Two Weeks' Notice Not Required: 5 Employment Law Surprises

Employment law is full of surprises. Here are five employment law surprises, myths, and misconceptions:

1. Two Weeks’ Notice Is Not Legally Required

Giving two weeks' notice to your employer before you quit is not legally required. On the contrary, employment in California is presumed to be “at-will”.  Employment is “at will” if it has no specified term. It may be terminated “at the will” of either party, meaning any time. Inversely employers can terminate employees whenever they like, so long it is not for an illegal reason.

The major exception is if the employee is employed for a contracted length of time, for example for one year. In this case, the employment could not be terminated “at-will” by either party. However, most employees do not have written employment contracts.  

2. It’s An “At-Will” State. I can fire you for whatever reason I want.  

Employment in California is presumed to be at-will, true. But with a big exception. Employees may not be terminated for an illegal reason. There are dozens of California and federal employment laws that prohibit termination of employment, even in an at-will context.

For example, employment may not be terminated  because of a "protected characteristic". This includes terminations based on age (if over 40), ancestry, color, disability or “health” discrimination, gender, gender identity, military and veteran status, marital status, national origin, race, religion, and sexual orientation. Other policies prohibit retaliation against whistle blowers (employees who have reported illegal acts).

At-will is not carte blanche.

3. If I pay you a salary you don’t get overtime.

Employers, and even human resource managers, very frequently believe that if an employee is paid on a salaried basis, rather than an hourly basis, the employee is not entitled to overtime pay. This is not the case at all.

There are two classifications of California employees, “exempt” employees and “non-exempt” employees. Non-exempt employees are entitled to 1.5 times their hourly rate for any hours worked longer than 8 per day or 40 per week, meal breaks, rest breaks, and other protections.  Exempt employees are not.

Employers and employees cannot simply agree on a classification. Rather, it is determined by looking at a complicated, multi-factor test. Each factor of the test needs to be satisfied before an employer can claim an employee is not entitled to overtime. Only one of the factors is whether the employee is paid on a salaried basis rather than an hourly basis. The most important and overlooked factor is whether or not the employee applies discretion and independent judgment on matters of significance. In simple terms, is the employee a grunt-level laborer or high level company decision maker?  Read more here.

4. I was terminated without cause!

Employees often believe that if they are terminated “without cause” that they can sue their former employer. This is not the case.

Employers are not legally required to have a cause to terminate the vast majority of employees. Employers may legally terminate employees without cause, for arbitrary and unfair cause, or even out of a mistaken cause that the employee performed poorly. Without more, the failure to terminate “for cause” does not give the employee the ability to sue their employer.

What employers cannot do is terminate employees for an unlawful reason. For example, employers cannot terminate an employee because of the employee’s health condition, injury, or illness if the employee can still perform the essential functions of their job; called “disability discrimination”.  Employers will often claim that an employee was fired “for cause” to disguise an otherwise illegal termination, called a “pretextual termination.” Read more about wrongful terminations here.

5. I have a hostile work environment!

The term “hostile work environment” is not a myth. It’s a common type of employment lawsuit. However, the legal definition of a “hostile work environment” is much narrower than what most employees expect.

A hostile work environment is a form of harassment in employment. However, harassment is only illegal in California if the plaintiff-employee is subjected to it because of a legally protected characteristic. Legally protected characteristics include age (if over 40), ancestry, color, disability or “health” status, gender (including pregnancy and “sexual harassment”), gender identity, military and veteran status, marital status, national origin, race, religion, and sexual orientation.

Employees do not have an illegal “hostile work environment” simply because they are overworked, are set up to fail by a rival supervisor, or because of an aggressive, mean, and vindictive working environment. The harassment must be directed at the employee because of a protected characteristic.  Read about a hypothetical harassment case here.

