All posts by Karen Marshall

Existing law requires that an employee who works more than five hours a day must be provided with a meal period of not less than 30 minutes, except that if the total work period per day is no more than six hours, the meal period may be waived by mutual consent. An employee who works for more than 10 hours a day must be provided with a second meal period of not less than 30 minutes, except that if the total hours worked are no more than 12 hours, the second meal period may be waived by mutual consent, but only if the first meal period was not waived. To give you an idea of how costly violating this law can be, a jury in Oakland recently awarded $172 million to thousands of employees who claimed that Wal-Mart denied them these required meal periods.

The Division of Labor Standards Enforcement (DLSE) has proposed a new regulation clarifying an employer’s obligation to provide meal periods to its employees. The proposed regulation defines the term provide as “to supply or make available a meal period to the employee and give the employee the opportunity to take the meal period.” The proposed regulation clarifies that an employer is deemed to have provided a meal period to an employee if the employer: (1) has informed the employee, either orally or in writing, of his or her right to take a meal period; (2) gives the employee the opportunity to take the meal period; and (3) maintains accurate time records. Notwithstanding these three criteria, an employer may still establish by a preponderance of the evidence that a meal period was in fact actually supplied or made available to the employee and the employee was in fact actually given the opportunity to take the meal period. The proposed regulation also clarifies when the required meal period(s) must begin. For employees who work more than five hours but no more than six hours per day, the meal period must be provided during the sixth hour of work, but may be provided earlier. For example, if an employee works from 8 a.m. to 2 p.m., the 30 minute meal period must be provided between 1:01 p.m. and 2:00 p.m., but may be provided earlier. Moreover, the employer and employee can mutually waive the employer’s obligation to provide a meal period.

For employees who work more than six hours but no more than 10 hours per day, the meal period must be provided before the completion of the sixth hour of work. The employer cannot waive its obligation to provide the meal period. However, an employee may initiate a request for approval from the employer to: (A) not take the meal period for that day; or (B) take only a portion of the meal period for that day. The employer has the discretion to approve or deny the request. The employer’s approval or denial of such request is not a violation of the employer’s duty to provide a meal period.

For employees who work more than 10 hours but no more than 12 hours per day, the employer must provide a second 30 minute meal period. The second meal period may be provided any time between 10 hours and 1 minute and 12 hours. If the total hours worked are no more than 12 hours, the employer’s obligation to provide a second meal period may be waived by mutual consent of the employer and the employee, but only if the first meal period was not waived.

The DLSE’s proposed regulation has already undergone two rounds of rather substantial revisions. The DLSE is currently considering comments to the most recent version of the proposed regulation, and may revise the proposed regulation yet again. As soon as the regulation is finalized and adopted, we will update you in a future edition of this newsletter.

2005 was a slow year for new employment-related legislation, and much of the new legislation is limited to certain types of employers or employees. Here is a synopsis of the more notable legislative activity.

Computer Professional Exemption Clarified
Existing law provides that employees in the computer software field may qualify for overtime exemption if certain conditions are met. One of those conditions is that the employee’s hourly rate of pay is not less than $41. A new law now clarifies that this condition is met if the employee’s hourly rate is not less than $41 or the annualized full-time salary equivalent of that rate, provided that in each workweek the employee receives not less than $41 per hour worked. Note that, under both the old and the new laws, an employee in the computer software field is not exempt from overtime requirements unless all of the following additional conditions are met:

1. The employee is primarily engaged in work that is intellectual or creative and that requires the exercise of discretion and independent judgment. 2. The employee is primarily engaged in duties that consist of one or more of the following: A. The application of systems analysis techniques and procedures, including consulting with users to determine hardware, software, or system functional specifications. B. The design, development, documentation, analysis, creation, testing, or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications. C. The documentation, testing, creation, or modification of computer programs related to the design of software or hardware for computer operating systems. 3. The employee is highly skilled and is proficient in the theoretical and practical application of highly specialized information to computer systems analysis, programming, and software engineering.

Deadline For Filing Fair Employment And Housing Act Claims Extended For Minors The Fair Employment and Housing Act (“FEHA”) prohibits discrimination, harassment and retaliation. Under current law, an employee who believes that her employer violated FEHA must file a complaint with the Department of Fair Employment and Housing within one year from the date upon which the allegedly unlawful conduct occurred. Effective January 1, 2006, this period is extended for up to one year after the employee reaches age 18.

Final Wages May Now Be Paid By Direct Deposit
Existing law has long allowed an employer to pay wages by direct deposit, so long as the employee has voluntarily authorized direct deposit. Final wages, however, could not be paid by direct deposit. Effective January 1, 2006, Labor Code section 213 has been amended to provide that final wages may be paid by direct deposit, so long as the employer complies with all other requirements regarding the payment of final wages.

Wage Statements
When an employer pays an employee’s wages, the employer must furnish the employee with an accurate itemized statement showing, among other things, the name of the employee and his or her social security number. By January 1, 2008, existing law requires the employer to include no more than the last four digits of the employee’s social security number or an existing employee identification number other than a social security number. This law has been clarified to provide that, by January 1, 2008, the employer must include on the itemized statement the last four digits of the employee’s social security number or an employee identification number other than a social security number. In other words, if you were intending to comply with the new requirement by including the last three digits of your employees’ social security numbers on their statements, you now need to include the last four digits.

Unruh Civil Rights Act Expanded
The Unruh Civil Rights Act generally prohibits business establishments from discriminating on the basis of sex, race, color, religion, ancestry, national origin, disability or medical condition. The Act has now been expanded to explicitly prohibit business establishments from discriminating on the basis of marital status or sexual orientation.

Service Of Labor Commissioner Complaints, Notices And Decisions
The Labor Commissioner is authorized to investigate employee complaints and provide for a hearing in any action to recover wages, penalties and other demands for compensation. A new law provides that, in such proceedings, the complaint, notices, and decision may be served by leaving a copy of the document at the home or office of the person being served and thereafter mailing a copy of the document to the person at the place where a copy was left. This new law was enacted to address the problem of employers who tried to avoid personal service of labor commissioner documents by refusing to sign for the documents.

Public Works Payroll Records
Existing law provides for the payment of prevailing wages on certain public works, and requires each contractor and subcontractor performing work on a public work to keep payroll records regarding his or her employees. Senate Bill 759 amends this requirement by specifying that the payroll records may consist of printouts of payroll data that are maintained as computer records, if the printouts contain the same data and are verified in the same manner as required for other payroll records.

DLSE Proposes New Regulation Clarifying Meal Period Requirements
By Kim Johnston
Existing law requires that an employee who works more than five hours a day must be provided with a meal period of not less than 30 minutes, except that if the total work period per day is no more than six hours, the meal period may be waived by mutual consent. An employee who works for more than 10 hours a day must be provided with a second meal period of not less than 30 minutes, except that if the total hours worked are no more than 12 hours, the second meal period may be waived by mutual consent, but only if the first meal period was not waived. To give you an idea of how costly violating this law can be, a jury in Oakland recently awarded $172 million to thousands of employees who claimed that Wal-Mart denied them these required meal periods.

The Division of Labor Standards Enforcement (DLSE) has proposed a new regulation clarifying an employer’s obligation to provide meal periods to its employees. The proposed regulation defines the term provide as “to supply or make available a meal period to the employee and give the employee the opportunity to take the meal period.” The proposed regulation clarifies that an employer is deemed to have provided a meal period to an employee if the employer: (1) has informed the employee, either orally or in writing, of his or her right to take a meal period; (2) gives the employee the opportunity to take the meal period; and (3) maintains accurate time records. Notwithstanding these three criteria, an employer may still establish by a preponderance of the evidence that a meal period was in fact actually supplied or made available to the employee and the employee was in fact actually given the opportunity to take the meal period.

The proposed regulation also clarifies when the required meal period(s) must begin. For employees who work more than five hours but no more than six hours per day, the meal period must be provided during the sixth hour of work, but may be provided earlier. For example, if an employee works from 8 a.m. to 2 p.m., the 30 minute meal period must be provided between 1:01 p.m. and 2:00 p.m., but may be provided earlier. Moreover, the employer and employee can mutually waive the employer’s obligation to provide a meal period.

For employees who work more than six hours but no more than 10 hours per day, the meal period must be provided before the completion of the sixth hour of work. The employer cannot waive its obligation to provide the meal period. However, an employee may initiate a request for approval from the employer to: (A) not take the meal period for that day; or (B) take only a portion of the meal period for that day. The employer has the discretion to approve or deny the request. The employer’s approval or denial of such request is not a violation of the employer’s duty to provide a meal period.

For employees who work more than 10 hours but no more than 12 hours per day, the employer must provide a second 30 minute meal period. The second meal period may be provided anytime between 10 hours and 1 minute and 12 hours. If the total hours worked are no more than 12 hours, the employer’s obligation to provide a second meal period may be waived by mutual consent of the employer and the employee, but only if the first meal period was not waived.

The DLSE’s proposed regulation has already undergone two rounds of rather substantial revisions. The DLSE is currently considering comments to the most recent version of the proposed regulation, and may revise the proposed regulation yet again. As soon as the regulation is finalized and adopted, we will update you on its requirements in a future edition of this newsletter.

