The Test to Determine Whether a Worker is an Employee or a Contractor

Why does it matter if a Sacramento worker is considered an independent contractor or employee? The difference is in the benefits. Employers do not have to provide as many benefits and rights to independent contractors as they do for actual employees. 

To dig further into the disadvantages, contractors:

  • Can be fired more easily than employees
  • Are not eligible for unemployment insurance, minimum wage, or overtime pay
  • Are not protected by state and federal anti-discrimination laws 
  • Do not have income tax withheld 

California Governor Gavin Newsom signed Assembly Bill 5.AB5, which went into effect January 1, 2020, to change the way workers in the state are identified. This will better solidify the Labor Code, the Unemployment Insurance Code, and the Industrial Welfare Commission wage orders. Tests have been developed to make sure these classifications of independent contractors versus contractors are done properly.

What is the ABC Test?

California’s ABC Test requires employers to apply certain conditions to the hiring process to determine if workers should be classified as an employee or independent contractors. This test actually considers workers an employee by default unless those hiring can prove these three conditions:

  1. The worker is free from the control and direction of the person hiring in connection with the worker’s performance.
  2. The worker does their job outside the typical methods of the hiring business.
  3. The worker already operates in an independent trade, occupation, or business similar to the hired job.

What is the Borello Test?

While the ABC test is the standard for California employers, Sacramento workers in certain industries may also be subject to the Borello test, which considers a few factors during the employer’s hiring process, such as: 

  • Whether or not the work performed is an essential part of the business
  • Whether or not the worker invested in the equipment or materials needed for the job
  • Whether or not the job requires a special skill
  • The method of payment, such as by the hour or salary
  • The length of time the job is supposed to be performed

What is the Common-Law Test?

This test acts as a set of guidelines the IRS uses on the federal level to classify workers as employees or independent contractors. By measuring how much behavioral and financial control an employer has over a worker, the three factors of the Common-Law Test, or Right-to-Control test, determine if they are indeed an employee.

Behavioral Control

There are four facts that will prove an employer’s right to say how a worker conducts their job or determines behavioral control, which means they are an employee:

  • If a business gives instructions on how, when, and where a worker performs their duties.
  • If a business gives more specific instructions, the more control they have over the worker.
  • If a business has a detailed evaluation system that measures work performance, not just judging the end result.
  • If a business trains the worker on how to do their job, instead of being free to perform their job duties their own way.

Financial Control

These five financial control factors will determine whether or not a worker is an employee:

  • If a worker is making a significant investment (though there is no specific dollar amount set) in their tools, materials, or resources, they are more likely an independent contractor.
  • If a worker incurs more unreimbursed expenses, it is more probable that they are an independent contractor. Although, this can be a blurred line because employees can also tack on unreimbursed expenses. 
  • An employee usually makes more of a profit, while an independent contractor has more losses. This is based on the accumulation of unreimbursed expenses.
  • Independent contractors have the freedom to advertise that their services are available to other businesses in the market, where employees are restricted by company policies if they want to run a side business.
  • Different payment methods will determine if the worker is an employee or a contractor. Independent contractors are normally paid a flat fee or by the hour for each job they are assigned. An employee has a set hourly wage or salary, which could include commission, for a period of time.

The Different Degrees of Relationships Between the Business and the Worker

There are four different categories of agreements between a business and a worker that will help determine how to classify the worker’s relationship, which includes:

  • Employee benefits, such as health insurance, paid time off (PTO), and sick days are available to employees, not contractors.
  • Written contracts, which clearly define how the business and worker work together.
  • How long the working relationship is, which, for an employee, is an indefinite period of time when hired and, for an independent contractor, is a specific time period for each project.
  • The level of services provided, meaning an employee offers services that are central to the business and under the company’s direct control.

Why Employers Should Correctly Classify Their Workers

It is crucial not only for employees to be correctly classified as either an employee or contractor but for employers as well because it affects the business taxes and reports they submit to federal and state governments.

For example, employees receive a W-2 form, and independent contractors receive a Form 1099 to file their tax returns. If workers are misclassified, financial penalties may ensue. 

What Workers Should Do if Misclassified as a Contractor

There are a few steps workers can take if they feel they have been improperly classified as a contractor and should instead be an employee, receiving more rights and benefits.

  1. They should meet with their supervisor first to discuss and review their work status classification. 
  2. Ask the IRS to review the case, as well as the Department of Labor and Workers’ Compensation Board.
  3. File taxes and include Form 8919, which allows contractors to pay only their portion of the payroll taxes if they believe they have been wrongly classified. If the IRS audits the tax return and rules that the worker is not an employee, this form should be brought to Tax Court.
  4. Hire a misclassification attorney well-versed in seeking justice for employees.

Are Those Non-Disclosure Agreements Enforceable?

Non-disclosure agreements share many characteristics with standard contracts. However some of them may not be enforceable, even when all necessary components to establish legal obligations are present. An NDA does not guarantee the confidentiality of all information. 

These confidentiality agreements do not apply to public records, such as SEC filings or corporate addresses. Furthermore, even when a non-disclosure agreement appears to be enforceable in all other respects, there are numerous situations in which a court may decline to bind the parties by the agreement.

What is a Non-Disclosure Agreement? 

A non-disclosure agreement (NDA) is a contract that is enforceable under the law and creates a binding, confidential relationship. The parties agree that any sensitive information they may collect will not be disclosed to any third parties. Non-disclosure agreements are frequently used by companies when they get into negotiations with other companies. They give the parties the freedom to exchange private information without worrying that their rivals would obtain it. It might be referred to as a mutual non-disclosure agreement in this situation.

NDAs go by a variety of names, such as confidentiality agreements (CAs), confidential disclosure agreements (CDAs), and proprietary information agreements (PIAs), but they all generally share one very crucial feature, once signed an NDA, the signing parties are not permitted to discuss any information covered by the agreement with any unapproved third person.

An NDA establishes the legal structure necessary to prevent ideas and information from being misappropriated or disclosed to rivals or outside parties. A variety of legal repercussions, including litigation, financial penalties, and even criminal accusations, result from breaking an NDA agreement. NDAs provide your company with a level of security so that even unintentional breaches are covered.

