Allow me to paint an unpleasant but no less unlikely picture. You fire an employee for violating a Club policy. Maybe that employee was drinking on the job, or stealing money, or harassing guests, perhaps even fighting with the guests. Once that employee leaves the premises for the last time you think that unpleasant chapter is closed for good… and good riddance.
But like that proverbial bad penny, the employee shows up again. Not literally, but in the shape of a letter demanding that you settle with this horrible ex-employee. How did you suddenly become the “bad guy”? That’s a good question to ponder as the next wave of risk impacting employers runs throughout California like a runaway train. And the track it is on leads nowhere good for the owners and managers of the state’s Clubs.
This new area of risk is called confidential settlement agreements. And what it does is open doors for your current or former employees, spurred on by an attorney, to “request” money for suspected wage/hour violations based on flimsy but convincing stories supplied by your disgruntled employees. And the request could be quite daunting, since that attorney will do his homework by looking at the potential risk and then multiplying that by a factor of four years plus the number of people in a class, etc. When he finally puts down his calculator, it is very likely you will be asked to pay big bucks. Most recently I saw requests for $60,000 to as high as $158, 000, for employees dismissed for seemingly innocuous infraction such as terminated for being intoxicated while at work. I wouldn’t come right out and call this extortion, but if it walks like a duck…. So, you ask, will this ever happen to our Club?
We’ll it’s already started and social media is one of the mediums giving it some steam. I was recently following the PGA coverage of the Ryder Cup on Instagram when an advertisement popped up asking me if I had been fired or paid incorrectly. It dawned on me I was witnessing the 2016 version of those attorney ads that always play on daytime TV. This was their form of recruiting and spreading the word that they were available “to help.” In two clicks it said to fill out a form and an attorney would call me in 20 minutes. No more looking through the yellow pages to find an attorney. Now they are advertising to me while I’m relaxing and taking a look at pictures of my favorite pastime – golf.
With the multitude of changes in minimum wage, questionable independent contractors, new paid sick laws, rest/meal periods, pay stub requirements and the regular rate of pay for overtime calculations, along with the maze of wage/hour laws in California, it’s virtually impossible for an employer to be 100% compliant. It’s just too easy these days for an employee to raise a red flag by questioning how his pay is calculated.
So what can an employer do to safeguard themselves? The answer is really very simple–Prevention. Since wage and hour violations are the number one area of risk for employers, you need to put time and money towards compliance efforts. If not, you could find yourself paying big bucks and bringing unnecessary drama and pain to your Club. Nobody wants to go back to their members to report a huge financial loss that might result in an assessment.
Here are some helpful hints:
- Audit your wage and hour practices
- Create a wage and hour policy and be consistent
- Train your managers and employees on the your policies, and enforce those policies
- Have proper documentation
- Monitor compliance
- Have managers police all violations.
By staying in compliance you will not only reduce the cost of insurance, but also create a Teflon coating for your Club which will keep frivolous confidential settlement agreements from sticking to your Club’s impeccable reputation.
Toni Shibayama is a Broker/Risk Consultant for S&K Insurance in Southern California. She has more than 15 years experience in risk management, job safety, Workers’ Compensation, wellness and HR consulting. Toni is also the author of “The Private Club General Manager’s Big Game Playbook.”
She can be reached at toni@sk-insurance.com and by phone at 213.627.5204.