Proposed Changes
As we previously informed you, on January 14, 2005, the Division of Labor Standards Enforcement (DLSE) issued a proposed meal and rest period regulation. The intent behind the proposed regulation was to provide clarity and flexibility with regard to the meal and rest period requirements. The proposed regulation addressed the timing of meal periods, the requirements for “providing” a meal period, and the classification of any money paid for failure to provide a meal period.

However, the DLSE failed to complete the rulemaking process and promulgate a final rule by the January 14, 2006 deadline. On that date, the proposed regulation lapsed, leaving employers with the law as it existed prior to the proposed regulation. Therefore, employers must be aware of and properly follow the applicable law in place before the proposed DLSE regulation.

Meal Period Requirements In Effect Prior To The DLSE’s Proposed Regulation And Still In Effect Today
Because the DLSE’s proposed regulation failed to take effect, employers are left to deal with the less-than-clear law in place prior to the proposed DLSE regulation. As always, diligence on the part of employers in following the law will help prevent lawsuits by employees and protect the interests of employers.

Currently, an employee who works at least five hours a day must receive an unpaid meal period of at least 30 minutes. However, if the total work period is less than six hours, the meal period can be waived with the mutual consent of the employer and employee. Additionally, a second meal period is required if the employee works more than 10 hours. Again, however, this meal period can be waived with the mutual consent of the employer and employee if the total work period is less than 12 hours and the first meal period was not waived.

Prior to the DLSE’s proposed regulation, the DLSE took the position that meal periods had to start before the end of the fifth hour for the first meal period and before the end of the tenth hour for the second meal period. Thus, employers should continue to follow this mandate in an effort to ensure that meal periods are timely taken. As for “providing” the meal period required by the law, the onus is on the employer to make sure that employees take their required meal periods at the required times. If the employer fails to provide a required meal period, the employer must pay one additional hour of pay at the employee’s regular rate of pay for each workday that the meal period is not provided in addition to paying for the time that the employee worked during the period. The failure to provide meal periods can be very costly. In a recent class-action suit, a jury returned a $172 million verdict against Wal-Mart for denying employees their legally required meal and rest periods. The potential for large verdicts and costly court battles necessitates diligence in ensuring that employees are taking their required meal periods.

If Meal Periods Are Missed And The Employer Must Pay, Is The Payment A Penalty Or Wages?
When employers pay for meal periods missed by employees, the payment can arguably represent either wages to the employee or a penalty against the employer. If the payment is characterized as a penalty, the employee must file a claim within one year, whereas a claim for wages must be filed within three (sometimes four) years. Additionally, a penalty, unlike wages, is not subject to income tax withholding. Finally, if the payment is characterized as a penalty, the employee cannot seek attorneys’ fees under the wage recovery statutes.

The lapse of the proposed DLSE regulation that would have clarified this area of law left employers without a definite answer to this issue. Further, no clear answer has been provided by the courts. In May of 2005, the Labor Commissioner issued an opinion that such payments were penalties. Additionally, two California appellate courts that have addressed the issue agree with the Labor Commissioner that such payments are penalties. However, another California appellate court has ruled that such payments represent wages to the employee. Because of this split of authority and the importance of the issue, the California Supreme Court has granted review of one of the cases to provide a definitive answer.

Conclusion
While employers may have heard or read about proposed changes to the meal period requirements, the proposed regulation that would have made such changes lapsed on January 14, 2006. Thus, any proposed changes regarding meal periods did not take effect and the law existing prior to the proposed regulation is still in force. In order to avoid liability for missed meal periods, employers must be proactive in making sure that employees take their meal periods at the appropriate times. Otherwise, employers may face costly lawsuits by employees.

In an effort to attract the most qualified employees, employers sometimes make promises that they cannot keep.  But what may once have been considered harmless exaggeration by employers can now be the basis for a costly lawsuit.  Several recent cases have held that employers can be liable for fraud if their representations about a job do not pan out.

Overstating earning potential costs employer over $1.2 million
In a recent case, an employer that overstated an applicant’s earning potential was hit with a $1.2 million damage award.  The employee in that case earned $5,800 to $5,900 a month at his old job.  He applied for a new job and, during the interview, told the employer that he needed to earn at least $5,700 a month.  The employer then pulled out a financial statement, made some calculations, and stated that if the employee had been with the company between January and September of 1999, he would have made $70,000 (which would have been well over $5,700 a month).  Based on this representation, the employee accepted a position with the new employer and quit his old job.  In his first three months of employment, however, his monthly paychecks amounted to $4,400, $5,100, and $4,800 respectively.  The employee complained but received no response, and shortly thereafter was fired.  Although he re-applied for a job with his old employer, it had a strict no-rehire policy.  He eventually found another job that paid less than $4,000 a month.

The employee sued for fraud, arguing that the employer falsely promised him a salary of at least $5,700 per month, and that he left his old job in reliance on that promise.  The jury agreed with the employee and awarded him $490,913 in economic damages, $50,000 for pain and suffering, and $1.5 million in punitive damages, which the trial court later reduced to $675,000.  In upholding the jury’s decision, the appellate court noted that the employee was entitled to recover the income he lost when he left his old job in reliance on the employer’s false promise about salary, so long as such damages were not speculative or remote.

Employer can be liable if it overstates job security

In another case, an employee claimed he was induced to leave a steady job in New York for a new job in California based on false promises of job security.  The employee earned $120,000 a year in New York as the president of a small family-owned company.  He was actively recruited by a California company that wanted him to accept a job as its general manager.  During the recruitment process, the employee told the employer he was concerned about giving up a secure job and moving his family across the country.  He asked the employer to assure him that his job would be secure.  In response to these concerns, the employer told him that he would continue to be employed so long as he performed his job well and achieved certain goals.  The employer also told the employee that that the company was strong financially and that it anticipated solid growth and a stable and profitable future.  The employee ultimately accepted the new position and moved his family to California.

Approximately two years later, the employee was terminated.  He was told that his job was being eliminated because of a management reorganization, and that the termination had nothing to do with his performance.  The employee sued the employer for, among other things, fraud.  The court found that the employee could state a claim for fraud if he could prove that the employer induced him to leave his job in New York by making promises that it knew it could not keep.  The court also held that, if the employee could prove his fraud claim, he would be entitled to recover the costs of moving to California and the loss of job security and income associated with his former job in New York.

Tips to Follow
As these cases make clear, employers can be held liable if their representations to prospective employees later prove to be false.  In order to avoid costly lawsuits, here are some tips to follow when interviewing employees and extending job offers:

•    Provide training to interviewers so they do not misrepresent the employer’s financial condition or the applicant’s salary potential or job responsibilities.

•    Review all job postings carefully to ensure that you are not making any unintended or unauthorized promises.

•    Write down the terms and conditions of a prospective employee’s employment in a detailed offer letter.

•    Use two interviewers at once, since this provides an employer with a witness if a dispute later arises.

The bottom line:  Do not make promises you cannot keep.

Have you been disposing of old personnel or job applicant files by tossing them into the trash can?  Effective June 1, 2005, such a practice could run afoul of a new regulation promulgated by the Federal Trade Commission.  The regulation implements a provision of the Fair and Accurate Credit Transactions Act (“FACTA”) that requires “any person that maintains or otherwise possesses consumer information, or any compilation of consumer information, derived from consumer reports for a business purpose [to] properly dispose of any such information or compilation.”  Under the new regulation, businesses that dispose of records that contain certain types of information about their employees and applicants must take reasonable measures to protect against unauthorized access to that information.

Who must comply with the new regulation?
The new regulation applies to any business, regardless of size, that maintains or possesses consumer information.

What is consumer information?
Consumer information means any record about an individual, whether in paper, electronic or other form, that is a consumer report or is derived from a consumer report.  A consumer report means any communication by a consumer reporting agency that bears on an individual’s character, general reputation, personal characteristics, mode of living, or credit worthiness that is or may be used to establish an individual’s eligibility for employment, insurance, or credit.

In the employment context, the classic example of a consumer report is a background check on a current employee or a job applicant that is prepared by a third party.  Both the background check itself and any record that is derived from the background check are covered by the regulation.  Depending on your business, there may be other types of consumer reports or information that you maintain or possess which would also be covered.

Note that consumer information only includes information that identifies a particular individual; it does not include information that does not identify a particular individual, such as aggregate information or blind data.

What does the new regulation require?
The new regulation requires anybody who maintains or possesses consumer information to properly dispose of such information by taking “reasonable measures” to protect against unauthorized access to or use of the information in connection with its disposal.

What measures are considered reasonable?
Although the new regulation does not actually define “reasonable measures,” it provides several examples, including the following:

•    Implementing and monitoring compliance with procedures that require the burning, pulverizing, or shredding of papers containing consumer information so the information cannot practicably be read or reconstructed.

•    Implementing and monitoring compliance with policies and procedures that require the destruction or erasure of electronic media containing consumer information so that the information cannot practicably be read or reconstructed.

•    Contracting with a third party engaged in the business of record destruction to dispose of consumer information in a manner consistent with the regulation.  Employers who contract with a third party to dispose of their consumer information must take reasonable steps to ensure that the third party complies with the new regulation.  Such steps could include reviewing an independent audit of the disposal company’s compliance with the regulation, obtaining information about the disposal company from several references or reliable sources, requiring that the disposal company be certified by a recognized trade association or similar third party, reviewing and evaluating the disposal company’s information securities policies and procedures, or taking other appropriate measures to determine the competency and integrity of the potential disposal company.

