case may find it easier to file a lawsuit for wrongful discharge.

Prohibitions to Firing

As noted, dismissals are illegal when based on age, ancestry, color, creed, disability, marital status, medical condition, national origin, race, religion, sex, or sexual orientation. In addition, an employer is prohibited from firing an employee for other reasons, such as:

• Good faith reporting of alleged violations of the law

• Participating in union activity, such as a strike

• Joining with others to protest unsafe working conditions

• Refusing to commit an unlawful act on the employer's behalf, such as committing perjury or fixing prices

• Reporting to jury duty

• Reporting railroad accidents

• Engaging in legal activities off-premises and after working hours

It also is prohibited to fire an employee whose wages have been garnished or whose pension rights under the Employment Retirement Income Security Act (discussed in the Employee Benefits Law Chapter) may be affected.

Defamation Related to Termination

Fired employees sometimes sue former employers for libel (defamation in written form) or slander (defamation in oral form). A defamatory statement is one that harms a person's reputation by lowering his or her standing in the community or deterring others from associating with him or her. Defamation occurs when the statement is false, communicated to a third party, and no special privilege exists.

Discussing a decision to terminate or criticizing a fired employee in front of non-essential third parties are actions that can increase an employer's vulnerability to defamation charges. Successful lawsuits have been based on statements in discharge letters and negative references to prospective employers. Truth is an absolute defense in any defamation lawsuit, and thus it is important that an employer always state truthful reasons for any termination.

For more information on employment law, the business owner may wish to refer to the following resources:

Robert Coulson, Empowered at Forty: How to Negotiate the Best Terms and Time of Your Retirement (HarperBusiness, New York, NY 1990).

Maureen E. McClain, Employment Termination Law: A Practical Guide for Employers (California Continuing Education of the Bar, Berkeley, CA 1989).

For information or to order free publications, including Discrimination is Against the Law, Employment Discrimination Based on Disability, Leave Rights of California Workers, Pregnancy Discrimination Fact Sheet, and Sexual Harassment is Forbidden by Law (in English or Spanish), contact one of the California Department of Fair Employment and Housing offices, 322 First Street West #2126, Los Angeles, CA 90012-3112

2000 O Street #120, Sacramento, CA 95814, (916) 445-9918, (916) 324-1678 (TDD); 30 Van Ness Avenue #3000, San Francisco, CA 94102, (415) 557-2005, (800) 884-1684.

Veterans interested in their reemployment rights or in assistance in attaining reemployment should contact the California Department of Veterans Affairs, 1227 Oak Street #300, P.O. Box 942895, Sacramento, CA 5814, (916) 653-2158, or the United States Department of Labor, Director for Veterans' Employment and Training, (202) 219-9110. The United States Department of Veterans Affairs, Office of Public Affairs, 810 Vermont Avenue N.W., Washington, DC 20420, publishes Federal Benefits for Veterans and Dependents (1994 ed.), a free booklet.

The California Employment Development Department, 800 Capitol Mall, Sacramento, CA 95814, (916) 654-8210, has free publications, including California Employer's Guide 1995 and Information Sheet: California System of Experience Rating.

Employers with questions about tax obligations with regard to their employees should inquire at the California Franchise Tax Board, P.O. Box 942840, Sacramento, CA 94240, (800) 338-0505, (800) 822-6268 (TDD); or the Internal Revenue Service, 1111 Constitution Avenue N.W., Washington, DC 20224, (800)829-3676.

Workplace safety enforcement questions should be addressed to the California Occupational Safety and Health Division, Industrial Relations Department, P.O. Box 420603, San Francisco, CA 94142-0603, (415) 972-8835.

The National Organization on Disability (NOD), 910 Sixteenth Street N.W. #600, Washington, DC 20006, (202) 293-5960, (202) 293-5968 (TDD), has information about the ADA and other disability issues.

For information on wages, hours and overtime, and other issues, or to order Compliance Guide to the Family and Medical Leave Act (June 1993) or Handy Reference Guide to the Fair Labor Standards Act (Oct. 1994), free pamphlets, contact the United States Department of Labor, Wage and Hour Division, Employment Standards Administration, 71 Stevenson Street #1700, San Francisco, CA 94105, (415) 975-4510; (202)-219-8743, (headquarters), (800) 326-2577 (TDD).

The United States Department of Labor, Women's Bureau Region IX, 71 Stevenson Street #927, San Francisco, CA 94105, (415) 975-4750, publishes free pamphlets including Family & Medical Leave: Know Your Rights, Pregnancy Discrimination: Know Your Rights, and Sexual Harassment: Know Your Rights.

For information about the ADA or to order The Americans with Disabilities Act: Questions and Answers or The Americans with Disabilities Act: Your Responsibilities as an Employer, free booklets, contact one of the offices of the United States Equal Employment Opportunity Commission: Los Angeles District Office, 3660 Wilshire Boulevard Fifth Floor, Los Angeles, CA 90010, (213) 251-7278; San Francisco District Office, 901 Market Street #500, San Francisco, CA 94103, (415) 356-5100; Region IX Disability and Business Technical Assistance Center, (510) 465-7884, (510) 465-3172 (TDD); 1801 L Street N.W., Washington, DC 20507, (202) 663-4900, (800) 872-3302 (TDD).