Headline: Unpaid intern cooks free lunch.

There is no such thing as a free lunch. Except for Tuesdays at Hillel on the University of California, Davis Campus. Granted they don’t have much more variety than bagels, cream cheese, and baby carrots - or so was the case when I was in undergrad there six plus years ago - however, the notion of a free lunch is always intriguing and as such, I was a Tuesday regular. 

With the economy being what it is today, it seems that more people are intrigued by getting a free lunch whereas the handouts available are concurrently decreasing. Even attorneys today are keeping a tighter grasp on their five-figure incomes, when they previously expected, six - plus benefits, a bonus, a box seat at sports arenas, and the dream of home ownership. Not only are attorneys suffering the blows of economic decline but other professions as well. It seems that the more you study, the more opportunities there are to work for free. 

It used to be that only non-profits and government organizations offered free internships in exchange for one inch of resume space and a glorious queeziness come rent day.  With layoffs, and higher competition for each spot in the corporate world, we find ourselves willing to accept less, and do more, in order to get our over-educated ramen-fed feet in the door. A friend of mine runs a wellness-related business, which is beyond successful, as she is a genius. However, given that wellness is a luxury rather than a responsibility in America, she is not raking in the dough, yet. She mentioned that she is getting daily emails from students requesting to intern for her for free! She sounded eager to accept the quid pro quo of free labor in exchange for them getting some experience. My initial reaction was "there is no such thing as a free lunch!", wage laws must apply unless the internship is through a non-profit and/or government agency. So I poked around Westlaw in exchange for some highly-valued supplement recommendations, and what I found was that there is no such thing as a free lunch, but it is much cheaper than I originally expected.

It appears that any organization is capable of having a free intern, but, that in order for this to be possible, distinct and not so free criteria must be met. First, by definition, the intern must not be an "employee." The Federal Labor Standards Act requires each employee to be paid at least minimum wage with few exceptions. Section 3(g) of the Act defines "employ" as "to suffer or permit to work" and 3(e) defines "employee" as "any individual employed by an employer." Useful language? [Insert snarky chuckle here]. The act does cover trainees, beginners, apprentices, or learners IF they are employed to work for an employer for compensation.

Hopefully, at this point you are realizing that the ticket to a free intern is to make them look, smell, and taste like the furthest thing from an employee. If they don't look, smell, or taste like an employee, they aren't, and thus, they are not covered by the Federal Labor Standards Act. (I'm saving the issue of tasting interns for another Law Bites Newsletter.) The Supreme Court in Walling v. Portland Terminal addressed the issue of unpaid interns. In that case trainees learning the duties of railroad yard brakemen received no compensation for  initial services provided to the railroad. The court determined the railroad did not owe the trainees at least minimum wage as the trainees were not employees by definition. The court outlined the exact parameters necessary to evade the Federal Labor Standards Act. These are the same parameters followed by California's Division of Labor Standards Enforcement:

1) The trainee is a prospective member of the field. Using my Wellness friend as an example, her intern would need to be registered for a nutrition or medical major or have graduated with such a degree.

2) The trainee is provided with a practical course of training. I.e. she's not cleaning your light bulbs and fetching your cafe latte light, but rather acquiring skills in research and applying academic knowledge in practical situations.

3) The trainee does not displace a regular employee. Self-explanatory enough.

4) Employees do most of the work themselves. This is basically a reiteration of the third parameter. If you already have a running business with employees, the new trainee does not decrease the work of the other employees.

5) The trainee is closely supervised by other employees.

6) The trainee's work does not expedite the company business, but may delay or retard it. Sold yet?

7) The trainee is not employed or paid. Basically, if you sign an employment agreement and are paying the trainee, you shot yourself in the foot and can no longer call them a free intern.

In my opinion, the most critical parameters are numbers five and six. The Federal Labor Standards Act was imposed in the interest of public welfare. If the supreme court is going to carve out an exception to the Federal Labor Standards Act, or more rightly, determine that a circumstance is not governed by the FLSA, it is going to do so with good reason. Again, the definition of employ is "to suffer or permit to work." In order to evade this definition it must be shown that the trainee is working for his or her own advantage. Thus, the trainee is not working for the benefit of your company but rather for their own benefit on your premises. The internship is meant to greatly benefit the trainees at no charge to them, rather than provide the company a free lunch. 

