California Governor Brown Signs Employment Bills at Last Minute

In my last post, I said that Governor Jerry Brown vetoed a bunch of ill-conceived laws.  Well, I posted too soon, and I take that back.

On October 9, the final day he could do so, Governor  Brown signed some employment law bills that make significant changes to employment law for California employers -

AB 22 - available here.  This new law bans most employers (not financial institutions or businesses required by law to perform credit checks) from obtaining credit information about applicants or employees, except in limited circumstances.  The law does not preclude criminal background checks, references, etc. - only credit information.  It does not apply to managers covered by the executive exemption (creating another basis for liability where there is a dispute / lawsuit over misclassification).  There are a few other exceptions as well. This is a huge issue for many employers who will have to change their practices.

AB 592 - available here.  This law adds an express prohibition of  "interference" with California Family Rights Act leave, similar to what is contained in the FMLA's text.  This is not a big change.

SB 299 - available here.  This provision seems to overlap AB 592, but also requires employers to extend group health coverage to employees taking PDL for the entire four month duration of PDL.  The extension of health coverage will apply even if there is no FMLA entitlement.  Between 592 and 299, it appears that the 12-week cap on employer paid benefits that applied to combined PDL/CFRA leave is gone.  Will ERISA preempt this provision?  Does the health care reform law affect it?  Stay tuned.  If this provision holds, get ready to modify all your policies again.

 AB 1236 - available here - allows employers to choose to use E-Verify, but prohibits cities or counties from requiring private employers to do so.  So, this is not a ban on E-Verify.  Breathe. 

AB 887 - available here - further defines "gender" in a variety of laws, including the Fair Employment and Housing Act.  Here's new Section 12940(p) - which already prohibited discrimination and harassment based on "gender."  This law specifically defines "gender" some more.

(p) "Sex" includes, but is not limited to, pregnancy, childbirth, or medical conditions related to pregnancy or childbirth. "Sex" also includes, but is not limited to, a person's gender. "Gender" means sex, and includes a person's gender identity and gender expression. "Gender expression" means a person's gender-related appearance and behavior whether or not stereotypically associated with the person's assigned sex at birth.

SB 459 - Available here - This new law imposes a fine of between $5000 and $25,000, for "willfully" misclassifying someone as an independent contractor, and makes it a crime and imposes joint liability for a non-attorney consultant to advise an employer to do so.  Employers also will not be able to make deductions from contractors' pay that they would not have been able to make had the contractors been employees.  What's "willful" misclassification? 

"Willful misclassification" means avoiding employee status for an individual by voluntarily and knowingly misclassifying that individual as an independent contractor.

This is going to be big.  I wish I had one of those Drudge Report siren thingies. 
 



OK, that's all the valuable information I can impart for now. (There may be more bills that I missed, which I will cover later.) But I have to go to work and get ready for all these laws! 



DGV

New CA Law Requires Written Commission Agreement

Governor Brown has mercifully vetoed many of the loony ill-conceived employment law bills that the legislature passed this term. But he signed AB 1396, which is going to impose a serious burden on employers who pay employees via commission.

The new law requires employers who pay employees via commission to (1) have a written contract with the employee regarding commissions (2) include the method for calculating the commissions (3) require the employee to sign a "receipt" retained by the employer. 

Also, the contract remains in effect until a new commission plan has superseded it or employment terminates, even if the old plan expires.

Finally, the law attempts to define commission and excludes bonuses, but then includes bonuses that are a percentage of sales or profits. Now, commissions aren't percentages of profits. So, some bonuses will be included in this provision.

I predict a lot of work for SV drafting commission plans in 2012.

The law takes effect 1/1/13. The text is here. 

DGV

NLRB Poster Implementation Delayed Until 1/31/12.

Poor poster companies!  The NLRB has decided to delay implementation of the new poster. (See post here).  The new implementation date is 1/31/12.  The NLRB says the delay is due to the Whitehouse freaking out about the 2012 election? the abysmal jobless economy? lawsuits? its desire to conduct outreach and education among members of the business community.
See the press release here.