Are you a Santa Cruz, Capitola, Scotts Valley, or Watsonville employee who wants to clarify an employment law myth? Visit BrianMathiasLaw.com

Commercial Tenancies 101: Five Things to Know

California law treats commercial tenancies very differently from residential tenancies. Here are five important differences that should be taken into account by commercial landlords and also by any business owner who rents their commercial space.

1. The Rental Contract Often Controls, Not Public Policy    

The California Legislature enacts new protections for residential tenants every single year. These protections must be followed by all residential landlords, despite whatever contract or Landlord-Tenant Agreement exists between the parties. In other words, the public policy will control even if a written landlord-tenant agreement conflicts with California public policy.

However, far fewer public policies apply to commercial tenancies. For example, while California law mandates that all residential landlords must provide provide a rental home with the basic necessities like plumbing, locking doors, and electricity, no such requirement exists for commercial landlords and tenants. Commercial landlords and commercial tenants are free to agree by contract on far more aspects of their business relationship.

As a result of this difference, it is very important for commercial landlords and commercial tenants to have a comprehensive written, commercial tenancy agreement that covers all the frequent areas of disagreement and tension between landlords and tenants.

2. No 60-Day Notice Required

In residential tenancies, a month-to-month tenant who has lived at a rental property for one year or longer must be provided with at least 60 days written notice before their tenancy is terminated. However, no such protection exists for commercial tenants. Month-to-month commercial tenants (meaning a tenant who does not have a fixed term lease) must only be provided with 30-Days Notice, regardless of how long they have rented.

As a consequence, even long-established businesses that have rented at a particular spot for decades can be asked to leave in just 30-Days. This result is devastating for retail businesses who have a customer base familiar with a particular store location and who may have to relocate hundreds of thousands of dollars in inventory within just a few weeks. Read about this real life eviction of multiple Watsonville businesses who were threatened with eviction in just 30-Days. 

3. No “Exact Amount of Rent” Rule

Unlike residential landlords who must precisely state the exact amount of unpaid rent in a 3-Day Notice to Pay Rent or Quit, commercial landlords may reasonably estimate the amount of unpaid rent when issuing a pre-eviction notice. Commercial landlords may overestimate the unpaid rent by 20% and still prevail at an eviction lawsuit (called an “unlawful detainer”).

4. Partial Rent Payments Are Allowed

In a residential tenancy, a landlord will often lose their legal standing to evict a tenant if they accept a partial payment of delinquent rent. This unfortunate result typically means that a landlord receives no rent from a tenant during an eviction (which may  be a 35 day process).

However there is no rule for commercial tenancies. Landlords may accept partial payments in rent after service of a 3-Day Notice and even after filing a lawsuit without waiving their right to evict the tenant. (See California Code of Civil Procedure Section 1161.1, subd. (b)(c)).

To illustrate this rule, take the following example. Mike the residential tenant leases a house in Aptos from his landlord, Jared. When Mike fails to pay Jared his $2,000 rent on the first of the month, Jared serves Mike with a 3-Day Notice to Pay Rent or Quit. Within the three days, Mike offers Jared a partial payment of $1,950.00, $50.00 short of the amount due. Jared would lose his right to evict Mike if he accepts the partial payment. If he accepts the partial payment, he would have to re-issue a new 3-Day Notice and start the process all over again. However, this would not be the case if Mike was a commercial tenant. Jared could accept the partial payment and still evict Mike for failing to pay the full $2,000 rent.

5. No Security Deposit Limits

Residential landlords in California are legally limited in how much they may charge as a security deposit. Landlords may demand a security deposit of up to twice the monthly rent for for an unfurnished property (for example, $4,000 if rent is $2,000) and up to three-times the monthly rent for a furnished property ($6,000 if rent is $2,000).  However, no such agreement applies in the commercial context. Landlords and Tenants are free to agree by contract to whatever amount they want.