Use of a Non-Disclosure Agreement 

When employees have access to sensitive information such as trade secrets, proprietary procedures, customer information and lists, marketing tactics, or any other important or sensitive information, NDAs are frequently used by businesses.

NDAs categorize information by defining what information is confidential and what can be released, allowing parties to operate freely within the restrictions imposed by the confidentiality agreement.

While preventing employees from sharing private information in the first place is one of an NDA’s goals, it can also help safeguard trade secrets when information is exchanged in the normal course of business. A non-disclosure agreement (NDA) might safeguard an innovator as they create a new product or concept because the public revelation of a pending innovation may occasionally nullify patent rights.

When to Use a Non-Disclosure Agreement 

Non-disclosure agreements are typically used to prevent the spread of information regarding products, employees, partners, clients, and during a merger and acquisition. 

An organization must make sure that none of the information it is releasing (technical, financial, or other proprietary material) can be shared with other parties before engaging in the sale or licensing of a technology or product. A business must make sure that its employees are prohibited from sharing sensitive information about the company while they are on the job or after they leave because they have access to confidential and proprietary information.

An NDA will be helpful when a business has to make sure the information given in negotiations with a potential partner or investor is protected. Additionally, when onboarding a new client, a corporation could get access to sensitive data belonging to that client. By specifying which information cannot be released, an NDA can shield the company from unintentional exposure to legal liabilities.

Finally, when selling a company, confidential financial and operational information must be disclosed to middlemen and brokers in addition to the entity that will be purchasing the business. The protection of a company’s data cam ensured through an NDA. When giving information to potential investors, entering into contracts with vendors, and considering joint ventures, confidentiality disclosure agreements are also frequently used.

Enforceability of a Non-Disclosure Agreement

State-by-state regulations may differ, but as long as a non-disclosure agreement is properly prepared and executed, most jurisdictions consider it to be enforceable. This means that as long as there is consideration and both parties intended to be bound by the language in the NDA, then it will typically be enforceable. Some courts have even established that continued at-will employment is enough consideration to enforce an NDA. 

When confidentiality agreements adhere to the fundamental principles of a contract, they are typically enforceable. However, there are legal rules at the state and federal levels that expressly address non-disclosure agreements due to their propensity to limit employees’ job mobility by preventing the ability to freely pursue employment prospects after leaving a position.

Typically, if an NDA abides by the standards of a contract and is not unduly one-sided or does not make outlandish requests, it will likely be enforced. 

When a Non-Disclosure Agreement is unenforceable 

California passed legislation that forbade employers from requiring non-disclosure agreements (NDAs) as a condition of settling a civil or administrative action in which claims of sexual harassment or sex discrimination have been made. The Act extends such limitations to harassment and discrimination allegations made in a civil or administrative complaint that are based on any protected feature.

A court is more likely to identify issues with an NDA that is unduly expansive or restrictive, especially if it is not time or scope-limited, in these situations, it is likely that an NDA will be unenforceable. The same goes for when the underlying objective of a contract is illegal; courts will not uphold it.  If a non-disclosure agreement mandates an employee to keep a specific topic private despite having a legal obligation to disclose it, it is likely illegal and, therefore, unenforceable.

When an employer asks someone to sign a non-disclosure agreement as part of a severance arrangement, the issue of inadequate consideration frequently arises. A court will not enforce an NDA on the grounds of lack of consideration unless the employer is providing additional consideration above what is already legally obligated.

Contacting the Lawyers at Perkins Asbill 

Make sure you understand the terms of the NDA before you agree to sign one. It can make sense to hold off on signing until the issue is resolved if you perceive ambiguous or general language to be an unreasonable restriction on you.

If you are ever concerned with the language in an NDA, all parties have the right to consult with an attorney before signing. 

Managers Deserve Overtime- What Does the Law Say?

The 1970s was a golden age for American workers. Just look at the popular songs of the day: 1974’s “Takin’ Care of Business” by Bachman-Turner Overdrive, 1977’s “Take This Job and Shove It” by Johnny Paycheck, 1978’s “Blue Collar Man (Long Nights)” by Styx, 1980’s “9 to 5” by Dolly Parton, and 1983’s “She Works Hard for the Money” by Donna Summer. And these are just a few in an extensive catalog of an era’s odes to the working-class hero.

In those days, an hour worked equaled an hour paid, and if someone worked over their shift, they were compensated with an increased wage. Overtime pay was a common occurrence with more than 60% of employees earning a salary qualified for overtime income in 1975. A salaried worker in the seventies was four times more likely to earn extra pay than someone in today’s workforce, and most of this was earned by the middle class.

Over the last 50 years, college tuition has skyrocketed, mortgages and rents have risen through the roof, and inflation balloons. As the price of living soars, retirement savings shrivel, and the average hourly wage sinks while the time spent working increases without additional compensation.

In other words, most Americans have consistently been underpaid while being overworked. The modern worker makes less money for working longer hours than most of their grandparents did. Many young people in the workforce do not know that if they work more than 40 hours in a scheduled workweek, any time over that is considered overtime, and their earned wage should become 150% of their normal wage.

Currently, only 15% of America’s salaried employees receive overtime pay. In most cases, employees work more than 40 hours and get paid nothing extra, essentially working for free. For decades, employers have found new ways to exploit this free labor pool.

The wealth divide has reached Gilded Age proportions. Income inequality widens—profits rise, and wages fall into the gap.

Everybody is Working for the Weekend

The Organization for Economic Cooperation and Development (OECD) reports that, on average, a majority of Americans (54%) work between 40 to 49 hours each week. More than 20% work 50-59 hours, and almost 10% of the more than 150 million workers put in more than 60 hours at work. Yet somehow, only 15% of these workers qualify for overtime pay.

This was especially applicable during the COVID pandemic when millions were working from home and finding it hard to separate their work and private lives.

According to federal law, employees working as managers need to earn less than $35,568 annually or $684 weekly to have a right to overtime pay. During the Obama administration, a new overtime threshold of $47,000 was proposed, but 21 states and the U.S. Chamber of Commerce halted the increase by suing the administration and alleging government overreach. The current threshold was agreed on in 2019 during the Trump administration.

California has its own threshold, progressively increasing each year and currently sitting at the minimum annual salaries of $58,240 for employers with fewer than 26 employees or $62,400 for employers with more than 25 employees.