What steps should you take to comply with the new regulation?
•    If you already have document retention and disposal policies in place, carefully review those policies to ensure they comply with the new regulation.

•    If you don’t already have document retention and disposal policies, establish and implement ones that comply with the new regulation.

•    Regularly train your employees on proper disposal procedures.

•    Monitor compliance regularly to ensure your policies are being followed.

•    If you contract with an outside company to handle your document disposal, take reasonable steps to ensure that the outside company is complying with the regulation.

Last December, the California Supreme Court confirmed that California employers have a powerful defense against harassment claims.  Specifically, the Court declared that if an employer has in place appropriate policies and procedures for preventing and correcting sexual harassment and if an employee unreasonably fails to use the procedures provided, the employee may not recover damages which could have been avoided if the employee would have used the company’s policies and procedures.  Known as the “avoidable consequences” doctrine, this defense has long been available in California, but has never specifically been applied to harassment cases.

To avail itself of the “avoidable consequences” defense, an employer first must have in place appropriate policies and procedures for preventing and correcting sexual harassment.  As we have advised numerous times in this newsletter, an employer must have in place a policy prohibiting sexual harassment and discrimination (as well as harassment and discrimination on any other protected basis) and must disseminate that policy to its employees.  Ideally, the employer should obtain written confirmation from the employee that the employee has received and read the policy.

Just as important as having and disseminating an effective policy is responding to complaints made pursuant to the policy.  While most employers have an effective sexual harassment policy in place, many fail to train supervisors regarding prohibited conduct and effective responsiveness to employee complaints.  Failure to provide this training renders the policy ineffective.  In order to meet the requirements of the “avoidable consequences” defense, the employer should train all supervisors at least once a year on the company’s anti-harassment policies and, in particular, on the necessity of reporting all instances of improper conduct to Human Resources.  Many supervisors believe that it is their responsibility to deal with inappropriate conduct themselves.  Unfortunately, most supervisors fail to respond appropriately to complaints when they are made and fail to report the actions taken to Human Resources, leaving the employer open to claims that complaints were not taken seriously.  Supervisors must be made aware that it is their responsibility to report all harassing conduct, whether that conduct is personally witnessed by them or reported to them by another source, to Human Resources.

Once supervisors are trained to appropriately report instances of potential workplace harassment, the ball is then in the court of the Human Resources Department to make sure that the employer’s defense is airtight.  This requires training of the Human Resources professionals on their obligations regarding intake and investigation of complaints.  Ideally, the Human Resources Department should have in place a policy for conducting defensible investigations into all complaints of harassment.  The policy should instruct Human Resources to proceed as follows after receiving a sexual harassment complaint:

• Document all complaints in writing upon receipt.
• Create a written plan for the investigation, including the laws or policies involved, the identification of documents to be reviewed and witnesses to be interviewed, and a timeline for completion of the investigation.
• Strictly follow the written plan for conducting the investigation and, if the written plan is deviated from, document the necessity for the deviation.
• Apprise the complainant, the alleged harasser and all witnesses who are interviewed of the confidentiality of the investigation and remind all parties of the company’s non-retaliation policy.  Document all interviews in writing.

At the conclusion of the investigation, a written report should be produced regarding the conclusions reached by the Human Resources Department.  The report should contain the following information:

• The nature of the complaint.
• The investigatory steps followed.
• The conclusions of the investigation, which may include any of the following:
  • The alleged harassment occurred.
  • The alleged harassment cannot be substantiated.
  • Insufficient information was gathered to enable the investigator to conclude that the harassment either did or did not occur.

Once a conclusion has been reached, remedial or disciplinary action must be taken if it has been determined that the alleged harassment occurred.  The nature of the remedial or disciplinary action will vary depending upon the severity of the misconduct.  However, the disciplinary action must be designed to prevent future instances of misconduct and correct the misconduct that occurred.  Types of remedial and/or disciplinary actions that can be considered include, but are not limited to (1) sexual harassment training; (2) suspension with or without pay; (3) demotion; and (4) termination.

Both the complainant and the alleged harasser must be made aware of the conclusion of the investigation and, if harassment was found, must be advised that remedial or disciplinary action will be taken, although the nature of the remedial or disciplinary action need not be disclosed to the complainant.

Finally, both the accuser and the harasser should be advised that retaliation will not be tolerated and that, if any future instances of harassment or retaliation occur, they should be promptly reported.  It is important to note that the employer may still have a defense even if the conclusion reached by the employer was incorrect, so long as the conclusion was made in good faith.  Certainly, it is unlikely that a jury would punish an employer with punitive damages if the employer acted promptly to investigate a complaint and reached a reasonable conclusion, even if it turned out that that conclusion was wrong.

Clients often ask us what types of documents should, or should not, be kept in employees’ personnel files, and who should be given access to such files.  Below are some general guidelines on these issues.

What types of records should be kept in employee personnel files?
The following types of records should be maintained by the employer in employee personnel files:  applications; offer letters; records of salary changes; forms signed by the employee to secure or change benefits; attendance records; performance evaluations; forms signed by the employee acknowledging his or her understanding of, and agreement to abide by, the employer’s policies; employee awards and commendations; records regarding disciplinary actions; records of employer property issued to the employee; training records, including injury and illness prevention program training records; verification of references; verification of employment provided to subsequent prospective employers; transfer requests; records of leaves of absence; wage attachments/garnishment notices; notice of union membership and dues check-off; and records of termination and reasons therefor.

What kinds of records should not be kept in employee personnel files?
Not all employee records should be kept in personnel files.  Certain records should be segregated because of privacy and confidentiality concerns, and to prevent claims that others’ access to certain information exposed an employee to retaliation.  The following kinds of records should be kept separate from an employee’s personnel file:  verification of the right to work in the United States (Form I-9); EEOC charges and related documents; DFEH charges and related documents; employee grievances and complaints and related documents; workers’ compensation claims and related documents; medical information (discussed in more detail below); any information that may be defamatory; and any information that is not job-related.

What about payroll records? 
Payroll records (i.e., records of hours worked, wages paid and date of payment, amounts earned as straight-time pay and overtime, and deductions) are generally kept separate from personnel files.

What about a supervisor’s notes regarding an employee’s performance or disciplinary issues?
A supervisor’s notes regarding an employee’s performance or disciplinary issues should generally not be kept in an employee’s personnel file.  Instead, a supervisor’s notes regarding these issues should be kept in a separate file maintained by the supervisor.  However, if the supervisor actually gives the employee a performance evaluation, counseling memo, disciplinary memo, or other similar document, these documents should be kept in the employee’s personnel file.

What about records that contain medical information about an employee?
Medical information about an employee is considered extremely confidential, and the Confidentiality of Medical Records Act significantly restricts an employer’s use and disclosure of such information.  Medical information includes any individually identifiable information in possession of or derived from a health care provider or health care service plan regarding a patient’s medical history, mental or physical condition, or treatment.  Any employer who receives medical information regarding an employee must establish appropriate procedures to ensure its confidentiality and protection from unauthorized use and disclosure.  These procedures may include, but are not limited to, instructions regarding confidentiality to employees and agents handling files containing medical information and security systems restricting access to files containing medical information.  Employers should restrict access to employee medical information to supervisors, managers, and others with clear business reasons for the information.  Employers are also advised to keep employee medical information separate from other personnel records, under lock and key if possible.  If the information is stored electronically, special access codes should be required.  A complete discussion of an employer’s obligations under the Confidentiality of Medical Records Act is beyond the scope of this article; please contact us for additional information.

Who should have access to employee personnel files?
Because of concerns about employee privacy and confidentiality, access to employee personnel files should be restricted to those persons with clear business reasons for the information. Employee personnel files should also be stored in a secure place.

Do employees have access to their own personnel files?
Yes; employees (and, in some instances, former employees) have the right to inspect all personnel records that relate to their performance or to any grievance that concerns them.  This inspection right extends to records that contain information on the employee’s qualifications for employment, promotion, additional compensation, termination or other disciplinary action.  It does not, however, extend to the following:  (1) records relating to the investigation of a possible criminal offense; (2) letters of reference; or (3) ratings, reports, or records that were obtained prior to the employee’s employment, prepared by identifiable examination committee members, or obtained in connection with a promotional examination.

In several prior issues of California Veterinarian, we provided information regarding an assortment of legal issues, running the gamut from a veterinarian’s duty of care with respect to dangerous animals to responding to a subpoena to insurance-related matters.  In this issue, we switch gears in order to analyze another issue of interest to California veterinarians—the use of employment agreements between veterinarian employers and their employees (including veterinarian employees).

While veterinary practitioners are not legally required to maintain formal employment agreements with their employees, such agreements can be a useful way to clearly specify pertinent terms of employment and avoid disputes regarding such terms.  As we will detail, employment agreements may include terms relating to such items as terminability, compensation, dispute resolution processes, and many other items.  Employment agreements may contain as little or as much as the parties wish.  Therefore, if an employment agreement is used, it is not necessary that the agreement contain language relating to every single term or condition of employment.  In this regard, employers who are generally comfortable operating without a detailed employment agreement, but want to reduce certain specific items to writing, may do so.  The following is a list of several topics that an employment agreement may address.