H/T Ross Runkel
DGV

Brinker!! Argument is 11/08/11

The California Supreme Court will hear arguments in Brinker v. Superior Court (see a bunch of posts here) regarding employers' obligations to provide meal periods.  Argument is November 8 in San Francisco.  I'm so excited, I need a rest period.  Docket is here.

DGV

Ninth Circuit - Inconsistency Costs Employer Summary Judgment

So, the Ninth Circuit in Earl v. Nielsen Media Research reversed summary judgment in an age discrimination case.  Earl violated several company policies over time. She was placed on a Development Improvement Plan and ultimately was fired.  As she was nearly 60, she claimed age discrimination motivated her discharge.

The Ninth Circuit reversed summary judgment.  Earl showed that younger employees violated the same policies without getting fired.  Because they were sufficiently similar employees (same positions, same policy violations), they were adequate to satisfy the "similarly situated" requirement for comparing employees.  When you read this case, you will know why we management side lawyers always preach consistency.

The court's second point was that the employer did not apply a performance improvement plan to plaintiff Earl, which they had done for other employees. The court rejected the company's argument that it employed people "at will" and could deviate from the progressive discipline system.

Earl was terminated after receiving a single DIP. She never received a PIP, a much more serious warning. Earl has presented evidence that in terminating her without first issuing a PIP, Nielsen deviated from its normal internal disciplinary procedure. In May 2006, Nielsen did not terminate employee 46432, a younger recruiter, even though he had extremely serious performance issues, because he had received only a DIP. In an email exchange with other company officials, Bob Burns wrote: “As much as it sounds reasonable to terminate him without a PIP, it would not be consistent with our procedure.” Employee 46432 was eventually terminated, but only after issuance of a PIP.

Thus, the court found that the company's insistence on a PIP for a younger employee in the name of consistency raised a factual question regarding the company's willingness to forgo the PIP re Earl. It is unclear whether the company tried to show the court there were a variety of employees of a variety of ages who had received and not received PIPs.  If so, perhaps the employer would not have lost this point.

If your organization uses PIPs and other progressive discipline, it is important to understand that if you make an exception, you risk a claim of disparate treatment unless you can explain why employees who receive different treatment are not similarly situated. It also is important to ensure that progressive discipline is not applied differently to different protected individuals.

The opinion is Earl v. Nielsen Media Research, Inc. and the opinion is here.

DGV

Dukes v. Walmart Fallout

Eveyone knows about the Dukes v. Walmart case (post is here). Well, Ellis v. Costco is another "big box" retailer case, in which female managers challenged Costco's promotion practices.

According to the opinion, Costco does not document or set concrete standards re promotion to General Manager and it always promotes from within the ranks of its AGMs.  Several female Costco employees brought a nationwide class action, claiming Costco's promotion practices discriminated against women.

The Ninth Circuit reversed the district court's grant of class certification.  The opinion finds many errors with the district court's reasoning, mainly because of Dukes' interpretation of the class action standards in federal court (Rule 23).   For example, the district court failed to conduct a "rigorous analysis" regarding whether a common question of law or fact would affect the entire proposed class's rights to recovery. The court of appeals also held the district court did not consider whether individual circumstances rendered the plaintiffs incapable of proving the "typicality" element.  Costco put forward evidence regarding the named plaintiffs that appeared to explain individualized reasons why each plaintiff did not succeed.

The court of appeals also rejected certification under Rule 23(b), which permits class certification in cases where the relief sought is primarily an injunction rather than damages.  Again, relying on Dukes, the court of appeals noted Walmart precludes certification under Rule 23(b)(2) when each class member would be entitled to an award of money damages. Moreover, former employees cannot bring claims for injunctive relief, as injunctions operate prospectively and former employees will have no stake in them.

There is more. But this case places into focus that Dukes will have a profound effect on large employment law class actions in federal court. It remains to be seen how California courts deal with Dukes, but the state's courts do rely on federal law when evaluating class actions.

The case is Ellis v. Costco and the opinion is here.

Ninth Circuit Interprets Learned Professional Exemption

The State of Washington's Department of Social and Health Services employ social workers, whom the agency classifies as exempt under the Fair Labor Standards Act.  The state relies on the "learned professional exemption," which means "an employee whose primary duties require 'knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction.'” 29 C.F.R. § 541.300(a)(2)(I).