Typically, employees exempt from overtime pay are 

  • Administrators
  • Contractors
  • Executives
  • Licensed professionals
  • Managers
  • Outside salesmen
  • Supervisors 
  • Other high-level employees that require independent judgment

Many of these workers are excluded because they are miscategorized as managers or supervisors instead of employees who perform managerial duties. Under California law, employees can only be classified as exempt if:

  1. They spend more than 50% of their work hours directing at least two subordinates 
  2. Their annual salary exceeds the minimum wage threshold

This direction of subordinates includes powers like firing and hiring capabilities. Supervising other employees does not automatically require overtime exemption because, in usual circumstances, a supervisor is performing the same primary tasks as their subordinates.

If a manager is working overtime hours because the employer has not hired the appropriate number of employees to do a job, the manager has a right to overtime pay, even if the manager supervises other employees while being overworked. 

An employer paying an employee a salary instead of an hourly wage or adding a nomenclature like manager, leader, supervisor, or director to an employee’s Human Resource file does not also mean the employee is required to work overtime hours for free.

Employees can file a claim against any employer that violates California’s overtime laws that withhold wages. Employees may sue for:

  • Backpay
  • Interest
  • Penalties
  • Undue suffering

Meet the New Boss, Same as the Old Boss? 

Overtime protections have been under attack since FDR’s New Deal first established them. National industry groups and the U.S. Chamber of Commerce argue overtime pay adds an additional economic burden to employers. The current business lobby makes similar claims, citing the damage these changes could have on small businesses and nonprofits.

Creative management by fearful employers often solves these problems with moves like hiring appropriately, changing the scale or operations, or cutting out needlessly repetitive tasks or duplicate efforts.

Joe Biden always touts his support of the working class, and since becoming president, he has continuously spoken about the administration’s pro-worker agenda. This includes: 

  • Ensuring workers receive the pay and benefits they deserve
  • Increasing the number of workers who qualify for overtime pay
  • Encouraging and incentivizing unions and collective bargaining
  • Expanding worker protections
  • Holding corporations and companies accountable for violating of labor laws
  • Wage increases for federal workers

Lawmakers have also been discussing and proposing bills that cater to a modern workplace, amending the federal workweek to 32 hours and requiring overtime pay for nonexempt workers when they hit hour 33. 

This progressive approach to the labor force seems to be taking targeting measures toward overtime pay. The Economic Policy Institute (EPI) projects federal labor laws will follow the lead of states like California, New York, and Washington by adopting laws that strengthen overtime protections. The EPI envisions the federal salary thresholds to increase to more than $82,000 by 2026.

In his recent speech, Biden claimed that passing the American Rescue Plan, the Protecting the Right to Organize (PRO) Act, and the Infrastructure Investment and Jobs Act is really about “rebuilding the middle class” and allowing “more workers to have a voice on the job.”

Having a voice in the workplace also means restoring the dignity of American workers by ensuring workers the appropriate pay for the hours they work. 


Paying Managers Overtime – What the Law Says

What does California law have to say about paying managers overtime? It has been a long, arduous journey – and continues today – with the state appearing at the forefront of the U.S. in strengthening overtime policies for employees, despite opposition from employers and the state legislature. 

The daily overtime rule dates back to 1918, which requires businesses to pay extra compensation whenever an employee works more than eight hours a day. These laws were originally put into place to to prevent any safety hazards at factories caused by overwork. 

There have been many twists and turns in California occupational laws since then, of course, and we will explore what employees need to know about their rights when on the job.

What are More Recent Job Overtime Laws in California?

California is no stranger to the “duties test” exemption law which is used for managerial obligations, which says an employee who manages other workers – even a few – for at least 50 percent of their shift is exempt from overtime pay. 

Needless to say, a more detailed definition of a manager has erupted into debates on the floor of the California State Legislature. In 2020, in fact, the legislature answered with stronger protections for employees with the approval of a bill which allows overtime for some contract employees who were previously exempt.

App-based companies, such as Uber, Lyft, and DoorDash, fought back with a referendum to repeal the law, but it was actually ruled unconstitutional, and the California legislature will argue in defense of Proposition 22 in a state court later in 2022.

What Legally Determines an Employee to be a Manager?

First of all, California law requires an employee to be classified as a manager by more than just having the job title of “manager.” Under wage laws, it is not that simple to make this employee exempt from overtime pay and commission.

It actually depends on the employee’s job duties and how long the employee performs those duties, which needs to be 50 percent of the time. Primary managerial job duties must consistently include the following:

  • Regularly overseeing the work of at least two or more employees.
  • Communicating directly with leaders of the company.
  • Has the authority to hire and fire an employee.
  • Regularly exercising power and training with his or her discretion.
  • Can sign purchase receipts.
  • Can make suggestions and give input about personnel, which is then highly considered by his/her employer or supervisor.

Employees also legally qualify as a manager in California if they earn a monthly wage, which is equal to at least two times the state minimum wage for full-time employment. 

If an employee is considered a manager by his or her employer and marked as exempt from overtime pay, but the employee does not follow the above duties or monthly wage, they may be eligible to file a lawsuit against the employer to relinquish their unpaid compensation.

When Managers are not Exempt from Overtime Pay

Because of the recent economic slowdown in California, many employers are cutting costs, labor force, wages, and benefits to survive, which also means that the workers left to pick up the slack could be faced with more job duties and longer shifts without an increase in pay.

Right now, however, employees in managerial positions should really take a closer look at their day-to-day duties to determine if they are actually managing others or spending the same amount of time performing the same tasks as those they manage. In other words, those who were once considered managers and exempt from overtime may now be eligible to receive overtime (time and one-half), even double time, depending on the overage of eight hours a day or 40 hours in a week. 

What Do Federal Laws Say About Overtime Pay?

While the U.S. Department of Labor’s Occupational Safety & Health Administration (OSHA) does not enforce any overtime limits, it does have guidelines designed to protect worker safety and advise employers to follow, which include:

Defining the Workweek

According to the Fair Standards Labor Act, the workweek for employees in the United States is set at 40 hours in a seven-day period. After 40 hours per week, overtime (base pay plus half) is required to be paid for each hour of work. While there is no limit, federally, to the number of hours an employee can work, OSHA warns of the dangers caused by these extra hours and extra shifts, and extra days.