Status of Employment
Unless otherwise specified, employment in California is presumed to be “at-will”; that is, either party may terminate the employment relationship at any time, provided that the termination is not in violation of law or public policy (e.g., an employee may not be terminated simply because of the employee’s race).  Where the parties seek to transform the normal at-will relationship into one under which an employee may only be terminated “for cause,” it is important to have a written document memorializing the particular items that may justify termination.  If the employer also has in place an incremental discipline system with steps such as a warning, followed by probation, followed by termination, it is very important to clearly describe this system in writing so that there will be no confusion over whether the designated steps were properly followed.

By the same token, even if the parties wish to maintain the at-will presumption normally attendant to employment, they may still want to reduce this arrangement to writing in order to minimize the chances of there later arising a dispute in which it is contended that the employment relationship was one that was terminable only for cause.  In this vein, certain dealings between the parties during the employment relationship can sometimes serve to alter “at-will” employment to “for cause” employment.  One such example is where the employer, after hiring the employee on an “at-will” basis, is understood to tell the employee that the latter would not be terminated unless he/she engaged in some form of misconduct.  In such a case, while the original understanding may have been that employment was “at-will,” this classification is not etched in stone if the subsequent course of dealing shows an intention to change the classification.

Of course, a written employment agreement memorializing at-will employment status does not act as an absolute insurance policy against future disputes.  However, such an agreement definitely does make it less likely that a dispute will arise, and the burden of establishing a transformation of employment to “for cause” status is more significantly more difficult to meet in the face of a written agreement.  In fact, California courts have held that an implied agreement of “for cause” employment may not exist where there is an express contract to the contrary.  For this reason, an employment agreement setting forth the nature of a particular employee’s employment can be useful in forestalling future disputes about the circumstances under which the employee can be terminated.

Compensation
Although not legally required, a written employment agreement may also be useful for purposes of setting forth an employee’s compensation.  This may be the case even when an employee’s actual compensation may vary from period to period (i.e., when the employee is paid on a commission or piece rate).  For example, it is important to compensate your exempt employees at a rate of no less than two times the state minimum wage for full-time employment.  The current minimum wage in California is $6.75 per hour.  Thus, in order to qualify for exempt status under California wage and hour law, an employee must earn the equivalent of $13.50 per hour based on a 40-hour work week, or $28,080.00 per year ($2,340.00 per month and $540.00 per week).  If the parties wish to ensure that a particular employee’s compensation meets the exemption criteria, it would be best to include a provision in a written employment agreement indicating that the employee will receive a monthly salary equivalent to no less than $540.00 per week (the California Division of Labor Standards Enforcement indicates this figure is derived by multiplying the required monthly salary—at least $2,340.00—by twelve, then dividing by 52).  In this manner, even if this minimum standard never actually comes into play as a factual matter, the parties will have clear documentation indicating that the employee will always be sufficiently compensated to meet the requisite standard.  This, in turn, will ensure that, at least insofar as compensation is concerned, the employee will meet the requirements for exemption.  In order to take into account future increases in the minimum salary required for exemption, you may also put in a “floating” standard in the agreement which indicates that, should the state minimum wage increase, that the employee will always be compensated at a monthly rate equivalent to at least two times the state minimum wage for full time employment (computed on a weekly basis).

Obviously, an employment agreement also may contain provisions regarding other aspects of salary, including time of payment and the like, as well as language regarding additional benefits attendant to the employment.

Arbitration Provisions
Although a thorough discussion of arbitration provisions in employment agreements is well beyond the scope of this article, some employers prefer to include arbitration clauses or other dispute resolution processes in employment agreements. There are a myriad of advantages and disadvantages inherent in such processes, and the propriety of including an arbitration or similar provision in an employment agreement depends on the unique circumstances of each employment relationship.  If you are considering including such provisions in an employment agreement, you should contact a qualified attorney to explain the benefits and detriments of these alternative dispute resolution mechanisms.

Prohibitions on Other Employment
In the veterinary and other professional contexts, it is often understood between the parties that the employee’s employment is to be exclusive.  However, other than legal constraints on competition during employment, there is nothing that formally prohibits an employee from performing work for another business.  If the parties wish to make clear that the employment is exclusive even as against non-competing ventures, they may include a provision in an employment agreement indicating as much.

Parties who wish to enter into an agreement prohibiting or constraining post-termination employment activities, even activities of an employee that are in ostensible competition with the former employer, must be very careful, as such non-competition provisions are usually unenforceable in California.

Conclusion
No matter what provisions parties decide to include in an employment agreement, such provisions should be carefully reviewed before the parties execute the agreement so that both parties are cognizant of their respective rights and obligations.  An employment agreement means little if the parties do not know what is included therein, or if the agreement is ambiguous or confusing in its terms.  The whole reason for entering into an employment agreement is to obtain greater certainty than would attach in the absence of such an agreement.  Pay attention to the terms of the agreement, and make sure you understand what they mean.  If you are uncomfortable with the terms or effect of an agreement, or have other questions or concerns that are not satisfactorily being answered, consider consulting a qualified attorney.

In the previous issue of California Veterinarian, we began a series of articles which delve into assorted legal matters that are of increasing concern to California veterinary practitioners.  Our first article, “All Bark and May Bite,” outlined relevant law regarding a veterinarian’s duty of care with respect to warning of an animal’s dangerous propensities.  We attempted to provide certain general principles that may be applied in determining whether a duty to warn exists in a given set of circumstances.  As we detailed, very little specific law exists in regards to a veterinarian’s duty to warn of an animal’s dangerous tendencies.  There is even less on the subject of exactly how that duty is discharged vis-à-vis different classes of individuals.

In this issue, we offer suggestions on steps veterinarians can take in order to fulfill relevant duties of care to staff, owners, and third persons.  Keep in mind that it is not our goal to impose hard and fast rules for veterinarians or to delegate universal standards of care on behalf of CVMA.  Rather, the following are to be considered simply as practical tips for limiting potential liability based on an individual’s claim that a veterinarian failed to discharge a duty to warn.

Staff
The most important step veterinarians can take to limit potential liability to staff is to adopt and follow clear internal policies with respect to the intake and examination of dangerous animals.   Written policies and good record keeping are the key.  If a veterinarian examines an animal patient whom he or she believes poses a bite or other serious risk to humans, that veterinarian should have in place a defined process for identifying the animal as dangerous.  This process should be followed each and every time such an animal is examined.  For example, in order to prevent injuries to veterinary technicians and other staff, a veterinarian might consider having owners fill out forms for each new animal brought to the veterinarian which seek information regarding the animal’s behavior.  For animals identified as dangerous (either by the owner or veterinarian during examination), veterinarians might consider labeling the pet’s file with a warning such as “handle with care—bite risk” or similar indication in order to put staff on notice of the propensities of the animal.  In instances where a dangerous animal patient is being examined, advance notice should be provided to staff so as to allow them to be aware of the potential danger while in proximity to the animal.  If necessary, physical restraints on dangerous animals, such as muzzles, should be used.

Vigilance for dangerous animals should not end with the veterinarian.  Staff should be encouraged to notify the veterinarian and other staff members in order to better inform each and every person in the office about the potential risk.

Owners
Obviously, keeping staff members safe is and should be a top priority for veterinarians.  However, most veterinarians (whether because of staff allegiance, the fact that staff to some extent “assume the risk”, workers’ compensation considerations, or otherwise) are probably less concerned about liability to staff then to animal owners or third persons attacked by animal patients.  As we discussed in the last issue of California Veterinarian, it is unlikely that a veterinarian will be held liable to an animal owner for a failure to warn of the animal’s dangerous propensities where the owner has knowledge of these propensities.  Whether this knowledge is pre-existing or acquired from a treating veterinarian following an examination is immaterial.  Thus, it is important for veterinarians to notify animal owners when there is reason to believe the animal poses a risk.  Although it is never pleasant to inform an owner that his or her animal is dangerous, providing the owner with such information and notification creates a shield against liability to the owner in the event the owner is later injured by the animal.

As one would expect, documentation of warnings provided to owners is well-advised.  There are two ways in which such documentation might be carried out.  First, a veterinarian may simply make a written notation in the animal’s chart that a warning was given to the owner. Second, a veterinarian may also provide an actual written warning to the owner, confirming the warning that was provided in person. (In this regard, note that veterinarians should not substitute such a written warning for one given personally to the owner.  From a public relations perspective, it is important that the warning be communicated orally so that the owner does not feel blindsided by a later-received written warning.)  The advantage of providing written notice to the owner, of course, is that there can be no debate later on about whether and to what extent a warning was given.

One thing to keep in mind with respect to the nature of the warning given to an animal owner is to avoid being unduly narrow or vague in describing the potential danger posed by the animal.  By acting affirmatively to provide a warning, the veterinarian may be assuming a duty to disclose all potential dangers.  Providing a narrow description of the danger posed may be problematic in the event that injury is later caused by an action by the animal that would have been subsumed within a broader “category” of warning.  The owner may be able to argue that while the veterinarian discharged his or her duty with respect to warning of Risk A, the veterinarian failed to warn of Risk B (which was the risk that manifested itself), and was therefore negligent.  Therefore, when in doubt, err on the side of providing a broad, as opposed to narrow, warning regarding the animal’s dangerous propensities.  Similarly, do not minimize the danger posed by the animal in order to soften the blow on the owner or otherwise make the news more palatable.