The state's requirements for social worker positions included:

at least a “[b]achelor’s degree or higher in social services, human services, behavioral sciences, or an allied field,” as well as eighteen months as a Social Worker 1 or two years’ experience in an equivalent position. Candidates for Social Worker 3 must meet the same educational requirements and have additional work experience. Within one year of their appointment, new employees in these positions must complete a formal training program that includes four weeks of classroom instruction and two weeks of field instruction.

The state also had guidance regarding when equivalent work experience could substitute for specialized degrees.

Reversing the district court, the court of appeals decided that the social worker position was not "exempt" automatically and required a trial to find out the facts.  The court explained:

while social workers no doubt have diverse jobs that benefit from a multi-disciplinary background, 6 the “learned professional” exemption applies to positionsthat require “a prolonged course of specialized intellectual instruction,” not positions that draw from many varied fields. While particular coursework in each of the acceptable fields may be related to social work, DSHS admits that it does not examine an applicant’s coursework once it determines that the applicant’s degree is within one of those fields. For the “learned professional” exemption to apply, the knowledge required to perform the duties of a position must come from “advanced specialized intellectual instruction” rather than practical experience. 29 C.F.R. § 541.301(d). The requirement of a degree or sufficient coursework in any of several fields broadly related to a position suggests that only general academic training is necessary, with the employer relying upon apprenticeship and experience to develop the advanced skills necessary for effective performance as a social worker.

So, the issue is not whether a job requires a college degree generally.  The issue is whether the job requires a college degree in a particulars skill that is directly related to the job.

The case is Solis v. State DSHS and the opinion is here.

California Supreme Court Limits Employer Liability to IC's Employees

Typically, when an organization hires a vendor / independent contractor, the hiring organization is not liable to the vendor's employees when something goes wrong. The vendor/contractor is the "employer" responsible to its own employees.

As explained by the California  Supreme Court:

Defendant US Airways uses a conveyor to move luggage at San Francisco International Airport. The airport is the actual owner of the conveyor, but US Airways uses it under a permit and has responsibility for its maintenance. US Airways hired independent contractor Lloyd W. Aubry Co. to maintain and repair the conveyor; the airline neither directed nor had its employees participate in Aubry‘s work.

The conveyor lacked certain safety guards required by applicable regulations. Anthony Verdon Lujan, who goes by the name Verdon, was inspecting the conveyor as an employee of Aubry, and his arm got caught in its moving parts.

Plaintiff SeaBright Insurance Company, Aubry‘s workers‘ compensation insurer, paid Verdon benefits based on the injury and then sued defendant US Airways, claiming the airline caused Verdon‘s injury and seeking to recover what it paid in benefits. Verdon intervened as a plaintiff in the action, alleging causes of action for negligence and premises liability.

Of special relevance to this case, the insurance company argued that US Airways was liable because of its obligations under CalOSHA to provide a "safe workplace." The issue was whether US Airways could delegate the duty to provide a safe workplace to its contractor, with respect to the safety of the contractor's employees.

Was US Airways liable for the injury to Verdon, even though Aubry was Verdon's employer and Verdon was covered by Workers' Compensation Insurance?  Hmmm?  Heck I don't know, I was asking you.

Oh, right the California Supreme Court knows. And the Court said:

plaintiffs here cannot recover in tort from defendant US Airways on a theory that employee Verdon‘s workplace injury resulted from defendant‘s breach of what plaintiffs describe as a nondelegable duty under Cal-OSHA regulations to provide safety guards on the conveyor. Hence, the Court of Appeal erred in reversing the trial court‘s grant of summary judgment for defendant.

The court emphasized that US Airways owed its own employees a non-delegable duty to provide a safe workplace. But Verdon, an employee of Aubry, could not look to US Airways for relief.

The decision is Seabright Ins. Co. v. US Airways and the opinion is here.

NLRB Soon to Require Poster!

Effective this November, Non-union employers will have to post a new poster explaining to employees their rights under the National Labor Relations Act.  For a simple posting regulation, there sure are a lot of rules.