Symptoms Associated with Overtime

The Center for Disease Control and Prevention (CDC) and OSHA report that overtime hours worked can cause these symptoms:

  • Decreased alertness
  • Increased fatigue
  • Increased chance of injuries
  • Higher tension and anxiety
  • Lower cognitive function
  • Increased vulnerability to illness
  • Depression

Solutions to Risks Caused by Overtime

OSHA recommends employers provide additional breaks and lunches during overtime. It is also recommended that, if overtime is necessary, the number of hours per shift should be reduced each day, and the number of days per week should be increased. Employers are encouraged to keep an eye out for fatigue and the symptoms above and to take action if employees show these signs. 

How Can Managers Protect Themselves and be Paid for Overtime?

Employers benefit from classifying employees as managers because they can work long hours without the additional pay. But beware of employers who are misclassifying employees as managers; this is illegal. 

An employee has a legal right to recover any overtime wages he or she is owed, along with any penalties connected to the misclassification, by filing a claim with the Division of Labor Standards Enforcement, or labor commissioner. Falsely classified employees can also file a civil lawsuit against their employer. 

There is a limited amount of time to file these claims in California, so it is critical for employees to hire an attorney experienced in all of the nuances of overtime compensation claims and lawsuits to be sure they do not lose their rights to compensation and receive the wages they are owed. 

How Quickly Does an Employer Have to Pay a Terminated Employee?

Employees lose their jobs all the time. Although some must face the unfortunate reality of being unemployed, so long as the employer acted lawfully, an employer has every right to terminate their employees. Nonetheless, the State of California and federal law have specific rules employers must abide by to properly discharge employees and provide them with the proper compensation resulting from that termination. Employees should know their rights under state and federal law to ensure they are appropriately compensated for all hours worked and any additional compensation owed to them.

Timeframe of Final Compensation

California employees are covered under two laws that dictate the rules for payment of an employee’s wages and the organization of hours. These laws include the federal Fair Labor Standards Act (FLSA) and applicable sections of the California Labor Code.

Fair Labor Standard Act

Under regulations created by the U.S. Department of Labor, employers covered under the FLSA are not required to pay employees their final paycheck upon termination immediately. Generally, employers covered under the FLSA will pay employees their final compensation at the end of the most recent pay period when all other employees receive their pay.

Covered employers include employers with two or more employees who earn yearly revenues of $500,000 or more. Covered enterprises also include:

  • Hospitals.
  • Medical care facilities.
  • Nursing homes.
  • Schools and preschools.
  • Government agencies.
  • Enterprises involved in interstate commerce (sale of goods or services across state lines).

California Labor Code

Unlike the FLSA, California maintains much stricter rules for the payment of a terminated employee’s final wages. Under applicable sections of the California Labor Code, terminated employees must receive their final paychecks immediately upon notification of termination. That means when an employee is notified of their discharge from the enterprise, their employer must provide their final check after providing the notification Furthermore, an employer must pay the discharged employee at the place of the employee’s discharge. For example, suppose an employee is a cashier at a grocery store and received their termination notification at the grocery store. In that case, the employee must receive their final paycheck at that grocery store–not another location.

Forms of Compensation Entitled to Employees

Under California law, compensable wages owed to an employee upon their separation from an enterprise include pay for all hours worked; all overtime, time and a half, or double time worked by the employee; and any earned and unused vacation or paid time off (PTO). Employees are not entitled to unused sick time or other compensable time like bereavement leave.

Notification of Departure

Many employees have the ability to terminate their own employment (i.e., voluntarily quitting their position) at any time they choose. However, at-will employees (employees that work for an indefinite period that may be terminated for any lawful reason) that quit their position without providing their employer notice must be paid within 72 hours of notification.

At-will employees who provide at least 72 hours of notice that they are quitting their current position must be paid when their employment relationship with their employer ends. Employees that fail to provide at least 72 hours’ notice may request their final paycheck be mailed to a designated address.

What if an Employer Improperly Withheld an Employee’s Last Paycheck?

Under California law, employers are subject to harsh penalties for improperly withholding an employee’s last paycheck. If an employer does not provide an employee with their last paycheck based on the parameters established under California law, the employer is liable for the unpaid wages. 

Furthermore, the employer will have to pay an additional penalty to the employee based on their average daily pay for up to 30 days after the employer fails to pay. Thus, if an employee’s former employer waited 30 days to pay the employee their final paycheck, they are entitled to 30 days of additional compensation as if they worked that time.

Severance Pay Considerations

Under federal and state law, an at-will employee is not entitled to severance pay upon lawful termination of their employment. However, some employees may be entitled to pay if their employer has a policy that provides employees with severance pay if specific requirements are met. Employees should closely review their employer’s personnel handbooks to determine whether their employer offers severance pay and how to qualify.

Unemployment Insurance

California requires covered employers to carry unemployment insurance coverage if or when employees separate from the enterprise under certain circumstances. An employee is entitled to unemployment compensation unless they fall under one of the following categories:

  1. The employee voluntarily quit their position without good cause.
  2. The employee was discharged from the enterprise because of willful misconduct (an example would be stealing the employer’s property and deviating from the employee’s job duties causing harm to the employer or other employees).
  3. The employee refuses suitable work.

Employees denied unemployment coverage but have reason to believe they might be entitled to compensation should contact an experienced California Wage and Hour attorney.

How Can an Attorney Help My Case?

The California Labor Code levies heavy penalties against employers that fail to pay their employees final wages within the timeframes provided under the law. Every so often, employers will try to withhold wages from an employee’s final paycheck, citing all sorts of misconduct allegedly committed by the employee. Employment attorneys are trained to determine whether an employer has a reasonable basis for their claims or is simply trying to pull a fast one on its former employee.

California law allows employers to provide “good faith” evidence that employees should not be paid their final wages. In some instances, an employee may not be entitled to their final wages because they committed some unlawful action. However, employers will try to withhold wages without any substantial evidence of wrongdoing.