Here again, I am going to point to numbers five and six of the parameters. In order to have a free intern you must expend resources in closely supervising, training, and scrutinizing them. Meaning your are paying employees or spending your time to provide the intern training. Also, in order to be able to classify the trainee as an intern rather than employee they must not add significant value to your business or expedite your productivity. Rather, the case must be that the time and effort spent in training and evaluating the trainee actually is a hindrance to the usual flow of business.

On the bright side, free internships are possible. The down side is that they are not meant to provide business an immediate advantage, but rather, meant to provide new prospective members of the field training. If you've gotten to this point in the newsletter, a free intern is probably starting to sound more comparable to Hillel's stale bagels and baby carrots, hence the analogy.

Prior to starting a training program, it is highly recommended to meet with an attorney in order to draft and assemble all of the preliminary paperwork necessary. Unfortunately, you should always protect yourself, even prior to hiring the freest of interns. A cute intern today can turn into an ugly law suit for unpaid wages tomorrow. With the proper legal planning, preparation, and paperwork, you can help train the future members of your profession. Also, after the sunk cost of training is out of the way, they may contribute some competent benefit to your business?

Important Disclaimer                       

                        Transmission of this Newsletter is not intended to create, and the receipt does not constitute, an attorney-client relationship between sender and receiver. Newsletters and articles are offered only for general informational and educational purposes. They are not offered as and do not constitute legal advice or legal opinions. You should not act or rely on any information contained in this Newsletter without first seeking the advice of an attorney.
                         If you contact us through this website or otherwise in connection with a matter for which we do not already represent you, your communication may not be treated as privileged or confidential. The transmission of an email request for information does not create an attorney-client relationship and you should not send us via email any information or facts relating to your legal problem or question. If you are a client, remember that email may not be secure. There is a risk that your communication may be intercepted illegally. There may also be a risk of waiver of attorney-client privilege and/or work product privileges that may attach to your communication.
                          In some jurisdictions, portions of this website may be considered advertising. The hiring of an attorney is an important decision, and should not be based solely upon written information about our qualifications and experience. We do not desire to represent clients based upon their review of any portions of this newsletter that do not comply with legal or ethical requirements.
                          Newsletters and articles are offered only for general informational and educational purposes. They are not offered as and do not constitute legal advice or legal opinions. This Newsletter may contain hyperlinks to other resources on the Internet. These links are provided as citations and aids to help you identify and locate other Internet resources that may be of interest, and are not intended to state or imply that we sponsor, are affiliated or associated with, or legally authorized to use any trade name, registered trademark, logo, legal or official seal, or copyrighted symbol that may be reflected in the links.  Please include the following information when citing this Newsletter: Grutman, N., “Headline: Unpaid intern cooks free lunch.” Weblog entry. Law Bites. July 20, 2012. Date accessed (http://lawbites.blogspot.com/2012/07/headline-unpaid-intern-cooks-free-lunch.html). 

The joys of winning… a judgment: winning and collection

You’ve pursued your case and you’ve won. What does that mean? A judge has provided you a favorable judgment. The judgment is a piece of paper with the judge’s signature indicating her agreement that you have been wronged and should be compensated X amount. As you are probably already aware, a judgment is not money in the bank.


How do you go from Point A: A Favorable Judgment, to Point B: Money in the Bank? It depends. The path may be short and smooth but it can also be long and windy. With a little education, you can set reasonable expectations for the road ahead and learn of possible shortcuts.


The names have changed. You are no longer the plaintiff. You are now the judgment creditor, and the person, or entity, now obligated to pay under the judgment, is the judgment debtor. Your goal is to collect on the judgment. Under circumstances where the judgment debtor is a profitable business or an honest and solvent person, collection will be relatively fast and straightforward. More complex circumstances arise when the judgment debtor avoids paying the judgment due to lack of funds, lack of integrity, or disagreement with the judgment.


