Sunday, April 24, 2016

California Supreme Court Takes a Stand on Sitting Down

The California Supreme Court in Kilby v. CVS Pharmacy (opinion here)  issued a unanimous opinion interpreting California Wage Orders' (section 14(A)) requirement that employers provide
[a]ll working employees  . . . suitable seats when the nature of the work reasonably permits the use of seats.”
Also, Section 14(B) says:
When employees are not engaged in the active duties of their employment and the nature of the work requires standing, an adequate number of suitable seats shall be placed in reasonable proximity to the work area and employees shall be permitted to use such seats when it does not interfere with the performance of their duties.” 
Why is the state's highest court doing this?  In this case, the Ninth Circuit Court of Appeals asked the California Supreme Court to interpret California law, because the Ninth Circuit is trying to figure out whether certain class actions filed in federal court have merit.  No case interpreted this portion of the Wage Order before, because the class action lawyers were busy suing over rest periods, wage statements, and a host of other matters.  They finally made it down to section 14 - "suitable seating," and so here we are.  

With that background, here are the questions the California Supreme Court sought to answer:
(1) Does the phrase “nature of the work” refer to individual tasks performed throughout the workday, or to the entire range of an employee's duties performed during a given day or shift?

(2) When determining whether the nature of the work “reasonably permits” use of a seat, what factors should courts consider? Specifically, are an employer‟s business judgment, the physical layout of the workplace, and the characteristics of a specific employee relevant factors?  
(3) If an employer has not provided any seat, must a plaintiff prove a suitable seat is available in order to show the employer has violated the seating provision?.

This case involved CVS employees.  The named plaintiff, Kilby, had a customer service job that included duties such as: "operating a cash register, straightening and stocking shelves, organizing products in front of and behind the sales counter, cleaning the register, vacuuming, gathering shopping baskets, and removing trash. CVS did not provide Kilby a seat for these tasks."

This case also was consolidated with Henderson v. JP Morgan Chase Bank, which involved tellers at a bank.  They are covered by Wage Order 4 rather than 7.  The seating requirement, section 14(A), is identical in both Wage Orders.  The tellers 
had duties associated with their teller stations, including accepting deposits, cashing checks, and handling withdrawals. They also had duties away from their stations, such as escorting customers to safety deposit boxes, working at the drive-up teller window, and making sure that automatic teller machines were working properly. These duties varied depending on the shift or branch location and whether the employee was a lead or regular teller.
Against this backdrop, the Court answered the above questions.

1.   So, how does a court look at the "nature of the work" 
courts must examine subsets of an employee's total tasks and duties by location, such as those performed at a cash register or a teller window, and consider whether it is feasible for an employee to perform each set of location-specific tasks while seated. Courts should look to the actual tasks performed, or reasonably expected to be performed, not to abstract characterizations, job titles, or descriptions that may or may not reflect the actual work performed. Tasks performed with more frequency or for a longer duration would be more germane to the seating inquiry than tasks performed briefly or infrequently.
* * *
An employee may be entitled to a seat to perform tasks at a particular location even if his job duties include other standing tasks, so long as provision of a seat would not interfere with performance of standing tasks.
Mushy.  But what this means is that if a teller spends a certain period of time at a teller window, one looks at the tasks s/he performs at that location and then looks whether it's feasible to perform the tasks seated.  If not, can there be a seat available so that some tasks are performed seated.

The Court also looked at how employers  have to provide suitable seating for employees who may have to stand when they are actively working, but who may experience "lulls" in operation:
if an employee‟s actual tasks at a discrete location make seated work feasible, he is entitled to a seat under section 14(A) while working there. However, if other job duties take him to a different location where he must perform standing tasks, he would be entitled to a seat under 14(B) during “lulls in operation.” Although the seating inquiries under sections 14(A) and 14(B) are analytically different, the seat provided to an employee under section 14(A) may satisfy the requirement of section 14(B) to the extent it is within “reasonable proximity to the work area” (§14(B)) and is available when work is not required to be performed. 

2.  What does "reasonably permits" mean?  

The Court then turned to an examination of what factors courts would consider to determine if the nature of the work "reasonably permits" the use of a seat.  What if the employer thinks that employees should stand as a matter of respect or service?  What if the physical layout does not accommodate seats, even if the duties of the job might?  Etc.   