By contacting an experienced California Wage and Hour Attorney, employees can ensure they receive their final paycheck and any damages associated with the withholding of that paycheck. In addition, an attorney can help investigate the facts of the case, notify the employer of the pending dispute, contact the California Department of Industrial Relations (DIR) of the employer’s potential misconduct against the employee, negotiate on the employee’s behalf, file a legal or administrative claim for wages, and engage in settlement discusses to ensure final wages are paid.

Why Mediation May Be the Best Route for Solving Your Business Dispute

In many parts of the world, mediation is known as conciliation. It has historic routes within the diplomatic arena. Interest in mediation has risen dramatically in recent years in the commercial world. Part of the reason for this increase in interest is unhappiness with the cost, delays, and length of the court process. The benefits of mediation, notably its appeal as a procedure that gives parties full control over both the process to which their dispute will be submitted and the outcome of that process, have sparked increased interest.

Mediation has a very high success rate in finding a result that is acceptable to both sides of a dispute when it is implemented. Some people are hesitant to use mediation since it is a very unstructured method, and they are afraid of not knowing what to anticipate. An attorney can help navigate you through the process of mediation, if you feel that it is a viable option for your business dispute. If you are a business owner concerned about the outcome of a disagreement, mediation could save you a lot of time and money, as well as help you maintain a vital business relationship by allowing you to work through the conflict with an agreeable resolution.

What is Mediation? 

Mediation is a process in which the parties address their disagreements with the help of a skilled neutral third party who helps them reach an agreement. It could be a casual gathering of the parties or a formal settlement conference. The disagreement could be pending in court or could be filed in court in the near future, or not have any intentions to use the court system. 

Disputes in commercial transactions, personal injury, construction, workers compensation, labor or community relations, divorce, domestic relations, employment, or any other situation involving simple procedural or evidentiary concerns are appropriate for mediation. Most business disputes will use mediation to resolve their issues. The parties’ attendance at the mediation session is entirely optional, unless otherwise required by statute or contract clause.

A good mediator has tolerance, tenacity, and common sense. The mediator is merely a facilitator with no authority to resolve the disagreement. As the mediator progresses through the process, the parties will construct a resolution. Although the mediator is an attorney in many jurisdictions, he or she cannot provide legal advice while acting as a mediator. The mediator’s subject-matter expertise, on the other hand, may be useful to the parties in drafting and framing the mediated agreement, or in situations where the parties are amenable to an impartial case evaluation.

Mediation vs. Arbitration

Arbitration, like mediation, relies on a neutral third party, the Arbitrator, to resolve disputes between parties outside of the courtroom. Unlike mediation, however, the Arbitrator acts as a private judge, hearing evidence and issuing findings to determine the dispute’s conclusion. Thus, the private judge controls the process and the outcome in arbitration, whereas the disputing parties control the process and the outcome in mediation.

Most arbitrators are willing to work around the parties’ schedules and demands. Although arbitration is usually less formal than a courtroom trial, both parties must follow a series of processes as they prepare for the hearing. In most circumstances, the arbitrator’s decision is final and binding on both parties. After a binding arbitration, there is virtually little room for appeal.

Mediation and arbitration can be used together. Typically, most business disputes will either make mediation mandatory or strongly suggest it as a first step. The dispute is then brought to arbitration if a settlement is not reached within a specified length of time (it is advised that the parties arrange for either 60 or 90 days), or if a party refuses to participate or continue to engage in the mediation (or, if the parties so agree, through expedited arbitration). 

The benefit of the combined procedure is that it provides an incentive for both parties to make a good faith commitment to the mediation process, because the consequences of failing to reach an agreement will be more tangibly measurable in terms of the financial and management commitment that would be required in the subsequent arbitration procedure.

Benefits of Mediation

A party to a dispute may choose mediation over traditional litigation or other kinds of alternative dispute resolution for a variety of reasons, including: 

  • Affordability
  • Participation in the resolution of the conflict
  • Preservation of the relationships between the parties 
  • Private sessions
  • Prompt settlement 
  • Secrecy

Mediation is less expensive than litigating a conflict, both in terms of time and money. The hourly rate of a mediator is typically lower than that of a lawyer. A decision to mediate or a court order to mediate can usually be scheduled within days or weeks.

Mediation is particularly useful in business disputes because it is confidential, informal, quick, and inexpensive. Additionally, the parties like having a tighter grasp of controlling the situation and dispute resolution.

Is Mediation Binding? 

Mediation is a non-binding practice. This means that even if parties agree to submit a disagreement to mediation, they are not obligated to continue the process after the initial meeting. In this approach, the parties are in charge of the mediation at all times. The process’s continuation is contingent on their continued acceptance of it.

Due to the fact that mediation is non-binding, the parties cannot be forced to make a decision. In order for a settlement to be reached, both parties must agree to accept it voluntarily. The mediator, unlike a court or an arbitrator, does not make decisions. Rather, the mediator’s responsibility is to assist the parties in making their own choice on a dispute resolution.

Mediation is a private and confidential process. Confidentiality encourages frankness and openness in the process by ensuring the parties that any confessions, proposals, or settlement offers made during the mediation process would have no lasting implications. In general, they cannot be used in later litigation or arbitration.

However, when both parties sign the agreement at the end of meditation (if they choose to do so), it becomes a legally enforceable contract and therefore binding. If a settlement cannot be reached through mediation, the parties reserve the right to pursue another method of alternative dispute resolution (ADR) or to take their dispute to court.

Contact Perkins Asbill Today

If you are interested in learning more about alternative dispute resolution or you believe you are involved in a business dispute that could be resolved through mediation, you should contact an experienced attorney today.

Perkins Asbill’s Sacramento business litigation attorneys have more than 30 years of experience navigating the complexities of the various alternative dispute resolution process, including mediation. To get started on your case or discuss your options, contact (916) 446-2000 for a discreet consultation.

Seven Common Signs of Gender Bias in the Workplace

Bias may be prevalent in almost every facet of our lives. Biases can lead to preconceptions against others, resulting in severe inequities between different demographic groups. While there are numerous types of bias, this article focuses on the common signs of gender bias and how it affects the workplace. The tendency to favor one gender over another is known as gender bias.

Perkins Asbill is located in Sacramento focusing on employment law and business litigation. Your rights are important to us. Protecting those rights frequently necessitates the assistance of a genuine and devoted legal professional. Our employment law and business litigation attorneys at Perkins Asbill are here for you if you have been subjected to any signs of gender bias in the workplace. 