When seeking to collect a judgment the first step is always to write a letter to the judgment debtor informing her of the judgment and the amount due, including a copy of the judgment. The next step is to take measures in converting the unsecured debt created by the judgment into a secured debt. The easiest way to accomplish this goal is to record what is called an Abstract of Judgment in the county in which the judgment debtor owns real property. An Abstract of Judgment creates a lien on the debtor’s property. This gives the judgment creditor priority over later creditors and forces the debtor to pay off the lien if she ever chooses to refinance or sell her property. Recording an abstract of judgment is the easiest method of securing the debt. You need not know the exact address of the property in order to create the lien.


In contrast, a Writ of Execution creates a lien only upon specified, known property of the debtor. The advantage of a Writ of Execution is that the creditor need not wait for the debtor to sell or refinance real property. Also a Writ of Execution may apply to real or personal property. The creditor provides the Writ to a levying officer, in most cases a sheriff or marshal of the county, with instructions to actively levy upon specified property. The property levied may be a bank account, employee wages, or even a cash register – also known as a “till tap.” Non-monetary property levied upon may thereafter be sold to satisfy the money judgment.

To find out specifics about a debtor’s assets the creditor may apply through the court for an Order for Appearance and Examination of the debtor. The order mandates the debtor to appear in court to answer questions concerning her assets to aid in the enforcement of the judgment. If the debtor does not appear for the Examination hearing, an arrest warrant may be issued. At the examination the creditor may ask detailed questions about the debtor’s income, location of bank accounts, tangible property owned, and any other assets that may generate proceeds to pay the judgment. The creditor may also require the debtor to provide specific documents such as bank statements at the examination through a Subpoena Duces Tecum.


Yet another option in collection of the debt is wage garnishment of the debtor’s wages. A debtor’s earnings may be reached by obtaining an Earnings Withholding Order and serving it on the debtor’s employer. This order is then enforced by the levying officer who periodically collects a portion of the debtor’s wages and sends it to the creditor.


Costs incurred by the creditor during the collection process including fees for writs, abstracts, or Sheriff’s services may be added to the existing judgment by filing a Memorandum of Costs After Judgment form. Additionally, the original judgment accrues at 10% interest until paid.


The above are useful avenues in landing “Money in the Bank.” Do not forget, however, that there is a bigger picture. Law, like life, is not only about the destination, but the journey. Whenever possible, even when we are “in the right,” we should strive for the path of least resistance. Therefore, if the judgment debtor is not able to pay the judgment in full, it may serve both parties to agree on a payment plan. You may agree to weekly or monthly installments. Make sure to reduce the agreement to writing and keep copies of all checks paid!


A wise lawyer friend of mine told me while I was in law school “Everything is an annoying process, and the end result is kind of annoying too.” This quote is particularly fitting here, as you have won, but does it really feel like winning? My hope is that with the above road map you can set reasonable expectations for the road ahead, and, avoid the repetitive, rhetorical question: “Ugh, are we there yet?”

Important Disclaimer                       

                        Transmission of this Newsletter is not intended to create, and the receipt does not constitute, an attorney-client relationship between sender and receiver. Newsletters and articles are offered only for general informational and educational purposes. They are not offered as and do not constitute legal advice or legal opinions. You should not act or rely on any information contained in this Newsletter without first seeking the advice of an attorney.
                         If you contact us through this website or otherwise in connection with a matter for which we do not already represent you, your communication may not be treated as privileged or confidential. The transmission of an email request for information does not create an attorney-client relationship and you should not send us via email any information or facts relating to your legal problem or question. If you are a client, remember that email may not be secure. There is a risk that your communication may be intercepted illegally. There may also be a risk of waiver of attorney-client privilege and/or work product privileges that may attach to your communication.
                          In some jurisdictions, portions of this website may be considered advertising. The hiring of an attorney is an important decision, and should not be based solely upon written information about our qualifications and experience. We do not desire to represent clients based upon their review of any portions of this newsletter that do not comply with legal or ethical requirements.
                          Newsletters and articles are offered only for general informational and educational purposes. They are not offered as and do not constitute legal advice or legal opinions. This Newsletter may contain hyperlinks to other resources on the Internet. These links are provided as citations and aids to help you identify and locate other Internet resources that may be of interest, and are not intended to state or imply that we sponsor, are affiliated or associated with, or legally authorized to use any trade name, registered trademark, logo, legal or official seal, or copyrighted symbol that may be reflected in the links.  Please include the following information when citing this Newsletter: Grutman, N., “The joys of winning… a judgment: winning and collection.” Weblog entry. Law Bites. April 9, 2012. Date accessed (http://lawbites.blogspot.com/2012/03/joys-of-winning-judgment-winning-and.html).  