You crave simplicity and bright line rules?  No such luck:
Whether an employee is entitled to a seat under section 14(A) depends on the totality of the circumstances. Analysis begins with an examination of the relevant tasks, grouped by location, and whether the tasks can be performed while seated or require standing. This task-based assessment is also balanced against considerations of feasibility. Feasibility may include, for example, an assessment of whether providing a seat would unduly interfere with other standing tasks, whether the frequency of transition from sitting to standing may interfere with the work, or whether seated work would impact the quality and effectiveness of overall job performance. This inquiry is not a rigid quantitative analysis based merely upon the counting of tasks or amount of time spent performing them. Instead, it involves a qualitative assessment of all relevant factors.
Ok but what about business judgment? Can't the employer pay the employee to stand?  Well sure:
There is no question that an employer may define the duties to be performed by an employee. As the DLSE observes, “[a]n employer's business judgment largely determines the nature of work of the employee both generally, as well as duties or tasks specifically.” Contrary to plaintiffs‟ suggestion, such duties are not limited to physical tasks. Providing a certain level of customer service is an objective job duty that an employer may reasonably expect. An employee's duty to provide a certain level of customer service should be assessed, along with other relevant tasks and obligations, in determining whether the nature of the work reasonably permits use of a seat at a particular location. Providing “customer service” is an objective job function comprised of different tasks, e.g., assisting customers with purchases, answering questions, locating inventory, creating a welcoming environment, etc.
Wait, did I say "sure"?  Hold the phone:
However, “business judgment” in this sense does not encompass an employer's mere preference that particular tasks be performed while standing. The standard is an objective one. An employer's evaluation of the quality and effectiveness of overall job performance is among the factors that can be objectively considered in light of the overall aims of the regulatory scheme, which has always been employee protection. An objective inquiry properly takes into account an employer's reasonable expectations regarding customer service and acknowledges an employer's role in setting job duties. It also takes into account any evidence submitted by the parties bearing on an employer's view that an objective job duty is best accomplished standing. It protects employees because it does not allow employers unlimited ability to arbitrarily define certain tasks as “standing” ones, undermining the protective purpose of the wage order.
So, can an employer can pay an employee to stand?  Can the boss require employees to be standing when on the clock and customers are in view, because it's "classier"?  It seems the employer can define customer service duties, which include standing tasks. But a third party - jury or judge - will decide if they are objectively reasonable.  "I, for one, welcome our new overlords," said no business owner, ever.

The Court similarly considers the physical layout of the workplace to be a relevant consideration to whether it is reasonable to have suitable seating available.  But, employers - and architects - take note:
just as an employer's mere preference for standing cannot constitute a relevant “business judgment” requiring deference, an employer may not unreasonably design a workspace to further a preference for standing or to deny a seat that might otherwise be reasonably suited for the contemplated tasks. As the DLSE observes in its amicus curiae brief, the seating requirement is “a workplace condition aimed at the welfare of employees performing work and not an „engineering‟ or technically-based standard,” and “[w]hile facts regarding technical aspects of workplace configurations or studies may be relevant to determining whether suitable seating can be provided, the application of the standard is essentially one of overall reasonableness applied to the particular facts.” As the DLSE suggests, reasonableness remains the ultimate touchstone. Evidence that seats are used to perform similar tasks under other, similar workspace conditions may be relevant to the inquiry, and to whether the physical layout may reasonably be changed to accommodate a seat. As the DLSE states, reasonableness must be based on the particular circumstances.

3. Whose Burden Is It to Prove Suitable Seating Either Is or Is Not Available?

It is the employer's burden to show that no suitable seat was available, not the employee's burden to show that there was one.   The Court spent little time on this.  However, the language of the wage order appears to place this burden on the employer.

In sum, this case will be difficult to interpret for employers looking for a bright line rule on whether seating should be provided in work situations when seating is not necessarily an obvious part of a job.  It remains to be seen whether there will be more litigation in this issue, or whether employers will reconfigure businesses to permit more seating in California to avoid these lawsuits. 



Court of Appeal Saves Electronically Signed Arbitration Agreement - Relevant to Other Electronic Acknowledgements Too

Wait, don't skip this one yet. It's not just another arbitration case. If your business uses electronic acknowledgments of policies, handbooks or employment agreements (commissions, confidentiality agreements, etc.), it's worth a read.