The following is a list of the seven most common signs of gender biases that occur in the workplace.

1. Feedback and Suggestions: Males are acknowledged over females. 

In many instances, women in mid- or senior leadership positions find that their proposals and feedback during meetings are ignored. When a male coworker makes the identical suggestion, however, he will be recognized and rewarded for it. When a male is acknowledged over a female for the same suggestion, this is an implicit sign of gender bias. 

Additionally, when women are continually interrupted or their suggestions are overheard, this represents another form of unconscious gender bias in the workplace. According to a George Washington University research, men interrupt women 33 percent more frequently than men.

2. Glass Ceilings: Promotions and other advancements are affected by gender bias.

Women are unable to flourish in their careers due to these differences in opportunities, and they are unable to earn the same amount as males. Women encounter impediments at every step of their employment, putting them at a disadvantage in terms of job possibilities, mentorships, promotions, and salary hikes.

Assuming equal talent, experience, and other credentials, men and women should have equal opportunities to ascend the corporate ladder. When an employer fails to give equal opportunities for advancement in the workplace due to gender, this is a display of bias. 

3. Interview Questions: Interviews can be unconsciously gender biased. 

When interview questions are not standardized, interviewers may offer inquiries that are prejudiced depending on the candidate’s personality, experiences, and even gender.

Some recruiters try to acquire a sense of a woman’s family situation or plans, for example, because they believe she is “too family-oriented” to completely commit to a company, they may not hire or give her certain advancements. When interviewers’ questions become overly specific to someone’s life or when a question would not be appropriate to ask both genders, then this is an example of gender bias.

4. Outdated Views: Women must prove themselves more than men.

Some businesses still have archaic ideas about what constitutes suitable male and female behavior, i.e., attire, assignments, behavior, and responsibilities.

You may have difficulty asserting yourself and remaining likeable in the job as a woman. You are well aware that if you are overly considerate, your coworkers may take advantage of you. You may be ostracized if you are aloof or brief with your responses. Having to deal with this and your work can be difficult. Being aware of certain gender bias situations and calling attention to them can help the flow in a workplace. 

5. Parental Status: A worker mother’s commitment to the company is questioned.

In the workplace, we have seen unequal pay and perks, as well as differences in men’s and women’s expectations. These disparities are much more pronounced and shocking for working mothers.

There are women who work in environments where their bosses question their dedication to their jobs if and when they have children. This form of prejudice is based on the misconception that moms cannot work outside the home because they must care for their children. Men are not asked the same questions, which is inherently gender biased. 

6. Positional Bias: People are assigned to specific roles solely based on their gender. 

If all of your receptionists are female and all of your maintenance workers are men.  This is an example of positional prejudice, in which people are placed in positions based on gender preconceptions.

Gender bias can be found in even the most commonplace of job descriptions, as well as in the positions themselves. Due to language being fundamentally gendered, adjectives like confident, decisive, forceful, and outspoken have been proven to attract male applicants while discouraging female candidates.

7. Unequal Pay: Discrepancies in compensation are reflected through gender bias.

If you are in the same role, with the same amount of experience as a person of the opposite gender and you are receiving unequal pay, it is likely that you are experiencing gender bias. 

Pay disparities between men and women exist all across the world, including in the United States. The global gender pay gap spans from 3% to 51%, with a global average of 17%, according to official data collected by the International Trade Union Confederation (ITUC) as cited by the International Labour Organization.

According to research, in the United States, pay gaps between Latina and Black women are the largest (58 percent of white men’s hourly earnings) and the second-largest (65 percent, respectively), whereas white women had an 82 percent pay disparity. These figures directly show how gender bias affects compensation in the workplace. 

Contact Experienced Employment and Business Litigation Attorneys Today

Whether the signs of gender bias in your workplace are conscious or unconscious, they can become a problem, nonetheless. As noted above, gender bias is seen through almost all facets of the workplace, through pay, promotions, positions, parental status, views, and leadership. 

If you suspect that you have been the victim of workplace gender discrimination or gender bias, you should contact an experienced employment and business litigation attorney. The practice of law, in our opinion, is more than just an intellectual exercise. We assist real people with real issues. Every instance is an opportunity to make a difference.

For more information about the business and employment law services of Perkins Asbill, please contact us at 916-446-2000. Our Sacramento office is conveniently located on the Capitol Mall, and we serve clients throughout Northern California.

The Types of Breach of Contract You Should Be Aware Of

In the business world, particularly for those who deal with a lot of contracts with vendors, employees, or even customers, it is only a matter of time before someone fails to meet the requirements of the contract. While the reasons why one party in the agreement was unable to hold up his or her end of the bargain are endless, the ways in which a breach of contract can occur are not. Read on for more information about the four types of breach of contract you should be aware of.

What is Breach of Contract?

A contract is a legal document that requires each party entering into an agreement to meet certain obligations. A breach of that contract occurs when one party fails to meet the contractual provisions. Because the contract is legally binding, the first step in the process of obtaining compensation for the losses you experienced as a result of the breach is by determining that a breach did, in fact, occur.

Four Types of Breach of Contract

There are four main types of breach of contract, as listed below.

Actual Breach of Contract

An actual breach of contract occurs when one party in the contractual agreement fails to meet the provisions of the contract. This type of breach has already occurred, meaning that the party who breached the contract has already failed to fulfill the provisions of the agreement by the due date or the duties have been fulfilled incompletely or improperly. There are two types of actual breach of contract:

  • Actual contract breach during the course of performance refers to the failure to meet the provisions of the contract or to satisfy the contract in accordance with the other party’s terms.
  • Actual contract breach due to late performance refers to a party failing to meet the provisions of the contract by the deadline to do so. Because the party missed the deadline that was spelled out in the contract, the other party is no longer bound to the provisions of the contract either, though may agree to continue to honor the provisions of the contract and accept the work late if time was not of the essence with the project.

Anticipatory Breach of Contract

An anticipatory breach of contract can occur even before the deadline on which the services or product was due if the party tasked with performing the service or creating or delivering the product states that he or she is not going to complete his or her obligations under the contract by the applicable deadline. While evidence of this type of breach often includes one party stating to the other that he or she does not intend on delivering on the terms of the contract. However, it can also be proven if one party can show by the other’s actions that he or she has no intention of honoring the contract. 