Are you a Santa Cruz County commercial landlord or commercial tenant? Call the Law Office of Brian Mathias for a free consultation. 831.531.7141

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Five Common Mistakes for Landlords to Avoid

Each and every landlord-tenant issue will pose a unique challenge or novel issue. However, most landlords can avoid legal problems by learning from these top five most common landlord mistakes.

1. Preparing your own 3-day, 30-day, or 60-day notices

Landlords should never draft and serve their own pre-lawsuit notices. This can be a time consuming and costly mistake.

For background, a landlord is required to serve a pre-lawsuit notice on the tenant in the event of a failure to pay rent or other breach. These are commonly referred to as a “3 Day Notice to Pay Rent or Quit” or a “30-Day Notice to Quit”. The notice must meet highly technical requirements in order to survive an unlawful detainer or eviction.

The problem is that landlords often prepare these forms incorrectly. This results in the notice having to be re-served and the landlord having wait another three days, another 30 days, or even another60 days to enforce legal rights in court. Landlords should always have an attorney prepare a pre-lawsuit notice.

2. Not asking for a security deposit

Landlords should always require a security deposit of at least one-month’s rent, or even more. Legally, a landlord may require a security deposit of up to two-months’ rent for an unfurnished property and three-months’ rent for a furnished property.

Collecting a security deposit is often a landlord’s only opportunity to collect money from the tenant in the event of a failure to pay rent. As an illustration, in the event the tenant refuses to pay rent, a lawsuit called an “unlawful detainer” must be initiated. That process, if successful, can take 30 days or longer to complete. During that entire time the tenant is typically not paying any rent.

3. Not promptly objecting to late rent payments or other contract breaches

A common problem occurs when landlords fail to promptly object to late payments of rent or other breaches of the rental contract. This is problematic for landlords because the tenant may successfully argue that the landlord “consented” to the breach.

As an illustration, take the case of Jared who rents an apartment in Capitola and his landlady, Laurel.

Jared started off as a very good tenant from Laurel’s perspective and always paid his rent on the first of each month. Then Jared gradually starts paying the rent a few days late. He never pays a late fee. Secretly Laurel is highly annoyed with Jared for paying the rent late, but she never says anything to Jared about the problem. After 8 months of receiving the rent late, Laurel is fed up and wants to evict Jared for failing to pay rent on time and failing to pay a late fee.

Unfortunately for Laurel, and luckily for Jared, Jared may argue that Laurel consented to his practice of paying rent late and paying it without a late fee. He may argue that the long-standing practice of paying rent late modified the rental contract that called for rent on the first day of the month. Jared has a viable defense to an unlawful detainer.

Landlords should always promptly object to late payments of rent or other breaches of the landlord tenant agreement.

4. Allowing “tenant swapping” and “subletting”

It’s a bad idea for landlords to permit to “tenant swapping”. Tenant swapping occurs in multiple-occupant rentals when one tenant moves out, and the remaining tenants select a new tenant to take the old tenant’s place. Tenant swapping is prevalent in student-occupied housing at UCSC and CSUMB.

“Subletting” occurs when an existing tenant rents out the rental premises for a short period time. The original tenant then becomes a quasi-landlord. Subletting is common during the summer when college students leave Santa Cruz and Monterey at the end of the school year.

Tenant swapping and subletting are problematic for two reasons. First, much of the time tenant swapping and subletting results in the new tenant not signing a written landlord-tenant agreement with the landlord. Failing to have a written landlord-tenant agreement with each tenant creates complications with the security deposit and in the event of an eviction.

Second, tenancies that result from tenant swapping and subletting typically do not go through any basic screening and application process by the landlord. A basic screening process will disclose if the potential tenant has a history of evictions and not paying rent. Would you want a career squatter living in your property? Absolutely not!

5. Using free landlord-tenant agreements

Landlords also encounter problems by using free landlord-tenant agreements and leases from the internet. While some free landlord-tenant agreements may be fine, many are not tailored for California law. Free landlord-tenant agreements may also require the landlord to utilize an expensive arbitration or mediation process in the event of a failure to pay rent. Landlords should always use a landlord-tenant agreement from a trusted source that is based on California law.