As was the case with regard to minimizing potential liability to staff, following clear guidelines is also important in the veterinarian/owner context.  Veterinarians should avoid situations where a warning is given to one owner about the danger posed by an animal, but not given to another owner whose animal poses the same or similar danger.  Be consistent in how you handle individual cases.  Adopt written policies defining what tendencies are sufficiently dangerous to require a warning.  Persistent and violent attempts at biting will likely give the veterinarian reason to provide a warning.  For less aggressive (but still dangerous) behavior, veterinarians will have to make judgment calls on whether the particular quantum of animal conduct should generate a warning.  Of course, do not lose touch with common sense.  If an animal shows no dangerous tendencies, do not feel that a warning is necessary just to protect yourself from liability.

Third Persons
A veterinarian’s duty of care with respect to third persons (i.e., those other than staff or owners) is largely coterminous with the duty owed to owners.  Obviously, it is highly infeasible for veterinarians to somehow safeguard the public at large from each and every dangerous animal that passes through a veterinarian’s office.  Although given the paucity of law on the issue it is difficult to say with absolute certainty, it is likely that a veterinarian’s discharge of his or her duty to warn as against an owner will protect that veterinarian from liability to a third person.

For example, if a veterinarian examines a particular animal and determines during that examination that the animal poses a substantial bite risk to humans, the veterinarian, as indicated above, should warn the owner of this risk.  If the veterinarian does not provide such a warning, he or she could be held liable based on negligence principles to an ignorant owner who is subsequently attacked by the animal.  Liability could flow to third persons on the same theory.  If the owner was not informed by the veterinarian of the observed dangerous propensities and has no knowledge of those propensities, an injured third person (or the owner if the owner is sued) could charge that it was the veterinarian, not the owner, who acted negligently.  On the other hand, if the owner is duly warned, there is no basis for assigning liability to the veterinarian, rather than the owner.  It is the owner, not the veterinarian, who has the primary responsibility for the control of the animal.

Conclusion
No matter what specific steps you feel are best utilized in order to protect yourself from potential liability for a failure to warn, the most important thing is to document and stick to whatever policies you implement.  One relative luxury veterinarians have with respect to this issue is the lack of any clearly defined standard to which veterinarians must adhere in the duty to warn context.  This circumstance in essence allows veterinarians to create their own “standard of care” by instituting internal policies such as those mentioned above.  The drawback is that a failure to adhere to this self-created standard may be used as evidence of negligent conduct where a staff member, owner, or third person is injured by a dangerous animal patient.  Note, however, that with the likely increase of litigation arising from animal attacks, the institution of internal policies is, in the aggregate, a desirable and perhaps necessary tool to combat veterinary liability, even though documenting and following such policies may be inconvenient.

In the last two issues of California Veterinarian, we explored issues relating to a veterinarian’s duty to warn of an animal’s dangerous propensities, along with suggestions for avoiding potential liability for a failure to warn.

In this and future issues, we endeavor to discuss other matters of importance to veterinarians.  In this article, we provide general information on what to do upon receipt of a subpoena that calls for you to provide testimony and/or documents in connection with litigation.  This situation may arise where, for example, an individual is attacked by an animal, sues the owner, and seeks veterinary records and/or testimony regarding the animal.  As animal attacks become more and more visible on the collective radar screen of the general public, it is likely that lawsuits by victims of animal attacks will increase.  If this is the case, the occurrence of veterinarians being called upon to provide records and/or testimony in a lawsuit regarding an animal patient will also rise.  It is therefore important for veterinarians to be at least generally familiar with the process by which such evidence is obtained.

What is a Subpoena?
A subpoena is a document issued under court authority which commands the attendance and testimony of and/or production of documents by a witness who is not an actual party to the lawsuit in which the testimony and/or records are sought.  A subpoena may be issued to compel attendance or production of documents in court or at a deposition.  Since most subpoenas issue in the context of depositions, it is this type of subpoena that will be the focus of this article.

Under the California Code of Civil Procedure, a deposition subpoena may command (1) the production of business records for copying, (2) the attendance and testimony of an individual or representative of an entity (known as the “deponent”), or (3) both the attendance and testimony of the deponent and the production of business records, other documents, and/or tangible things.

Subpoenas Seeking Testimony Only

The first type of subpoena is that which requires only the attendance and testimony of the deponent.  Such a subpoena must specify the time and place of the deposition, and also must provide a summary of (1) the nature of the deposition, (2) the rights and duties of the deponent, and (3) the penalties for disobedience of the subpoena (which penalties include punishment for contempt of court).  If the deposition is to be videotaped, the subpoena must specifically so indicate.  If the named witness is an organization rather than an individual (i.e., a veterinarian’s corporation as opposed to the veterinarian personally, as will oftentimes be the case), the subpoena must describe with reasonable particularity the matters on which examination is requested, and must advise the organization of its duty to designate the person most qualified to testify on the organization’s behalf regarding the specified matters (which, of course, will usually be the veterinarian).

Subpoenas Seeking Business Records Only
The second type of deposition subpoena is that which commands only the production of business records (for veterinarians, these will most commonly be veterinary medical records) for copying.  Such a subpoena must specifically describe each individual item or reasonably particularize each category of item sought, and must be directed to the custodian of the sought-after records or another person qualified to certify that the records are prepared and maintained in the ordinary course of business.

Subpoenas Seeking Records and Testimony

The third type of subpoena is that which requires both the attendance and testimony of the deponent, as well as the production of business records, documents, and/or tangible things.  This subpoena must include the same information as that contained in a subpoena seeking testimony alone and, as with a subpoena seeking business records only, must designate the documents and/or things sought on an item-by-item basis or by reasonably particularized categorization.

Service of Subpoenas
A subpoena must be served personally.  Thus, if you receive a subpoena requiring your attendance at deposition or production of documents, or both, by mail alone, you are under no duty to appear for the deposition or produce the requested documents.  Although no specific amount of time in advance of the deposition date is required to command a deponent’s attendance, a sufficient time is required to allow the deponent to locate and produce any designated documents or things and to travel to the deposition.

Where the subpoena seeks the production of records only (and does not require personal attendance at deposition), the designated date for document production must be no earlier than 20 days after issuance, or 15 days after service, of the subpoena, whichever date is later.

Responding to a Subpoena Seeking Business Records Only
In the case of subpoenas seeking business records alone (e.g., veterinary medical records), the custodian of the requested records or other qualified person will usually be instructed to provide copies of the records to the deposition officer specified in the subpoena, either by delivering (personally or by mail) such copies to the office of the deposition officer (in which case the records must be separately enclosed and sealed as specified in California Evidence Code section 1560, subdivision (c)), or, alternatively, by permitting the deposition officer to come to the custodian’s office during normal business hours to make copies of the documents.   On some occasions, a subpoena may direct the witness to make the original records available for inspection or copying by the subpoenaing party’s attorney or a representative thereof.

Regardless of the method by which the documents are provided, the custodian must execute an affidavit stating that (1) he or she is authorized to certify the records, (2) the copies provided are true copies of the records specified or categorized in the subpoena or were delivered to the attorney or authorized representative thereof for copying, (3) the records were prepared by the personnel of the business in the ordinary course of business at or near the time of the relevant act, condition, or event, (4) the identity of the records, and (5) a description of the mode of preparation of the records.  Also, if the witness has none of the records described or only part of those records, the custodian must indicate this fact in the affidavit.  Note that the requested records must not be delivered before the time specified in the subpoena.

Always remember that good recordkeeping makes the process of producing documents a good deal easier and less time-consuming.  In the case of veterinary records, clearly-marked and user-friendly files, separately maintained for each animal patient, are preferable.  Furthermore, be aware that computer files (including emails) are discoverable and subject to the scope of a subpoena, so make sure that good recordkeeping procedures extend to the computer realm, also.

Defective Subpoenas
A subpoena may be opposed or challenged on a number of substantive (e.g., oppressiveness or lack of relevance of the categories of records or testimony sought) and procedural (e.g., defects in form or service of the subpoena itself) grounds.  Challenges may be raised by the witness who received the subpoena or a party to the litigation in which the subpoena is issued.  A subpoena that is substantively or procedurally defective may be challenged by procedures such as a motion to quash or a motion for a protective order.

Expert Witnesses

The above guidelines relate to the provision of testimony or records as a “percipient” witness.  A “percipient” witness is one called upon to testify in a non-expert witness capacity.  By contrast, an expert witness is a qualified individual specifically called upon to offer opinion or similar testimony regarding a particular matter.  Where an expert is retained by a party to litigation for the purpose of forming and expressing an opinion, no subpoena is required in order for that expert witness to be called upon to provide deposition testimony; service of a deposition notice on the retaining party’s attorney, together with tendering of expert witness fees at or before the time of deposition (these fees are the reasonable and customary hourly or daily fees for the expert’s services, as disclosed in the expert witness declaration that will previously have been provided by the party on whose behalf the expert is testifying), is all that is required.  However, a subpoena must still be used in order to command production of documents by the expert.

Being Deposed
If your attendance at deposition is commanded, be sure and show up punctually at the time and place of deposition, bringing the documents and things specified in the subpoena, if any.  Non-party percipient witnesses are entitled to daily witness fees (currently $35.00 per day) and mileage fees (currently $.20 per mile to and from deposition) for attending a deposition, so you should receive such fees either with the subpoena itself or at the time of deposition.  If no such fees are presented at the time of deposition, insist that they be provided; the duty of the subpoenaing party to provide such fees is mandatory. (As stated above, if you are testifying as a retained expert witness, you are entitled to expert witness fees.  These fees must be provided to the retaining party’s attorney no later than the commencement of the deposition.)