Material Breach of Contract

A material breach of contract is a failure to perform the obligations of the contract in which the failure strikes so deeply at the purpose of the contract that it renders the contract irreparably broken and unenforceable. An example of this type of breach would be if you were to contract with a home builder to build your home for you and the builder failed to meet his or her obligations so completely that not only did you not get a house that was built to your specifications, but no house was built for you at all. Individuals who have been on the receiving end of a material breach of contract can seek compensation for all direct and indirect losses they incurred as a result of the other party’s failure to perform.

Minor (Partial) Breach of Contract

A minor, or partial, breach of contract occurs when the deliverable aspects of the contract were eventually honored, but the party failed to meet some sort of obligation. Using the home builder scenario once more, if you hired a person to build a home for you according to your specifications, and the builder did build the home but was late in completing the project and several of the rooms were painted a different color than what you had requested, these would be considered minor or partial breaches of contract. With this type of breach of contract, the claimant can seek compensation for any financial losses that occurred as a result of the breach, such as the cost of paint and hiring someone to paint the room as specified, or two months worth of rent that was incurred because the home was not finished by the due date specified on the contract.

How to Prevent a Breach of Contract

One of the ways to avoid breaches of contract that can result in a loss of money and time is to ensure that the contracts you make and enter into with others are legally enforceable. An experienced contract lawyer can look over the provisions to ensure that language is clear and that you have a complete understanding of what your obligations are as well as what the other party’s obligations are to you.

It is also important that, when you enter the agreement with the other party, the other party is aware of your expectations for the project through a thorough handover process in which these expectations are gone over with both parties completely. Once the contract has been signed, regular monitoring of the performance of the contract is necessary to ensure that the provisions are being met while there is still time to address concerns that each party might have with their ability to meet the requirements. 

What Happens if a Contract is Breached?

If a vendor, employee or customer has breached a contract, you can seek recovery of your financial losses directly related to the breach as well as other losses in some cases. An experienced contract lawyer from Perkins Asbill can help you understand your legal options. We have more than three decades of experience in business and employment law. Contact us online to learn more about your options or by calling 916-446-2000.

Are Non-Compete Agreements Enforceable in California?

Generally speaking, non-compete agreements (also sometimes called non-competition agreements, or simply non-competes) are not enforceable in California against former employees. However, those agreements can be enforced against others, including former business partners, former members of a limited liability company, and parties to the sale of a business.

In addition, in some circumstances California courts may enforce non-solicitation and non-disclosure agreements, which can sometimes limit an individual’s future employment prospects. 

Here’s an overview. 

California’s General Prohibition on Non-Competes for (Ex-)Employees

A non-competition agreement, as its name implies, is a contract restricting someone’s ability to compete with a business, usually after termination of a relationship with that business. 

In most U.S. states, employment agreements routinely contain non-compete provisions. The ostensible purpose of a non-compete is to shield an employer from the expense of training an employee, only to have the employee quit and put those skills to work for a competitor. Courts in most states will generally enforce a non-compete so long as it is reasonably limited in its subject-matter, geographic scope, and duration, and provided it serves a legitimate business purpose. What constitutes a reasonable limitation and a legitimate purpose varies from state-to-state and case-to-case.

California, however, is different. Here, state law effectively bans agreements not to compete between employers and employees. California Business and Professions Code (BPC) §16600 states, in no uncertain terms, that: 

Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.

California courts have consistently interpreted this statutory language to mean that, by-and-large, agreements restricting employees from competing with their former employers constitute unreasonable restraints on trade, and are void. 

Non-Competes Allowed Against Others

As the proviso “Except as provided in this chapter” suggests, however, BPC §1600 is not absolute in its ban on non-competes. It allows for exceptions, three of which (found at BPC §§16601, 16602, and 16603) have particular significance in the context of employment law.


In certain circumstances, California law enforces non-competes in the context of a business partnership. In anticipation of a partnership dissolving or a partner leaving a partnership, partners can agree “not [to] carry on a similar business within a specified geographic area where the partnership business has been transacted, so long as any other member of the partnership, or any person deriving title to the business or its goodwill from any such other member of the partnership, carries on a like business therein.” 

So, for example, a partner in an accounting firm may agree not to compete with that partnership in the geographic area where the partnership has continued to do business, if she chooses to leave and start her own accountancy. The partnership can enforce that obligation against its former partner, even though it could not enforce an identical restraint against a former employee. 

Limited Liability Companies (LLCs)

Similar to partnerships, California statutes also allow for enforcement of non-competes against former members of a limited liability company (LLC). The law permits non-competes entered-into in anticipation of dissolution of an LLC or a member’s interest in it, restricting a member’s ability to compete with another member or anyone carrying-on the LLC’s business, in a geographic area where the LLC has done and continues to do business. Notably, this exception might permit enforcement of a non-compete against an employee who was also an LLC member, provided the restrictions of the agreement are tailored to that person’s role as a member. 

Sales of Businesses or Interests in Businesses

In connection with the sale of a business (including its goodwill), or the sale of someone’s interest in a business, the parties to the sale can agree that the seller will not compete with the business in the geographic area where the business has done and continues to do business. This exception to the prohibition on non-competes applies in the context of the sale of a partnership interests, LLC membership interests, capital stock in a corporation, and a subsidiary of a business entity. As above, this restriction could apply to a former employee who owned and sold interests in a business, provided the restriction is appropriately tailored.

Enforceability of Non-Solicit and Non-Disclosure Agreements

Non-competes often go hand-in-hand with two other types of agreements that cover related subjects: non-solicitation agreements and non-disclosure agreements. Here is how California law addresses them. 

Non-Solicit Agreements Treated Mostly the Same as Non-Competes

A non-solicitation agreement generally prohibits a party from soliciting a business relationship or transaction from specified persons or enterprises. Employers include non-solicit provisions in employment contracts when they want to bar an employee from soliciting the employer’s clients or customers after the employment ends. Like non-competes, the premise of a non-solicit is that an employee might unfairly capitalize on the employer’s investment in client/customer development to the employer’s detriment. 