In this case, Doctor Espejo sued Kaiser for wrongful termination. The facts aren't important.  At the beginning of employment, Kaiser sent the doctor an email containing electronic links to his offer letter, the dispute resolution procedures (arbitration agreement), "rules and regulations," and a benefits handbook. He accepted his offer and the other materials via an electronic signature that he applied after clicking the links, signing in and following procedures.

The issue that lawyers have to deal with, dear HR and company management, is how to prove that these things happened in litigation.  And that problem came up when Kaiser tried to compel Dr. Espejo to arbitrate.

The trial court rejected Kaiser's attempt to prove that Dr. Espejo signed his arbitration agreement. But the trial court did so because it refused to rely on a declaration that Kaiser submitted after Kaiser had filed its initial Petition to Compel Arbitration.  (Kaiser submitted the additional declaration in response to a new court decision that had come down, trying to satisfy its evidentiary burden.)  The Court of Appeal decided the trial court should have accepted Kaiser's declaration.

With that out of the way, the Court of Appeal made two significant rulings. One applies in the context of compelling arbitration. But one is more generally applicable to proving that electronically signed documents are "authentic" and admissible evidence.

First, the Court of Appeal decided that a party's initial burden on a Petition to Compel arbitration does not include fully "authenticating" an arbitration agreement, unless the other side disputes the agreement is authentic in its opposition.

we conclude that defendants here met their initial burden by attaching to their petition a copy of the purported arbitration agreement bearing Espejo’s electronic signature. Once Espejo challenged the validity of that signature in his opposition, defendants were then required to establish by a preponderance of the evidence that the signature was authentic.
That's good news unless, as in this case, the employee is going to deny electronically signing the document.  Doctor Espejo recalled electronically signing his offer letter, but he did not remember authorizing his electronic signature on the other documents.  So, as it says above, Kaiser then had to prove authenticity by a preponderance of the evidence. This issue will arise a lot in other contexts, such as handbook receipts, commission plans, etc.  How does one prove to a court that an electronic acknowledgment is real?  Remember, that's the only reason employers have these sign-offs - in case of litigation.  So, it pays to have a way of proving they are valid.

The Court of Appeal reviewed the law in this area and approved the declaration that Kaiser submitted.  To prove an electronic signature is valid under Civil Code section 1633.9, subd. (a), it is necessary to prove it is the "act of the person" whom you want to establish signed the document.  The Court of Appeal reviewed Kaiser's declaration and decided it was sufficient to do so:
Tellez detailed SCPMG’s security precautions regarding transmission and use of an applicant’s unique user name and password, as well as the steps an applicant would have to take to place his or her name on the signature line of the employment agreement and the DRP. Based on this procedure, she concluded that the “name Jay Baniaga Espejo could have only been placed on the signature pages of the employment agreement and the DRP by someone using Dr. Espejo’s unique user name and password. . . . [¶] Given this process for signing documents and protecting the privacy of the information with unique and private user names and passwords, the electronic signature was made by Dr. Espejo” on the employment agreement and the DRP at the date, time, and IP address listed on the documents. These details satisfactorily meet the requirements articulated in Ruiz and establish that the electronic signature on the DRP was “the act of” Espejo (Civ. Code, § 1633.9, subd. (a)), and therefore provide the necessary factual details to properly authenticate the document.
So, to prove electronic signatures depict the acknowledgment of the person whom the company wants to say signed the document, the following is necessary:

- a company witness has to know how the electronic signature process works and has to be able to explain it in a declaration.  The vendor has to have a white paper explaining the process in plain English, and training for HR and IT;

- the electronic signature process has to have sufficient security safeguards to allow a court to find that it is more likely than not the signature of the person you want it to be.  It always helps to have an email confirmation of the signing event sent to the email user with a return receipt; and

- the lawyer has to know how to draft a proper declaration of a person who can lay foundation regarding knowledge of how the process works and how it was applied to the plaintiff.  (You're welcome).

This case is Espejo v. Southern California Permanente Medical Group and the opinion is here.







Friday, April 08, 2016

Ninth Circuit's Tip Case Makes a Hash Out of California Tip Pool Law

The Ninth Circuit decided 2-1 that the U.S. Department of Labor was allowed to issue a regulation that applies to tip pooling arrangements, but even if the tips are not taken as credits against the federal minimum wage.  This is an interesting decision about federal agency power, but you don't care about that.  I'll just fume about that alone.

