Fenton & Keller

Arbitration Agreements

Question: I am interested in having my employees sign an arbitration agreement for employment-related disputes.  Is that legal and how do I ensure it is an enforceable agreement?

Answer: Yes, employers in California may require employees to agree to an arbitration agreement for their employment related disputes as a condition of the employees’ employment. 

For those who are unfamiliar with arbitration, arbitration is a private alternative to court that provides the parties with a legally binding alternative dispute resolution process.  In arbitration, a chosen neutral third party, an arbitrator, takes the place of a judge by reviewing the evidence and facts to make a final decision for the parties.  Employers may prefer arbitration because it is typically a faster, more efficient, and less formal alternative to court.  Moreover, the employer can insert contract provisions that require employees to waive their rights to class action lawsuits against the employer.  However, for an arbitration agreement to be enforceable, it must meet the following requirements:

Capable of Contracting

An adult of sound mind is capable of entering a contract.  Therefore, ensure that the employees you intend to have sign arbitration agreements are not minors and are competent adults.

Consent to Arbitration

Employees must knowingly consent to arbitration.  It is best practice to obtain a signed agreement from employees that they (1) consent to arbitration, or (2) acknowledge that their continued employment constitutes consent to arbitration.

Mutuality of Agreement

The arbitration agreement must have a mutuality provision—this means both parties agree to arbitrate their employment related disputes against each other.  This requirement prevents employers from signing an agreement that forces employees to arbitrate against the employer but reserves the employer’s own right to sue their employees in court.

Neutral Arbitrator

For fairness reasons, the arbitration agreement must state that the arbitrator will be neutral.  This prevents employers from unilaterally choosing an arbitrator that has a long-time business relationship with the employer.  It also empowers employees to veto or propose an arbitrator the employee believes will be fair to both parties.

Adequate Discovery

The agreement must also contain an adequate discovery provision.  When litigating a dispute in court, the Code of Civil Procedure governs the rules of discovery.  The arbitration agreement must allow the arbitrator to apply the same substantive discovery rules that a judge would apply in a court of law.

All Relief Available in Court

The agreement must state that the parties are entitled to all the relief that would be available to the parties in a court of law.  This means that any type of relief (e.g., injunctive) or damages (e.g., punitive) that a party could seek in a court, the party may also seek in the arbitration process.

Employer Payment of Excess Fees

The informal and efficient nature of the arbitration process comes with an increased price tag.  Therefore, courts require that the arbitration agreement state that the employer will pay the extra arbitration related costs that an employee would not have paid if the parties had litigated their disputes in court.

Written Award

Finally, the agreement must also require the arbitrator to provide the parties with a written decision after the arbitration hearing.  This written award, like a court order, will be enforceable and hold the parties accountable to the decision made by the arbitrator.

If an employer is interested in learning more about arbitration agreements or how to implement an enforceable arbitration agreement, they should contact their local labor and employment attorney.

by Fenton & Keller

New Year, New Laws in 2026

Question: Is it true that a lot of new laws were passed that will affect employers? What are the new laws, and when will they go into effect?

Answer: Yes.  Beginning January 1, California employers will face a number of significant legal updates affecting wage and hour rules, hiring practices, leaves of absence, workplace safety, and more. Below is a summary of key legislative and regulatory changes that require immediate attention and potential policy revisions.

Paid Sick Leave

An employee may now take paid sick leave when they are a victim or a family member of a victim of a crime and require time off from work to attend judicial proceedings related to that crime, or to seek treatment or services related to the qualifying act of violence. Employees may also use paid sick leave when they are summoned for jury duty.

Discrimination, Harassment, and Retaliation

The Equal Pay Act prohibits employers from paying employees less than other employees because of gender, race, or ethnicity for the same work. The statute of limitations for the Equal Pay Act increased from two to three years from the last date the cause of action occurred and allows recovery to reach back as far as six (6) years.

Minimum Wage Increase

California’s minimum wage will increase to $16.90. The hourly increase also affects the annual salary of exempt employees, which will increase to $70,304. Employers should keep in mind that the minimum wage is different for some employees and employers should check if their city or county raised their local minimum wage.

New Annual Notice

Employers must distribute a new annual notice to their employees about several topics including: workers’ compensation; immigration protections, the right to engage in concerted activity and constitutional rights when interacting with law enforcement by February 1, 2026. Employers can find the template notice on the Labor Commissioner’s website in January 2026. Employers must keep record of their compliance with this notice requirement for three years.

Record Keeping

Employers must notify an employee’s designated emergency contact if the employee is arrested or detained on their worksite. An employer is only obligated to notify if the employee has designated an emergency contact specifically for this purpose and the employer has actual knowledge of the arrest. Employees should choose an emergency contact specifically for this purpose by March 30, 2026, or at the time of hire.

 Employment Contracts

With limited exceptions, it will be illegal to include in an employment contract a term that requires the employee to repay a debt if the employee’s employment ends.

Wage and Hour Enforcement

California employers that fail to pay a final wage judgment within 180 days after the time to appeal expires may face a civil penalty up to three times the outstanding judgment, post-judgment interest, and be responsible for attorneys’ fees and costs in an action to enforce the judgment.   Additionally, the Labor Commissioner may now investigate and issue a citation or file a civil action for gratuities taken in violation of Labor Code section 351, which prohibits employers from taking gratuities from employees or crediting the gratuities against the employee’s wages.