For the same reasons that it prohibits non-competes, California law generally prohibits enforcement of non-solicitation agreements against former employees, because those agreements tend to restrain individuals from engaging in their professions or occupations. California courts may, however, enforce a non-solicitation agreement against a former employee if its core purpose is to protect the employer’s trade secrets or confidential business information (as to which, see below). 

Under the exceptions to BPC §16600, California courts generally will enforce non-solicits against partners, LLC members, and parties to the sale of a business or business interests, provided the agreement relates to the conduct of business in a specified geographic area.

Non-Disclosure Agreements (NDAs) and Similar Confidentiality Obligations Enforceable

Employees often have access to sensitive information in the course of their employment. Employers have an understandable interest in protecting against the misappropriation of that information after an employee leaves the fold. For that reason, employment contracts commonly contain confidentiality and/or non-disclosure provisions prohibiting an employee from sharing or using an employer’s trade secrets and other confidential information post-employment.

Unlike non-competes and non-solicits, California courts generally will enforce these non-disclosure agreements, even against former employees, and even if they arguably impact an employee’s future employment prospects, so long as they protect information validly characterized as a trade secret or entitled to confidentiality. However, courts in California will reject NDAs that define the protected information so over-broadly that they effectively act as non-competes or non-solicits that unlawfully restrain ex-employees. 

If you have questions about the enforceability of a non-compete, non-solicit, or non-disclosure agreement in California, a skilled business litigation lawyer at Perkins Asbill can help. Contact us online or call 916-446-2000 to speak with a member of our team.

Understand Reasonable Accommodation and Religious Discrimination in the Workplace

Federal law provides few protections for workers. However, a candidate cannot be excluded from consideration for a job nor can an employee be discriminated against in their job for religious reasons. Title VII of the Civil Rights Act of 1964 protects you as a job application or a current employee to be free of religious discrimination during the hiring process or during your employment. 

Not only does this law promise you that you will not be discriminated against for your religion, it also provides for reasonable accommodation that your employer must take. Because of this, religious discrimination and reasonable accommodation claims often go hand in hand. If you think you may have been discriminated against because of your religion, you need to speak with an experienced Sacramento employment law attorney today who can help you right this wrong.

Religious Discrimination

Unfortunately for many people, religious discrimination in the workplace happens often and goes unreported. The United States Equal Employment Opportunity Commission (EEOC) manages religious discrimination complaints. The EEOC fields over 3000 complaints each year. 

Religious discrimination can take many forms. The most common examples include:

  • Refusing to hire an applicant because of their religion
  • Terminating an employee because of their religion
  • Paying an employee less because of their religion
  • Refusing to promote an employee because of their religion

Religious discrimination may come to light at any point during the hiring process or during your employment with a company. If you have been denied employment or a promotion because of your religion, you may have a claim against the company for religious discrimination. To find out for sure, you need to speak with a skilled employment lawyer in Sacramento today who can help you understand and protect your rights.

Reasonable Accommodation

Religious discrimination is pretty clear cut. Reasonable accommodation, however, is less transparent. Based on an employee’s legitimate religious beliefs, an employer must make reasonable accommodation to protect your right to practice your religion. Many religions require certain practices, dress, or grooming.

Employers often violate employee’s rights and fail to make reasonable accommodation by:

  • Requiring employees to work on religious holidays
  • Not allowing prayer breaks
  • Banning certain head wear
  • Prohibiting facial hair or hairstyles
  • Not allowing schedule changes or time off for religious holidays

When a business fails to take certain steps to reasonably accommodate employees with religious beliefs, the business may violate Title VII. This could give rise to your religious beliefs being discriminated against, leaving you feeling harassed and embarrassed by your employer. 

You do not have to stand for this. You have a protected right to practice your religion and your employer must make reasonable accommodation for you to do so. When they do not, you need to partner with a trusted employment lawyer who can help you right this wrong.

Cause of Action

When you have suffered religious discrimination in the workplace, you may file a discrimination claim against the company. To be successful in your cause of action, you must show:

  • You have a bona fide religious belief that conflicts with an employment requirement
  • You have told your employer about your belief
  • You suffered adverse employment action as a result

Part of your cause of action must show that the employer did not provide reasonable accommodation. This is where things can get murky. When you alert your employer to your religious belief and how it conflicts with a job requirement, you may also suggest how your employer can accommodate you. 

Your employer does not have to provide you with the exact accommodation you have requested. But the accommodation they offer must be reasonable and not provide undue hardship to the employer. 

Not every employer is covered under Title VII. Employers with more than 15 employees, including private companies, are subject to Title VII. If your employer has fewer than 15 employees, you may still have a valid claim if you can show your employer was acting with a parent company or subsidiary that would have put them over the minimum employee requirement. The best way to know for sure is to speak with a knowledgeable employment lawyer as soon as you have suffered religious discrimination in the workplace.

Possible Remedies

With many legal claims, the remedies are clear. In a car accident, you want to have your medical bills covered. But religious discrimination claims may create some confusion. 

Your employment lawyer may attempt to remedy your situation by asking for:

  • Getting your job back, if you lost it
  • Compelling the company to hire you or promote you
  • Back pay
  • Retroactive benefits
  • Monetary damages for your suffering and embarrassment 

As with all legal claims, your case is unique and your remedies will be unique. Working with your employment lawyer, you can determine what you want out of your cause of action against the company who discriminated against you. It’s important to remember that you do not have to go through this alone.

Religious Discrimination Lawyers Fight for You

The lawyer you choose can make a difference in the outcome of your religious discrimination claim. You need a lawyer who has proven experience fighting for religious discrimination victims like you. Companies too frequently get away with this type of behavior. We can help you hold your employer liable for your suffering.

A company can ask you about the sincerity of your religious beliefs when you ask for reasonable accommodation. These questions may seem intrusive but your employer has a right to determine your sincerity. Asking other questions or getting too personal may cross the line. If you have been denied a promotion, terminated, or turned down for employment because of your religious beliefs, you may be entitled to legal remedies through a discrimination claim against the company. 

If you think you may have been discriminated against by your employer, speak with an experienced employment law attorney in Sacramento today. Contact us online or at 916-446-2000. We look forward to speaking with you and helping you resolve your workplace discrimination matter.