- Multiple languages if more than 20% of employers speak a language other than English
- posting on intranets
- size of the poster, placement, etc.

The poster's content basically is a short seminar on the National Labor Relations Act, the right to unionize, what unfair labor practices are, how to file a charge, etc.  Handy!

The good news is that the NLRB will let you download the poster free from its website, or you can order paper copies gratis from the Agency. So, printing costs will be minimal.

The regulations are at the bottom of this long long website page, which includes the "comments" to the final proposed rules and the NLRB's response to them.
DGV

Court of Appeal: No Reinstatement after 12 weeks of CFRA Leave

After taking 19 weeks of leave, the first 12 of which was covered under the California Family Rights Act, LA County reinstated Katrina Rogers, but then transferred her to a new job as a business decision. Rogers did not take the transfer well and sued under various causes of action, including the CFRA.  A jury awarded her damages and the county appealed.

The court first rejected Rogers' argument that the transfer amounted to "interference" with her rights under the CFRA:

Here, the following is undisputed—the County accorded Rogers the full 12 workweeks of leave to which she was entitled under the CFRA; Rogers did not return to work at the end of this period, but instead remained on leave for 19 weeks; and the decision to transfer her was made within the 12-week leave period, but never communicated to Rogers during her leave. Rogers nevertheless argues that she suffered interference with her CFRA rights because the transfer decision was made during her protected CFRA leave. But she cites no authority to support her position, which we therefore disregard. (Perez v. Grajales (2008) 169 Cal.App.4th 580, 591–592.) Based on the foregoing, we conclude that Rogers’s right to reinstatement expired when the 12-week protected CFRA leave expired. Her CFRA interference claim therefore fails as a matter of law, and should never have been submitted to the jury.

 
Then the court turned to Rogers' claim that the transfer was "retaliation" for her exercising her rights. The court could not find any evidence that the county took its action because Rogers took leave, other than the fact that she took it and the transfer occurred thereafter:

In short, Rogers “failed to establish the requisite causal connection between her protected actions in taking a CFRA medical leave” and the decision to transfer her to another position. (Neisendorf, supra, 143 Cal.App.4th at p. 519.) “The unchallenged finding that [the County] had a legitimate, nondiscriminatory reason to [transfer Rogers], which had nothing to do with her CFRA leave, bars [Rogers] from articulating a cognizable cause of action for the jury’s consideration based on [the County’s] alleged refusal to honor the CFRA’s right to reinstatement.” (Id. at p. 520.) The Neisendorf court cited to several federal courts interpreting the FMLA that endorse this principle. (See e.g. Throneberry v. McGehee Desha County Hosp. (8th Cir. 2005) 403 F.3d 972, 979 [“‘As long as an employer can show a lawful reason, i.e., a reason unrelated to an employee’s exercise of FMLA rights, for not restoring an employee on FMLA leave to her position, the employer will be justified to interfere with an employee’s FMLA leave rights’”].) Like the Neisendorf court, we conclude that because the County’s “legitimate, nondiscriminatory reason” for the decision to transfer Rogers eliminated any obligation the County might have had to reinstate her, Rogers “could not state a valid claim under the CFRA.” (Neisendorf, supra, at p. 520.)

The decision is important regarding CFRA/FMLA leave, but it does not address reasonable accommodation obligations under the ADA/Fair Employment and Housing Act.  So, employers still need to consider reinstatement following extended leave when an employee has a covered disability and takes more leave than allowed under CFRA / FMLA.

The case is Rogers v. County of LA and the opinion is here.

Pre-Bar Admission Law Grads Can Be Exempt

Matthew Zelasko-Barrett graduated law school and obtained a job with Brayton-Purcell, a large, Marin County firm. Before passing the bar and becoming a licensed lawyer, he was designated a Law Clerk II; after admission he became an associate.  After quitting, he decided to sue Brayton-Purcell, claiming he was "mis-classified" as exempt during his time as a Law Clerk II.

Although licensed, salaried lawyers qualify as exempt, so do "learned" professionals.  The associate's principal argument was that because licensed professionals qualify as exempt under one part of the definition, unlicensed lawyers cannot.  The court of appeal rejected that argument.