Are you a residential landlord in Santa Cruz or Monterey County? Call the Law Office of Brian Mathias for a free consultation.

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Landlord-Tenant Law 101: Common Eviction Questions

The basic facts behind an eviction lawsuit are simple. A landlord and a tenant enter into an agreement. The landlord promises to provide a habitable property. In exchange, the tenant agrees to pay timely rent. But what happens if a tenant stops paying rent and refuses to leave?

The answer is that the landlord must file a lawsuit to evict the tenant, called an “Unlawful Detainer”.

Can landlords lock out tenants who are not paying rent?

Absolutely not. California has very clear laws that prohibit landlords from locking out their tenants if they fail to pay rent. Otherprohibited “self-help” remedies include shutting off utilities or other actions short of an actual lockout that essentially require the tenants to move.

The law is clear: if a landlord wants to evict a tenant, they must use the unlawful detainer process. The landlord needs to go to court and get a judgment ordering the tenants to leave.

How long does an unlawful detainer process take?

An unlawful detainer typically takes between 20 and 30 days to complete. The total amount of time depends on the case’s complexity and how quickly the court schedules a trial. To a landlord, this can be an excruciatingly long time because the tenant will have typically already been in default of rent a week or more before the legal process is initiated.

As an illustration, take the case of Linda the landlord and her tenant, Tim. Tim fails to pay Linda $2,000.00 in rent on the first of May (the due date). Linda repeatedly asks Tim when he will pay, but two weeks go by and Tim still doesn’t pay rent.

Linda must initiate an eviction by serving a legally compliant “3-Day Notice to Pay Rent or Quit”. Tim the tenant will have three days to pay rent, or move out of the property. If Tim fails to pay $2,000 or move out, Linda may file a lawsuit. Tim will have five days after being served with the lawsuit to respond or “answer.” The court is then required to set a trial in 20 days or less. A part-day trial will then take place. Assuming Linda wins the trial, the Court Clerk will issue a Writ of Possession. The Writ of Possession is then served on Tim who will have another five days to move out. At the end of the fifth day, the Sheriff will forcibly remove Tim from the property. Only then does Linda get the property back.

That’s 33-days total. Delays in service of process, court holidays, or other complications will extend the timeline even further.

How much does an eviction cost?

Evictions can cost several hundred to thousands of dollars. It completely depends on the complexity of the underlying facts of the case.

There are two components to the cost of an eviction. The first component of costs are fixed fees charged by the court system, process servers, and the Sheriff’s Office. Those fees will typically cost around $550, including $245 to file the underlying lawsuit.

The next component of costs is attorney-fees. The total attorney fees in any eviction are entirely dependent on the complexity of the case and how much work needs to be done.

Do I need an attorney to file an Unlawful Detainer?

Yes. Landlords are not legally required to have an attorney represent them in court or file legal documents. However, they should be discouraged from doing so. Unlawful detainers are highly technical and it’s often better in the long run to get advice through an attorney from the outset to avoid long delays.

For legal context, a judge will only evict a tenant if the landlord can demonstrate strict legal compliance with all procedural requirements. In other words, one slip up can result in the landlord having to re-start the entire process.

The laws and rules surrounding unlawful detainers are very technical. As an example, what if your tenant owed $2,000 in back rent, $150 in late fees, and $200 in utilities? Would you know to serve two separate notices, a 3-Day to Pay Rent or Quit and a 3-Day to Perform a Covenant or Quit? Would you know the difference between the notices? The rules can be complicated. It’s often better to talk to an attorney rather than face a delay.

Are you a Monterey, Salinas, or Santa Cruz County landlord with additionalquestions about an unlawful detainer? Contact the Law Office of Brian Mathias for a consultation.