She works hard for the money, so you better treat her right.

Is your employer behind on paying your wages? Is she refusing to pay you overtime? Did you know that you are owed overtime wages whether or not your employer approved the extra time worked? 


This article will shed light on this area of the law. What attorneys don’t want you to know is how simple and accessible wage claims really are. You don’t even need an attorney to file a claim. In fact, there is a public agency dedicated to improving working conditions for California’s wage earners and for handling wage claims. It is the Department of Industrial Relations. Its very informative website can be found at www.dir.ca.gov. Much of the information in this article can be found on that website, along with all forms necessary to file a wage claim. Of course, this means that you will have to interact with a government worker; so, be prepared to have your patient Goofy voice ready. Yes, the always happy, Mickey Mouse character, Goofy. Even the most impatient government worker will offer an extra 15 seconds of work time to a friendly caller. On the bright side, you will not be paying an attorney to speak with the same government worker.


Why is this area of the law so accessible? It is fairly cut and dry; unique situations do not affect whether the employer need comply with wage law. Your employer must pay wages for hours worked and must pay overtime wages earned. But you are not reading a two-page article on your already-too-busy-day to hear some fluffy favorable facts. Here is the proof.

                  
California Labor Code § 1194 states: “Any employee receiving less than the legal minimum wage or the legal overtime compensation applicable to the employee is entitled to recover in a civil action the unpaid balance of the full amount of this minimum wage or overtime compensation, including interest thereon, reasonable attorney's fees, and costs of suit.” What is the legal overtime compensation applicable, you ask? According to California Code of Regulations, overtime is one-and-a-half times regular pay for: all hours worked over 40 hours in the workweek, all hours worked over eight hours in a workday, and for all hours worked on the seventh consecutive day of work in a workweek. Also, the same code provides double the regular rate of pay for: all hours worked over 12 hours in a work day, and for all hours worked in excess of 8 hours on the seventh consecutive day of work in a workweek. Explanation to come, but first, let me throw some more law at you.


If you are still employed, all overtime wages earned are due on the payday for the next payroll period. (See California Labor Code §204). California Labor Code § 201 states in part, with limited exceptions “if an employer discharges an employee, the wages earned and unpaid at the time of discharge are due and payable immediately.”   In the case of an employee quitting rather than being discharged, California Labor Code § 202 applies: “If an employee…quits his or her employment, his or her wages shall become due and payable not later than 72 hours thereafter, unless the employee has given 72 hours previous notice of his or her intention to quit, in which case the employee is entitled to his or her wages at the time of quitting.”


Under California Labor Code § 256 “the Labor Commissioner shall impose a civil penalty in an amount not exceeding 30 days pay as waiting time under the terms of Section 203.” Lastly, to give a complete representation of the law, California Labor Code § 203 states: “If an employer willfully fails to pay…any wages of an employee who is discharged or who quits, the wages of the employee shall continue as a penalty from the due date thereof at the same rate until paid or until an action therefor is commenced; but the wages shall not continue for more than 30 days.”

Now I will explain. Your employer must pay all wages earned, including all overtime wages - no excuses. If you were laid off, your employer should have paid you all unpaid wages, including overtime, immediately upon discharge. If you quit your job, you should have been paid all wages, including overtime, within 72 hours of quitting. If the employer was given at least 72-hour notice, all wages were due immediately upon quitting.