It bears noting that the Law Clerk II's duties practically mirrored  a licensed associate's, with the exception of signing documents as a lawyer, court appearances, etc.  Had the Law Clerk II's duties been more clerical, this case might have come out another way.

The court here also heavily relied on a 9th Circuit decision, in which the Court of Appeals held that certain accountants were exempt, even though they were not licensed as CPAs.  CPA is another category of licensed professional. See Campbell v. Pricewaterhouse Coopers, LLP (E.D.CA 2009) 602 F.Supp.2d 1163, 1172, revd. (2011) 642 F. 3d 820.  The district court held that the accountants were non-exempt, but the court of appeals reversed and held they were. 

That means this case has more applicability than just to law firms.  The other licensed professionals are: "medicine, dentistry, optometry, architecture, engineering, teaching, or accounting."  Again, unlicensed professionals will have to pass the duties test of the exemption and receive the required salary.

The case is Zelasko-Barrett v. Brayton-Purcell LLP and the opinion is here.

Court of Appeal: "Me Too" Evidence of Harassment Admissible to Prove "Intent"

So, a plaintiff in a sexual harassment case attempts to introduce evidence that the harasser harassed other employees, but not in the plaintiff's presence, and that the conduct was not directed to the plaintiff. 
Can the plaintiff use that information to prove she was harassed?  Basically, the plaintiff wants to say, "the defendant is a bad person because he mistreated others; therefore, it is more likely that he harassed me even though he denied doing so."  That's what's called "character evidence," and it's usually inadmissible.

Except when it's admissible. The Evidence Code allows for admission of "character" evidence if used to prove intent, motivation, common plan, and other things. 

Thomas Anton was a lawyer. Lorraine Pantoja was a member of the staff. Pantoja alleged Anton touched her inappropriately, used slurs and profanity, and engaged in other conduct amounting to sexual harassment. Anton denied engaging in those behaviors.

Pantoja's lawyers attempted to introduce other female employees' testimony that Anton engaged in similar conduct towards them.  Anton successfully had that conduct excluded as character evidence. But Pantoja's lawyers argued that evidence was necessary to prove Anton's intent.  A jury decided in favor of Anton. Pantoja appealed.

The court of appeal reversed the defense verdict and judgment. The court decided that the trial court erroneously did not permit "me too" evidence to prove Anton's anti-female intent. The evidence also was admissible to impeach Anton's denials. A significant issue was whether Anton used profanity "at the situation" or directed towards females.

This case is significant for a few reasons:

1.  The appellate court's discussion of intent suggests that the plaintiff must prove intent to win in a sexual harassment case. I think the court meant that the harassment must be "based on" the plaintiff's sex, race, etc.  But intent to harm or to discriminate actually is not an element of a harassment case.  If conduct has the "effect" of creating an objectively hostile work environment in the eyes of a reasonable victim, that's supposed to be enough.

2.. The court did not mention whether a defendant would be entitled to a special jury instruction explaining that the purpose of the testimony is not to establish the plaintiff's claim of a hostile environment or damages. Defendants certainly should request such an instruction, or the jury may be confused into thinking that the plaintiff can prove her own work environment was hostile because of the way others were treated, even outside of her presence.

3.  The court does not take into account the possibility that if a bunch of people testify about the defendant, the jury will find in the plaintiff's favor just to punish the defendant, even if the evidence of conduct against the plaintiff is thin.  The court did not draw the line at all - allowing evidence by employees who did not even work at the same time as the plaintiff.

4.  This case makes it highly dangerous to retain an employee who has previously been found to violate an anti-harassment policy. If all evidence of harassment conduct against other employees is admissible, even offered by employees who did not work at the same time as the plaintiff, then it will be a big risk to permit an employee previously identified as a  "harasser" to stay employed..

The case is Pantoja v. Anton and the opinion is here.

Court of Appeal: False Social Security Number = Unclean Hands = No Case

Vicente Salas worked for Sierra Chemical Company. He was seasonal, and was repeatedly laid off and re-hired.  Along the way, he injured himself.  The company allegedly denied him re-hire after he did not produce a release from his doctor. Salas claimed he was told he had to be 100% healed, which is one of those ADA no-nos.  He sued for a variety of employment based claims, including disability discrimination, failure to provide reasonable accommodation, etc.