During the deposition, remember that you will be under oath, just as if you were testifying in a courtroom.  Always provide truthful and accurate testimony.  Remain calm.  Provide short and succinct answers, unless the question clearly calls for a more lengthy or descriptive answer.  Only answer the questions asked, and do not volunteer information unless you absolutely feel such information is necessary to provide a full and accurate answer to the question asked.  If you do not know the answer to a question or do not recall a particular fact or nugget of information, say so.  If you are confused by a question or otherwise do not understand the question being asked, do not be afraid to ask for clarification.  It is the deposing attorney’s duty to ask proper and understandable questions, and you should not answer a question you do not understand; indeed, doing so may lead to inaccurate or misleading testimony.  Furthermore, if you have not been designated as an expert witness, you are not required to provide your opinion, and it likely would not be favorable for you to do so.  As a percipient witness, however, you may nonetheless be required to testify as to why you arrived at a particular diagnoses or embarked upon a particular course of treatment.

If you feel apprehensive about the deposition process in general or your role in the specific litigation in which your deposition is being taken, contact a qualified attorney to discuss whether you should be represented during the deposition.   An attorney may also help you respond to a subpoena in which business records or other items are sought if you are unsure about your duties in this regard.

In the last several issues of California Veterinarian we have undertaken to provide information regarding various legal issues of importance to California veterinary practitioners.  In the July/August and September/October issues of California Veterinarian, we addressed veterinarians’ duties of care with respect to warning pet owners, staff, and third persons about an animal patient’s dangerous propensities and provided suggestions on how veterinarians may discharge any “duty to warn.”  In the November/December issue, we turned to another matter of concern: the duties of a veterinarian in responding to a subpoena served in connection with litigation.  In this article, we address several ancillary issues that have been raised by our prior articles.

Written Warnings
One such issue deals with the nature of a written warning provided by a veterinarian to a pet owner regarding the dangerous propensities of the owner’s animal; specifically, should a veterinarian choose to provide such a written warning, what should be said?

The basic answer is that each veterinarian should use his or her common sense with respect to the specifics of a written warning.  As stated in the September/October article, a veterinarian is ill-advised to provide an overly narrow or vague warning in describing the potential danger posed by the animal at issue.  Warning letters should be written in a clear and understandable manner, and veterinarians, when drafting such letters, should refrain from employing obscure terminology or “in house” verbiage in describing the problem.  Remember, you are writing to a pet owner, not another veterinarian.  The letter should be drafted so that the owner recipient may discern the nature of the warning being given and the general reasons therefor.  Always keep in mind that providing an unintelligible warning is little better than providing no warning at all.

There is nothing wrong with maintaining a form letter for general use in cases where you believe a warning is necessary.  However, make sure that any such letter is flexible enough to allow inclusion, if appropriate, of a discussion regarding the specific facts and circumstances of the animal at issue.  Like use of a letter that is difficult to understand, rote use of an unchanging form letter may be of little value to the recipient owner.

In short, think of how you would want to receive communications from a professional in a field that you do not fully understand.  Just as you would not want an attorney to explain a situation to you using “legalese,” do not cloud the message you are trying to send by resorting to the drafting of letters that are overly technical and/or incomprehensible.

Referrals
Another issue that has been raised is whether and when a particular animal patient should be referred to a veterinary behaviorist.  Is such a referral required by the relevant standard of care?

Frankly, the issue is so uncultivated that it is doubtful that the veterinary standard of care (at least in the warning context) currently requires referrals of animals that exhibit dangerous propensities to a veterinary behaviorist.  The field of veterinary behavioral medicine is itself an emerging specialty, and there are only a handful of certified Veterinary Behaviorists in the State of California.  By contrast, there are many non-licensed individuals (such as animal trainers and the like) operating in this area.  To whom must a referral be given?  Moreover, while one might argue that a referral may in some cases be demanded by veterinary standards of care in order to properly render full and complete treatment to the animal itself (in order to combat the behavior problem), a referral would not appear to be a component of the duty to warn an owner of the animal’s dangerous propensities, so long as the owner is otherwise adequately apprised of the animal’s tendencies.

Prescribing Medications
Another issue related to the duty to warn arises when the veterinarian decides to prescribe medications to combat an animal’s behavioral problems.  As you know, when a prescription is given, the veterinarian provides full instructions regarding the use and effect of the drug(s) at issue.  Specifically, the veterinarian instructs the owner that the prescribed medication should not be relied upon to completely erase the danger posed by the animal to the owner and others.  Certainly, it is part and parcel of the duty to warn to provide complete disclosure of what a prescribed drug can and cannot do.  Veterinarians should not provide owners with a false sense of security regarding a dangerous pet, and should make clear that while the medication is designed to reduce the danger posed by an animal, it is still up to the owner to minimize the opportunity of the animal to cause injury to the owner and others.  A veterinarian who fails to give such cautionary instructions is walking into a potential minefield of liability.

Insurance Issues
Another issue that is germane to the matters discussed in the previous several articles is the adequacy of your insurance coverage.  Veterinarians should obviously strive to avoid situations out of which liability may arise by, among other things, providing the types of disclosures previously discussed.  However, when these proactive steps fail, it is important to have the appropriate amount and type of insurance in place to best discharge any judgments entered against you.

So, exactly what type and how much insurance should one carry?  There are no simple answers, because there are no “one size fits all” solutions for every type of practice.  Your individual specialty, type of practice (companion, mixed, equine, or exotic), form of business entity (sole proprietorship, corporation, partnership, et cetera) and exposure to the general public will dictate what types and limits of coverage you need.  Further, the value of your business and personal assets and your comfort with risk will likely be factors to be considered.

A lawsuit can originate from a number of acts, incidents or accidents.  Depending upon the circumstances, each might fall under a different form of liability insurance policy.  For veterinarians, the three most common arenas from which suits arise include:

a)    Lawsuits originating from professional negligence, referred to as malpractice.  This term includes alleged errors and omissions or mistakes committed in or arising out of the practice of veterinary medicine.

b)    Lawsuits regarding incidents arising out of the ownership of a premises or business operation.  Examples include trips, slips, falls, animal bites or other injuries to the public or guests while on the premises.

c)    Lawsuits for injury to a person’s reputation or character.  Such lawsuits include those seeking damages for defamation of character, based on alleged libel (written defamation) or slander (oral defamation).

Should you be charged with malpractice, the issue will often surface as a complaint to the Veterinary Medical Board (“VMB”) prior to any civil lawsuit being filed.  It should be noted that the majority of professional liability insurance policies do not cover and will not respond to an administrative or consumer complaint originating from the state Veterinary Medical Board.  An insurance policy would respond to an ensuing malpractice lawsuit, but not the civil penalties or costs which could be assessed by the VMB.  Accordingly, you may wish to procure a policy or an endorsement to a policy that provides at least the cost of defending against a VMB action.

When an insurance company is notified of a lawsuit, it first investigates the cause or action that created the complaint, injury or damage.  The company then determines the policy and coverage under which the claim would be defended.  In doing so, the company determines if the underlying cause of loss was professional negligence, personal injury or a premises hazard that caused the injured party to seek relief.  If the insurance company elects to deny coverage, it is required to advise you of the denial and the basis of the denial.  If you have question the appropriateness of a denial of coverage, you should seek the assistance of counsel.

Third-party injuries can arise out of professional negligence concurrently with premises ownership.  Take the case of a pet owner who is bitten or scratched while restraining his/her own animal for the veterinarian or the veterinarian’s staff.  In this case, the claim may be defended under the professional liability policy for failure of the veterinarian to warn the owner that even a family pet can become dangerous when stressed or in pain during medical treatment.  However, the same claim may also be defended under the premises liability coverage, simply because the incident “arose out of ownership of” or took place on the property.  Because of these types of claims, it’s an excellent idea to have all liability insurance coverages with a single carrier and, where possible, within the same policy.

Malpractice can also arise from an omission, such as failure to meet a standard of care. This includes failure to warn owners that their animal has behavioral problems which may cause injury to family, friends or the general public.  Similarly, negligence can occur by way of a failure to explain to an owner (and failing to properly document in the patient record) that the medications prescribed to calm a fractious animal might not reduce their inclination to bite or scratch someone.  In this vein, numerous claims have resulted from injuries occurring when an owner loses control of a pet in a veterinary hospital waiting room and it subsequently injures a third party or another animal.  In the case of such a professional omission, the insurance coverage would be afforded by the malpractice policy.  Where the injuries were caused by an incident in the waiting room, the general liability (premises liability) policy for the hospital would typically respond.

So, what limits should you carry?  Consider a clinic that only treats companion animals with relatively low economic value.  Do they need high limits of liability or would $50,000 or $100,000 be adequate?  To answer the question, consider the following: In the typical companion animal clinic (which generally has a low exposure to high valued animals), if the veterinarian fails to recognize or diagnose a rabies case that subsequently exposed members of the public requiring them to undergo treatment, would a plaintiff and his/her attorney necessarily sue for only $100,000?  Likely not.  What if this same veterinarian failed to notify and properly document to an owner that the owner had a dangerous dog and should take extra precautions to protect the public and family members and, subsequently, someone’s child was severely attacked and injured by that animal?  Again, in such a case, you would want very high limits of coverage.