Employers are encouraged to conduct internal audits of their wage practices, employee classifications, handbook policies, and posting compliance to reduce risk. Employers with questions about these laws should contact their labor counsel.

by Fenton & Keller

Considerations for Remote Workers

Question: I am interested in having a few of my non-exempt employees work remotely.  Is there anything I should consider or implement before these employees start working remotely?

Answer: Yes.  An employer considering a remote work arrangement should make the remote work opportunity available to other individuals in the same or similar roles.  Employers who decide to allow remote work should consider implementing a written remote work policy or agreement to ensure that remote non-exempt employees comply with California wage and hour laws.  Employers should also determine whether they will provide their remote employees with the necessary equipment to work remotely or indemnify them for their expenses.  Finally, employers should consider setting expectations to ensure employees remain available and professional while working remotely.  

A best practice for remote work is to establish and implement a written remote work policy or signed agreement that outlines the employee’s understanding and agreement to comply with these rules while working at home.  California’s wage and hour laws apply to all employees in California, regardless of whether they work in the office or at home.  Because of this, the written policy or agreement should require any hourly (non-exempt) employee to track all hours worked, to refrain from working off the clock, and to take their meal and rest periods.  Despite being remote, employees should not be expected to perform tasks, respond to emails, or answer calls during their rest periods or when they are clocked out of work.

Another issue to consider is what equipment the remote employee will need to successfully perform their job duties.  In general, it is a good practice to provide the employee with the equipment they need to perform their job.  If this is not practical, the employer may reimburse the employee for the out-of-pocket expenses they incur related to their equipment.  For example, if a remote employee needs to answer calls as part of their job, the employer may reimburse the employee for their use of a personal cell phone (rather than issuing the employee a company-sponsored cell phone).

There are reasons why an employer may require an employee to use an employer’s device rather than an employee’s device while working remotely.  For example, an employer may require the use of the employer’s device to ensure that the data accessed remotely is not a security risk to proprietary information or is accessed in violation of professional standards such as HIPAA or client confidentiality obligations.  If an employer decides to provide an employee with equipment, the remote work policy should include how the equipment should be used, how to maintain information confidentiality, and how the employee should return the equipment upon return to office work or separation.

Finally, the policy should outline the professional expectations for employees who work remotely.  The employer can expect that remote employees have a designated work area, dress appropriately when appearing in meetings via video.  The terms of the professional expectations will vary and depend on the employer’s industry and preferences.

If you are considering a remote work arrangement, or if you already have employees working remotely, you may wish to consult with your employment attorney to ensure the arrangement complies with the law and is set up to limit potential risks.

by Fenton & Keller

The Employment Development Department’s Work Sharing Program

Question: I run a large warehouse with over 300 employees and business has been steadily decreasing for the last five months. I need to reduce my overhead, but I don’t want to lay off my staff because most of them are loyal, long-term employees. I have talked to my accountant, and they recommend I reduce my workforce by thirty percent immediately. Do I have another option?

Answer: Yes.  An employer who do not want to lay off several employees may consider and apply for the Employment Development Department’s (“EDD”) Work Sharing Program.  This program is an alternative to a mass layoff.  In general, an employer may cut hours and wages while the EDD pays employees partial unemployment benefits.  

The EDD Work Sharing Program was established in 1978 as the first of its kind in the nation.  The program enables employers to cut business costs while retaining their trained workforce for when their business rebounds.  This means that employees maintain their jobs and health insurance.  The drawbacks of the program include increased unemployment insurance tax rates for employers and income reduction for employees.  However, layoffs could produce the same tax implications for employers, and the program prevents complete job loss for employees. Mass layoffs could also require an employer to comply with the federal Worker Adjustment and Retraining Notification (“WARN”) Act, and its California equivalent.

If an employer is interested in the program, the first step is to determine eligibility.  To be eligible, an employer must: be a legally registered business in California; have at least ten percent of the employer’s regular workforce or a unit of the workforce be affected by a reduction in hours and wages; reduce the hours and wages by at least ten percent but not exceed sixty percent; provide the same health and retirement benefits as before, or meet the same standards as other employees who are not participating in work sharing; identify each participating employee in the application; and notify employees in advance of the intent to participate in the work sharing program.  Other eligibility criteria can be found on the program’s website.

Second, the employer must apply for the program online or by mail. Once approved, the EDD requires that employers and employees “certify” eligibility with the EDD on a weekly basis online or by mail for continued partial unemployment payments.  Certifying on a weekly basis provides the EDD with information on the hours worked and wages earned by the participant employees each week.

The work sharing plans are active for one year but can be renewed if the business is still eligible for the program.  Payments by the EDD for partial unemployment benefits will end when employees are back to their regular work schedule or when employees have received all benefits available to them.

If an employer chooses layoffs instead of the work sharing program, the employer may be subject to the federal and California WARN Acts.  These laws apply to covered employers who engage in a mass layoffs.  Under these laws, covered employers must provide 60 days’ notice prior to the layoffs, and the notices must be provided to several individuals, including affected employees, the Local Workforce Development Board, and the chief elected official of each city and county governing where the layoffs occur.

Employers considering either the work sharing program or mass layoffs may wish to consult with their labor counsel to determine eligibility or compliance with the legal requirements.

by Fenton & Keller