                
If your employer refuses to pay earned wages or overtime wages, you may file a claim with the Labor Commissioner. Through your claim you may recoup your earned wages and overtime wages, including interest, plus thirty days of additional wages as a penalty for your employer’s disregard of the labor codes.

Let’s take it from theory to action. Here is your action plan for claiming your hard-earned money:


1. Get organized. Gather all your timesheets and pay stubs. Make copies, organize the copies chronologically, and highlight important numbers and dates.

              

2. Bow before battle. Based on the information you gathered, write a respectful yet poignant letter to your employer. Alert her of your intention to file a claim based on California Labor Code violations. Also, outline the highest award you expect the Commissioner may grant you. Calculate unpaid wages and overtime wages, plus thirty days of additional wages per sections 203 and 256. Do not forget interest, which is calculated at 10% under California Civil Code § 3289. The letter invites the employer to make payment, or suffer the additional costs of responding to a winning claim.


3. Don’t be late. File a claim for wages with the Labor Commissioner within two years from the date the claim arose, if based on a verbal employment agreement. File within four years from the date the claim arose, if based on a written employment agreement. A claim for unpaid overtime wages must be filed within three years from the date the claim arose. It is your prerogative to file a lawsuit rather than filing a claim with the Labor Commissioner first.

             

4. Present your case. Within thirty days of filing your claim, the Labor Commissioner will either (1) schedule an informal conference, (2) schedule a formal hearing, or (3) dismiss the claim. The purpose of a conference is to determine if a claim can be resolved without a hearing. A hearing is a formal process in which the employer and employee will present evidence and testify (a.k.a., explain) under oath.
                  

5. Victory. Within fifteen days after the hearing, the Labor Commissioner will file a decision with the Division of Labor Standards Enforcement office. You or the employer may appeal this decision in court.


Why buy the cow when you can get the milk for free? While this area of the law is fairly straightforward, it is wise to have an attorney present with you at the Labor Commissioner conference and hearing. An attorney will be able to outline the California Labor Code violations in a clear and concise way for the Commissioner. Further, articulating an argument for § 203 penalties takes some sophistication. The purpose of this article is to shed some light on your rights as an employee, and empower you to demand what is yours!

IMPORTANT DISCLAIMER

                        Transmission of this Newsletter is not intended to create, and the receipt does not constitute, an attorney-client relationship between sender and receiver. Newsletters and articles are offered only for general informational and educational purposes. They are not offered as and do not constitute legal advice or legal opinions. You should not act or rely on any information contained in this Newsletter without first seeking the advice of an attorney.
                         If you contact us through this website or otherwise in connection with a matter for which we do not already represent you, your communication may not be treated as privileged or confidential. The transmission of an email request for information does not create an attorney-client relationship and you should not send us via email any information or facts relating to your legal problem or question. If you are a client, remember that email may not be secure. There is a risk that your communication may be intercepted illegally. There may also be a risk of waiver of attorney-client privilege and/or work product privileges that may attach to your communication.
                         In some jurisdictions, portions of this website may be considered advertising. The hiring of an attorney is an important decision, and should not be based solely upon written information about our qualifications and experience. We do not desire to represent clients based upon their review of any portions of this newsletter that do not comply with legal or ethical requirements.
Newsletters and articles are offered only for general informational and educational purposes. They are not offered as and do not constitute legal advice or legal opinions. This Newsletter may contain hyperlinks to other resources on the Internet. These links are provided as citations and aids to help you identify and locate other Internet resources that may be of interest, and are not intended to state or imply that we sponsor, are affiliated or associated with, or legally authorized to use any trade name, registered trademark, logo, legal or official seal, or copyrighted symbol that may be reflected in the links.  Please include the following information when citing this Newsletter: Grutman, N., “She works hard for the money, so you better treat her right.” Weblog entry. Law Bites. March 5, 2012. Date accessed (http://lawbites.blogspot.com/2012/02/she-works-hard-for-money-so-you-better.html). 