Both of these potential civil cases would undoubtedly be defended under a veterinary professional or general liability policy.  Therefore, it is not unreasonable to carry at least one million dollars of coverage per incident and two million dollars in the aggregate for all claims during the policy term.  Of course, the greater the policy limits, the greater protection you have.  You should also consider the value of your assets that you wish to protect.  For instance, a veterinarian with a substantial portfolio may be more willing to pay premiums for high policy limits than a new veterinarian heavily burdened with student loans

Today, veterinary malpractice insurance is readily available and modestly priced, especially when compared to other medical professionals’ coverage. The cost difference to increase business and professional liability to one million dollars is quite reasonable.  Likewise, with the current legal climate in which veterinarians live and practice, it is highly recommended that they have at least $10,000 of Veterinary Medical Board defense coverage if it is available in their area.

The most important thing to remember when faced with a lawsuit or VMB complaint (or threat of one) is to contact your insurance representatives immediately.  Their job is to counsel you through the incident, advise if a report should be filed with the carrier and provide resources to begin building your defense against any claims or proceedings that may arise. Once you present the facts of the case, the carrier will advise you what course of action to take to minimize your involvement in the claim.

In some cases, an incident occurs which may give rise to the possibility of a future claim. While no lawsuit or threat has been received, the veterinarian has concerns because of the specific facts behind the incident.  If this happens to you, always contact your insurance professional and discuss the circumstances of the situation.  Your representative may complete a report for information purposes only, in which no claim is submitted until such time as a lawsuit is filed.  By doing this, you make sure that preliminary information gathering is obtained by the insuring company in a timely manner and the reporting clauses in the insurance contract have not been compromised.

Anytime you have questions concerning general or professional liability, it is prudent to contact your insurance representatives or your counsel.  They represent you and are thoroughly familiar with lawsuits, so you can freely discuss the issues frankly and openly, and they will be there should the need arise.

(contained in July/August 2002 issue of California Veterinarian Magazine—Volume 56, Number 3)

In recent months, veterinarians have become increasingly concerned about various legal issues that were heretofore not closely considered within the veterinary community.  The much-publicized Whipple dog-mauling case has forced veterinarians to reflect upon their professional and legal obligations, if any, to warn about the dangerous propensities of a particular animal.  This same case has also generated questions and concerns about veterinarians’ rights, duties, and obligations when enlisted to act as a witness in connection with litigation, either in an expert or “percipient” capacity.

In the next several issues of California Veterinarian, we will endeavor to assist veterinarians in dealing with assorted legal matters that are of increasing concern to California veterinary practitioners.   In this and the next issue, we discuss a veterinarian’s duty of care in regards to warning of an animal’s dangerous propensities.  The first part of this analysis requires outlining relevant law regarding this “duty to warn” in an attempt to identify principles defining the parameters of such a duty, including when a warning may be required and who must be warned.

General Duties of Care
Veterinarians are familiar with the fact that they must provide professional veterinary care in a competent and humane manner, and that all aspects of veterinary medicine are to be performed in a manner consistent with current veterinary medical practice within the State of California. (See, e.g., Title 16, Cal. Code Regs. § 2032.)  In this regard, a veterinarian’s general duty of care is defined by veterinary “community standards.”  As these “community standards” are evolving, so is the veterinarian’s duty of care.

In analyzing duties imposed on a veterinarian in connection with his or her rendering of professional services, there are certain standards that are employed.  Such a “duty” analysis is rooted in the legal principle of negligence.  Thus, if a veterinarian does not carry out his or her duties in accordance with relevant community standards of professional care, that veterinarian has acted negligently.  To maintain a valid cause of action based upon the negligent acts or omissions of a veterinarian in the performance of professional duties or services, a plaintiff must establish (1) the basis for the duty (generally by the veterinarian having been retained to perform veterinary services); (2) the veterinarian’s failure to exercise the appropriate standard of care; and (3) that the veterinarian’s departure from that standard was the proximate cause of injury.

Defining the Duty to Warn
Of course, the negligence analysis set forth above usually comes in the context of a veterinarian’s provision of care to the animal itself and injuries to the animal resulting therefrom. Although there are certain statutory and regulatory provisions regarding veterinary notification duties in particular circumstances (such as California Business and Professions Code section 4830.5, which states that whenever a veterinarian has reasonable cause to believe that a dog has been injured or killed through participation in a staged animal fight, the veterinarian must promptly report the incident to the appropriate authorities, or Title 17, Cal. Code Regs. § 2606, imposing a duty on “any person” having knowledge of the whereabouts of a rabid animal or the fact that a person or animal has been bitten by a rabid or suspected rabid animal to report to the local health officer), there is remarkably little by way of statute or case law (in California or elsewhere) regarding a veterinarian’s duty, if any, to warn of an animal’s dangerous propensities.  Still, several cases provide some guidance as to the application of the duty to warn.

For example, at least one court found that a veterinarian was not liable for the failure to warn of a dog’s dangerous condition where the dog, following a veterinary examination, bit the owner.  In McNew v. Decatur Veterinary Hospital, Inc. (Ga. 1951) 85 Ga. App. 54, the court concluded that the plaintiff owner did not prove that the veterinarian failed to exercise the degree of care that would have been exercised by a prudent veterinarian under the same circumstances in instructing the owner how to care for his dog, which had been treated for injuries and examined for rabies after itself being bitten by another dog.  Although the veterinarian did not provide a specific warning about the dog’s dangerousness, the veterinarian did advise the owner to keep the dog confined for a period of 21 days.  This instruction was deemed sufficient to preclude a finding of liability.

In Branks v. Kern (N.C. 1987) 320 N.C. 621, the North Carolina Supreme Court held that there was insufficient evidence to allow a jury to find that the veterinarian defendant violated a duty of care to the plaintiff owner by failing to restrain the plaintiff’s cat during a catheterization or by failing to warn the plaintiff of the risks of remaining in close proximity to the cat during the procedure.  The court found that the plaintiff, who had observed the procedure in its entirety, was in as good of a position as the veterinarian to appreciate the risk that the cat would try to bite someone in its immediate vicinity.  This conclusion was bolstered by the fact that the cat had previously tried to bite the veterinarian’s assistant in the plaintiff’s presence, and was therefore clearly revealed as a hazard at that point.  The veterinarian was held not to have a duty to warn of a danger about which the plaintiff had equal knowledge.

In Fazio v. Martin (N.Y. 1996) 227 A.D.2d 809, the owner of a dog was held not to have knowledge of the dog’s vicious propensities prior to the dog’s attack on a four year-old child, and therefore not liable for the injuries suffered by the child.  The previous day, the dog had been treated by a veterinarian after a nail had become stuck in the dog’s paw.  The veterinarian supplied a dosage of antibiotics, but released the dog with no special restrictions or warnings.  The next day, while the dog was being walked, the child attempted to pet the dog and was attacked after accidentally stepping on the dog’s injured foot.  The defendant owner’s case was aided by an affidavit from the veterinarian, in which the veterinarian indicated that the dog displayed no aggressive tendencies when discharged, the antibiotics prescribed for the dog would not cause mood swings, and the only instructions given to the owner were routine and related to the cleaning of the dog’s bandages.  Notably, the veterinarian was not named as a defendant in the lawsuit.

Certain general principles may be culled from the above decisions.  First, where an animal’s dangerous propensities are as readily apparent to the owner as the veterinarian, it is unlikely that an owner would have a legally cognizable claim against the veterinarian for a failure to warn.  Whether this circumstance creates a flaw in the plaintiff’s affirmative case or is instead properly utilized as an affirmative defense by the veterinarian is immaterial for our purposes.  The bottom line is that a veterinarian probably cannot be held liable for a failure to warn an owner who already has knowledge of an animal’s dangerous propensities.

Second, if the veterinarian has no knowledge, or cannot reasonably be said to have known, of an animal’s dangerous propensities, it is highly unlikely that the veterinarian could be held liable for a failure to warn.  Although a veterinarian will be held to a higher standard of constructive knowledge (i.e., what the veterinarian “should” have known based on the community standard of veterinarians) than a layperson, there will be some circumstances where an animal’s future conduct cannot be predicted, even by a veterinarian.  Moreover, the California “dog bite” statute (Civil Code section 3342, imposing civil liability for injuries suffered from a dog bite) applies only to owners of dogs, not to veterinarians.  Therefore, a veterinarian will not be subject to strict liability under the “dog bite” statute, and any claim for indemnification by the owner against the veterinarian would seem to require a finding of negligence.

Third, a veterinarian may not have to utter certain “magic” warning words in order to fulfill his or her duties.  Other types of instructions or directions, such as the instruction to keep the pet confined in McNew, may suffice.

Conclusion
Obviously, these general principles are not extremely helpful in terms of clearly defining a veterinarian’s duties with respect to warning owners, staff, and other individuals about a given animal’s dangerous propensities.  Simply put, the issue of veterinary liability for a failure to warn of dangerous propensities is a decidedly undeveloped body of law.  The above cases focus only upon the duty to warn an owner of the dangerous propensities of an animal, and do not address the scenario of concern in the “Whipple” case, where a third-party who was a stranger to the veterinarian was injured by a dangerous animal.  In the Whipple matter, the veterinarian did warn the owners that the dog had dangerous propensities and to take prophylactic measures.  If such warnings become the “community standard,” the veterinarian’s duty to provide warnings could be expanded.  With more and more publicity being directed at dog attacks and the like, it is only a matter of time before veterinarians find themselves on the “business end” of a civil lawsuit by an animal attack victim.  In the next issue, we offer some suggestions about what steps veterinarians can take in order to fulfill their duties and minimize their liability.