What you do care about in California is this: the DOL regulation will probably invalidate California law on tip-pooling in most cases.  That is because federal law trumps state law when it is more generous to employees.

The court in Oregon Restaurant and Lodging Association LLC v. Perez (Opinion here) decided that the DOL was within its rights to issue a regulation defining what a tip pool is, and that the DOL's definition applies regardless of whether the employer is using the employees' tips as a credit against the minimum wage.

So, let's look at the federal regulation:
§ 531.52 General characteristics of “tips.” 
A tip is a sum presented by a customer as a gift or gratuity in recognition of some service performed for him. It is to be distinguished from payment of a charge, if any, made for the service. Whether a tip is to be given, and its amount, are matters determined solely by the customer, who has the right to determine who shall be the recipient of the gratuity. Tips are the property of the employee whether or not the employer has taken a tip credit under section 3(m) of the FLSA. The employer is prohibited from using an employee's tips, whether or not it has taken a tip credit, for any reason other than that which is statutorily permitted in section 3(m): As a credit against its minimum wage obligations to the employee, or in furtherance of a valid tip pool. Only tips actually received by an employee as money belonging to the employee may be counted in determining whether the person is a “tipped employee” within the meaning of the Act and in applying the provisions of section 3(m) which govern wage credits for tips.


Ok so this regulation means that the employer cannot use a tip for any purpose except for a tip credit or "a valid tip pool."  What's a valid tip pool under federal law?

A valid tip pool is explained here:
§ 531.54 Tip pooling.
Where employees practice tip splitting, as where waiters give a portion of their tips to the busboys, both the amounts retained by the waiters and those given the busboys are considered tips of the individuals who retain them, in applying the provisions of section 3(m) and 3(t). Similarly, where an accounting is made to an employer for his information only or in furtherance of a pooling arrangement whereby the employer redistributes the tips to the employees upon some basis to which they have mutually agreed among themselves, the amounts received and retained by each individual as his own are counted as his tips for purposes of the Act. Section 3(m) does not impose a maximum contribution percentage on valid mandatory tip pools, which can only include those employees who customarily and regularly receive tips. However, an employer must notify its employees of any required tip pool contribution amount, may only take a tip credit for the amount of tips each employee ultimately receives, and may not retain any of the employees' tips for any other purpose.

Now the DOL's regulation says that only people who "customarily and regularly" receive tips can be in tip pools under federal law.  The cases say that those are people directly involved in service.  They include bussers, waiters, bar staff, even hosts.  But cooks, dishwashers, expediters, and the like are out of luck.  There are federal cases that say so.  So, bottom line is that federal law says that tip pools cannot include back of the house people.

State law, on the other hand, says that they can be included.  We've blogged a bunch about tip-pooling under California law here.   The net-net is that California does permit participation by back-of-the-house employees in the tip pool because they participate in making the service experience pleasant.

Anyway, the 9th Circuit may re-consider its decision in the Oregon case or the Supreme Court could decide to hear it.  If neither of those things happen, California employers that are covered by the Fair Labor Standards Act may wish to revisit their tip-pooling policies.






Saturday, April 02, 2016

California Minimum Wage Increases to $15.00!!..ZOMG..1!!1! There's Lots of Fine Print. But Much Is Not Good.

For one thing, it's not 2022.  Businesses can move away or raise prices 50% by then.  I kid.  ::cough::

Anyway, Governor Brown says he will sign SB 3 (here,) which is the bill you've heard of that "raises California's minimum wage" to $15.00 per hour.  Well, it may do so by 2022 (or a year later for employers with fewer than 25 employees). And it definitely will do so eventually. But there is lots of fine print.

"Good" News 

First, it's a staged increase. Second, the timing of the increase will depend on the business size.  Because California can't just pass a simple law.  See, e.g., the paid sick leave law, which looks like a tax code.

Here is the implementation schedule as it currently exists.
(1) For any employer who employs 26 or more employees, the minimum wage shall be as follows:
(A) From January 1, 2017, to December 31, 2017, inclusive,—ten dollars and fifty cents ($10.50) per hour. 
(B) From January 1, 2018, to December 31, 2018, inclusive,—eleven dollars ($11) per hour. 
(C) From January 1, 2019, to December 31, 2019, inclusive,—twelve dollars ($12) per hour. 
(D) From January 1, 2020, to December 31, 2020, inclusive,—thirteen dollars ($13) per hour. 
(E) From January 1, 2021, to December 31, 2021, inclusive,—fourteen dollars ($14) per hour. 
(F) From January 1, 2022, and until adjusted by subdivision (c)—fifteen dollars ($15) per hour.