Renovation Ruination: The Story of Contractors and Sureties

If you have had renovations on your house, you have met and worked with a contractor. Not known for their timeliness, contractors are responsible for providing the material, labor, equipment, and services necessary for the construction of a project. The contractor may then delegate portions of the construction work to specialized subcontractors.

In California, in order to become a contractor, one must first procure a contracting license. You may not have noticed before, but if you search the back of your desk drawer for the business card of the contractor who did your most recent renovations, you will see the terms “Licensed and Bonded” somewhere on the card. The Contractors’ State Licensing Board, in its effort to protect the public, demands that as a prerequisite to obtaining a license, a contractor first obtain a contractor’s bond. Under California Business and Professions Code § 7071.6  the contractor must have on file a contractor’s bond in the sum of twelve thousand five hundred dollars ($12,500). 

The purpose of the bond required by Bus. & Prof. Code § 7071.6 is to protect home owners, suppliers, and subcontractors in case they suffer harm as a result of the contractor’s wrongdoing. Just as the common Joe calls up an insurance company to insure his car in case of an accident, Joe Contractor calls up a Surety company in order to get a bond for the amount of $12,500. However, unlike insurance on a car which will cover the unfortunate “text-and-boom” scenario, a Surety bond will not cover accidental mishaps a contractor may have on the job. It only covers violations of the Bus. & Prof. Code. Such violations typically include intentional wrong doings by the contractor.

Also, depending on which class of claimant you are, you may not qualify for the full $12,500 recovery. Your claim may be capped at a maximum sum of seven thousand five hundred dollars ($7,500) regardless of the full value of the bond. A home owner is defined under Bus. & Prof. Code § 7071.5 as a person contracting for home improvement upon her personal family residence. If a home owner is damaged as a result of a violation of the Code, she may make a claim of up to $12,500, the full value of the bond. All other claimants under this section, even a property owner contracting for renovation of a single-family dwelling but not a personal family residence is limited to a maximum claim of $7,500.

Violations of the Code include but are not limited to abandonment of the contract, diversion or misapplication of funds, failure to pay subcontractors, failure to pay suppliers of materials, departure from accepted trade standards and departure from plans or specifications.

And if you are thinking “Aha! I can get Surety money for the unfortunate mistake the contractor made of putting Honey Melon Tea tiles in my Custom Luxury Beach Bath when I had specifically asked for Honey Suckle Tea Leaf tiles!” The answer is unfortunately: “No Honey, no mullah for you.” In order to prove a violation of the Bus. & Prof. Code for Departure of Plans or Specifications the claimant must show a “willful departure from or disregard of plans or specifications.” This means that if the contractor accidentally chose the wrong tiles, or the tiles in the plans were not available and she substituted similar-looking available tiles, she did not violate the code.

There is justifiable reason for the threshold for recovery being so high. Once a surety finds a violation of the Code and makes payment out of the bond, the Contractor’s State Licensing Board may suspend the contractor’s license. Therefore, once payment is made from the bond, the contractor loses her livelihood. This activity goes on the Contractor’s State Licensing Board record making it much more difficult for the contractor to procure another bond in the future to reactivate or renew her license.

For those of you disheartened by the high threshold to procure indemnifications from the bond, or for you contractors reading who now believe you are untouchable, rest assured, the bond is only one avenue to achieving indemnification for a poor construction job. In addition to making a claim against the bond, a claimant may also pursue a claim in Small Claims Court or State Superior Court. In litigation the burden of proof may be mere negligence and not the high burden of showing willfulness.

As always, when a dispute arises the best procedure is to first attempt to resolve it between the parties in good faith. This information could act as a good tool in convincing your contractor to cooperate in negotiations. Requesting that a contractor redo a mistake or make gradual payments to indemnify you for monetary damages may result in faster recovery than making a claim against the bond or seeking damages through the courts.

Should you have any questions, comments or suggestions for improvement, do not hesitate to email me at ngrutman@hausmansosa.com.