Both the federal Americans with Disabilities Act (“ADA”) and California’s Fair Employment and Housing Act (“FEHA”) affirmatively require employers to make reasonable accommodation for the known physical or mental disability of an applicant or employee, unless the employer can show that doing so would cause an undue hardship.  Reasonable accommodation can include making existing facilities readily accessible to, and usable by, individuals with disabilities.  Reasonable accommodation can also include:  job restructuring; reassignment to a vacant position; part-time or modified work schedules; acquisition or modification of equipment or devices; adjustment or modification of examinations, training materials or policies; the provision of qualified readers or interpreters; and other similar accommodations for individuals with disabilities.  This article discusses the scope of an employer’s obligation to reasonably accommodate an employee’s disability by reassignment to a vacant position.
WHEN SHOULD AN EMPLOYER CONSIDER REASSIGNMENT?

An employer should always consider reassignment when it is not possible to accommodate an employee’s disability in her current job, or when such an accommodation would cause the employer undue hardship.  To take an example from a recent California case, if an operating room nurse develops an allergy to a solution used to sterilize surgical instruments, her employer might not be able to reasonably accommodate her in her current job without undue hardship.  In this circumstance, the employer should consider reassigning the nurse to a vacant position that does not require her to come into contact with the sterilizing solution.
THE EMPLOYEE MUST BE QUALIFIED FOR THE NEW POSITION.

An employer does not have to reassign a disabled employee unless the employee is qualified for the new position.  An employee is considered qualified if he is able to perform the essential functions of the new position with or without accommodation.  In other words, an employer may, in effect, have to accommodate the disabled employee twice — first by reassigning the employee to a vacant position, and then again by making accommodations that will allow the employee to perform the essential functions of that position.

THE EMPLOYER NEED NOT CREATE A NEW POSITION.

An employer does not have to reassign an employee if no vacant position exists for which the employee is qualified.  This means that an employer does not have to create a new position in order to accommodate a disabled employee, or bump another employee out of a position in order to create a vacancy.

THE EMPLOYER MUST TAKE AN ACTIVE ROLE IN LOCATING A VACANT POSITION FOR WHICH THE DISABLED EMPLOYEE IS QUALIFIED.

Several courts have recently held that it is not enough for an employer to merely allow an employee to apply for other jobs within the company.  As one court has explained, all employees have the right to apply for other jobs within a company; reminding an employee of a right she already has is not a reasonable accommodation.  And in the words of another court:  “[T]he word ‘reassign’ must mean more than allowing an employee to apply for a job on the same basis as anyone else.  An employee who on his own initiative applies for and obtains a job elsewhere in the enterprise would not be described as having been ‘reassigned’; the core word ‘assign’ implies some active effort on the part of the employer.”  These cases suggest that it is not enough for an employer merely to give a disabled employee a listing of all available jobs or to tell an employee to keep checking the job board.  Instead, the employer should take an active role in attempting to identify and locate an alternative position for which the employee is qualified.

DISABLED EMPLOYEES MIGHT BE ENTITLED TO PREFERENTIAL CONSIDERATION FOR VACANT POSITIONS.

What if a disabled employee asks to be reassigned to a vacant position, but there is another applicant who is more qualified?  Several courts have recently held that, if the disabled employee is minimally qualified for the position, she must be hired.  In the words of one court, “when reassignment of an existing employee is the issue, the disabled employee is entitled to preferential consideration.”  This means that an employer who decides not to reassign a disabled employee to a vacant position must be prepared to demonstrate that the employee was not qualified (i.e., that the employee could not perform the essential functions of that position, with or without accommodation).

What about disabled job applicants?  Do employers have to give preferential treatment to disabled job applicants as well as disabled employees?  Probably not.  Both the ADA and FEHA specifically provide that reasonable accommodation can include reassignment to a vacant position, and, as several courts have noted, only existing employees can be reassigned.  Moreover, at least one federal court has noted that the legislative history of ADA warns against preferences for disabled applicants, but contains no similar warning for disabled employees.

HOW DO SENIORITY SYSTEMS AFFECT AN EMPLOYER’S OBLIGATION TO CONSIDER REASSIGNMENT?

The existence of a seniority system that was negotiated under a collective bargaining agreement changes the rule that a qualified disabled employee must be given preferential consideration for vacant positions.  An employer is only required to reasonably accommodate its disabled employees, and, as explained by one court, “[A]n accommodation that is contrary to the seniority rights of other employees set forth in a collective bargaining agreement would be unreasonable per se.”  However, if the seniority system is not collectively bargained, but is instead merely imposed by the employer, the rule changes again.  In such a case, an accommodation that is contrary to the seniority rights of other employees is not per se unreasonable.  Instead, the existence of the seniority system is only one factor for the court to consider in analyzing whether the accommodation (i.e., reassignment in derogation of the seniority rights of other employees) would cause the employer undue hardship.

Two recent California cases have sounded the death knell in California for any attempt to use a non-compete clause in an employment or stock option agreement.  In the first, D’Sa v. Playhut, Inc. (2000) 85 Cal.App.4th 927, an employee sued his employer for wrongful termination, alleging that the employer had violated California public policy when it fired him after he refused to sign an agreement that contained a covenant not to compete.  The employer attempted to have the case dismissed arguing that, because the employee was an at-will employee, he could be fired for any reason that was not illegal.  While the court agreed with that general proposition, it found that any attempt to condition employment upon an illegal covenant not to compete violated California’s public policy and that terminating the plaintiff for refusing to sign an illegal provision constituted a wrongful termination in violation of public policy.

In coming to its decision, the court focused on a particular statute, which states “[E]very contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.”  (Business & Professions Code section 16600.)  The court then reviewed the non-compete agreement proposed by the employer, which stated “[E]mployee will not render services, directly or indirectly, for a period of one year after separation of employment with Playhut, Inc. to any person or entity in connection with any competing product. . . .”  The court found that this provision violated section 16600 and was void and unenforceable.  Firing an employee for refusing to agree to such an illegal provision, the court held, violated public policy and exposed the employer to liability.

The employer next attempted to argue that the covenant not to compete should be construed narrowly as a restraint only against the disclosure of trade secrets and other confidential information.  While the court acknowledged that a contract provision will not be viewed as a violation of the Business & Professions Code if it is necessary to protect the employer’s trade secrets, the provision at issue in the case was not so narrowly drafted that a typical lay-person reading it would interpret it in such a manner.  Thus, the court concluded that if it were to agree to narrowly construe the provision, it would undermine the protection given to employees since “many, if not most, employees would likely interpret the provision as a covenant not to compete, and might act according to their interpretation rather than consult an attorney to find out if their interpretation is correct.”  The court prophesied a situation where employers would attempt to use illegal covenants not to compete so that, upon leaving employment, uninformed employees would forego legitimate employment rather than assume the risk of expensive and time consuming litigation to challenge the illegal provision.

While many employers are aware that covenants not to compete are illegal and unenforceable in California in some circumstances, a large number erroneously believe that covenants not to compete may be used for high-level management personnel or in conjunction with the grant of stock or stock options.  In Hills Medical Corporation v. Wycoff (2001) 86 Cal.App.4th 895, another California Court of Appeal rejected this notion entirely.  Hills involved a medical corporation that sued one of its former employees and shareholders to prohibit him from competing against it after he severed his relationship with the corporation.  The employee, a doctor, had signed a stock redemption agreement in which he had agreed that, in the event that his employment relationship with the medical corporation was terminated, he was required to sell his stock back to the corporation and not practice medicine within a 7½ mile radius from any medical corporation facility for three years.

After the doctor tendered his resignation, he indicated that he intended to practice medicine within 7½ miles of a medical corporation facility.  He sold his stock back to the corporation for $217,000, and the corporation thereafter sued him to enforce the covenant not to compete based upon an exception to Business & Professions Code section 16600, which provides that any shareholder of a corporation selling or otherwise disposing of all his/her shares in a corporation may agree with the buyer to refrain from carrying on a similar business within a specified area.  (Business & Professions Code section 16601.)

Although section 16601 appeared, by its wording, to support the medical corporation’s position, the court decided to look beyond the wording of the statute and impose a further requirement that a contract for the sale of shares of stock not circumvent California’s deeply rooted public policy favoring open competition.  When a seller’s shares constitute only a fraction of the total corporate shares, the court determined that the sale of the shares must involve so substantial an interest in the corporation that the transfer of the seller’s shares amounts to a transfer of the goodwill of the corporation.  The court then went on to find that, even through the doctor had been paid a substantial amount of money for his shares, the repurchase price did not include any payment for goodwill and that, because the doctor owned only seven percent of the shares, the transfer did not involve a substantial interest such that it could be said that the transfer of goodwill was considered in the agreement.

What This Means For You
Although it is extremely difficult to bind an employee to a non-compete agreement in California (unless the employee sold you the entire business), you can still protect your company’s trade secrets and other confidential information by requiring non-solicitation and confidentiality agreements of your employees.  These provisions should be narrowly drafted to ensure that they are not construed as illegal non-compete provisions.  Moreover, your employees are prohibited by California law from stealing your trade secrets, such as customer lists, even without a confidentiality or non-solicitation agreement.