(2) For any employer who employs 25 or fewer employees, the minimum wage shall be as follows: 
(A) From January 1, 2018, to December 31, 2018, inclusive,—ten dollars and fifty cents ($10.50) per hour. 
(B) From January 1, 2019, to December 31, 2019, inclusive,—eleven dollars ($11) per hour. 
(C) From January 1, 2020, to December 31, 2020, inclusive,—twelve dollars ($12) per hour. 
(D) From January 1, 2021, to December 31, 2021, inclusive,—thirteen dollars ($13) per hour. 
(E) From January 1, 2022, to December 31, 2022, inclusive,—fourteen dollars ($14) per hour. 
(F) From January 1, 2023, and until adjusted by subdivision (c)—fifteen dollars ($15) per hour.
After the rate goes up to $15 per hour, the minimum wage will be set according to price indexes as set forth in the statute.  Economists with advanced degrees and Sominex will figure out the amount of the increase and publish annually.

Effect of Minimum Wage Increases

Don't forget, the minimum wage increase will effect things like:

- Minimum salaries for exempt managers (which have to be at least 2X the minimum wage.

- Meal period premiums (penalties).

- Overtime premiums.

- Split shift pay (one hour at minimum wage).

- The minimum compensation to qualify for exempt inside sales (1.5 X minimum wage).

- Sick pay, vacation pay, and other paid leave costs.

-  Employers' payroll tax

- Public sector salaries / wages - and your personal taxes pay for those.

And there will be posters.

Also, this is the state minimum wage and does not preclude local minimum wage increases. What will the San Francisco minimum wage be in 2022?  It's currently going to $13.00 on 7/1/16.

***

OK, that's it for the positive part of this post.  The rest may be snarky.  But fair.


Small Employers: Look Out

As shown above, smaller employers can pay a lower wage.  If they are actually smaller employers under the law.  I know you're thinking it's easy to figure out if you're an employer of 25 or less employees because here's the handy definition:
(3) For purposes of this subdivision, “employer” means any person who directly or indirectly, or through an agent or any other person, employs or exercises control over the wages, hours, or working conditions of any person. For purposes of this subdivision, “employer” includes the state, political subdivisions of the state, and municipalities. 
(4) Employees who are treated as employed by a single qualified taxpayer under subdivision (h) of Section 23626 of the Revenue and Taxation Code, as it read on the effective date of this section, shall be considered employees of that taxpayer for purposes of this subdivision. 
Unfortunately, your thinking is incorrect, maybe because you are not cynical and paranoid like I am.  It is unclear who is a small "employer" under this standard because of the "indirectly"  and "agent" language.  

There may be litigation over whether "joint employers" (like temp agencies or contractor-subcontractor relationships) will count when the employer is assessing the small employer provision.  Plaintiff attorneys won't be shy, because they can bring class actions and seek one-way attorney's fees. And there's PAGA too!  

As we have covered, the government agencies and courts are expanding "joint employer" liability.  Paying below minimum wage is a very costly endeavor and can result in double pay and other penalties, personal liability, and more.  So, small employers may have to get a legislative fix for this provision, or pay the higher rate to avoid potential lawsuits.  That won't break a lot of hearts in the legislature.

Suspended Implementation?

Now here's another twist.  During the period when the minimum wage is increasing to $15.00, each year in July, the state Director of Finance will examine "economic conditions" according to certain listed criteria.  The purpose of the review is  "to ensure that economic conditions can support a minimum wage increase . . . "

Huh. Why would that be necessary?  I thought minimum wage increases were economically super duper!!!  Well, just in case the data come in not-super-duper, the Governor may suspend the minimum wage increase set for the following year.  If he does so, that will delay the above schedule for a year.

The governor has the right to make that determination and suspend implementation twice.  So the $15.00 wage could be delayed a couple of years longer than the above schedule in case of an economic downturn.

Conclusion

Please prepare for minimum wage increases to begin 1/1/17 and to adjust other wage rates accordingly.

Please contact your Chamber of Commerce, legislator, or the Governor's office to express your concern if you have one, particularly about the potential mushy small employer definition.

And consider researching ETFs or mutual funds that focus on moving companies and Texas real estate. I kid again! ::cough:::