But Sierra found out that Salas used a false social security number and obtained summary judgment because of the "unclean hands" / after acquired evidence defenses.  (The trial court actually denied the motion, but the court of appeal issued an order to show cause in response to a petition for a writ, resulting in the trial court's changing its mind.)

Salas's use of another person's Social Security number to obtain employment with Sierra Chemical went to the heart of the employment relationship and related directly to his claims that Sierra Chemical wrongfully failed to hire him following his seasonal lay off and discriminated against him by failing to provide a reasonable accommodation for his back injury. Because Salas was not lawfully qualified for the job, he cannot be heard to complain that he was not hired. This is so even though he alleges that one reason for the failure to hire was Sierra Chemical's unwillingness to accommodate his disability.

In light of the nature of the misrepresentation, the fact that it exposed Sierra Chemical to penalties for submitting false statements to several federal agencies, and the fact that Salas was disqualified from employment by means of governmental requirements, we conclude that Salas‟s claims are also barred by the doctrine of unclean hands.

The court also rejected Salas' claim that the Legislature foreclosed the unclean hands/ after acquired evidence defense by passing SB 1818, which provides in pertinent part:

"The Legislature finds and declares the following: [¶] (a) All protections, rights, and remedies available under state law, except any reinstatement remedy prohibited by federal law, are available to all individuals regardless of immigration status who have applied for employment, or who are or who have been employed, in this state. [¶]

(b) For purposes of enforcing state labor, employment, civil rights and employee housing laws, a person‟s immigration status is irrelevant to the issue of liability...

The court noted that SB 1818 was intended to be "declarative of existing law," and so it did not abrogate existing defenses to employment law actions.

The upshot is that this case denies relief to employees who falsify their employment credentials, resulting in a violation of law if the employer continues to employ the employee.  The employer will have to show as well that the employer's settled policy is to discharge / refuse to hire employees who commit the type of violation at issue.

The case is Salas v. Sierra Chemical Co. and the opinion is here.

DGV

Court of Appeal Raps Employee Appellant

This one is mainly for the practitioners.


Richard Foust lost at court trial, in which he sued his former employer, San Jose Construction Company, for breach of contract.  He appealed from the judgment. The court of appeal not only affirmed, but also held the appeal was frivolous and imposed sanctions. Foust apparently failed to provide an adequate record, made arguments for the first time in his reply, and generally made it impossible for the appellate court to adequately consider his appeal.

The court sanctioned Foust $6000, payable to the court, for the frivolous appeal, and awarded sanctions to San Jose in the amount of $8743. 

The obvious takeaway - If you're going to appeal, it's best to designate an adequate record or the appellate court may make losing more expensive.

The opinion is Foust v. San Jose Construction Company, Inc. and the opinion is here.

Court of Appeal: What's a Vacation?

Some companies give paid "sabbaticals" to long term employees. I am jealous of people who work for those companies.

Eric Paton worked for Advanced Micro Devices for seven years before he resigned.  He then sued AMD, claiming the sabbatical that he had not yet earned had "vested" during his entire employment, like vacation.  Therefore, he claimed, he was entitled to a proportional amount of sabbatical pay upon his termination of employment.  His lawsuit is a class action, brought on behalf of some 1400 former employees who had earned portions of their sabbaticals.

Preposterous, you say? Not so fast, said the court of appeal.

To figure out whether the sabbatical is vested vacation, which must be paid out upon termination under Labor Code Section 227.3, the court came up with a definition of "vacation:"

It is paid time off that accrues in proportion to the length of the employee's service, is not conditioned upon the occurrence of any event or condition, and usually does not impose conditions upon the employee's use of the time away from work.

Thus, consistent with the employment lawyer's understanding of vacation, holidays and sick days are not vacation because they are "conditioned upon the occurrence" of sickness or holidays.  Paid days off that do not require a condition to occur (like PTO and floating holidays) tend to fit within this definition.

The court then considered what is a true sabbatical.  The court borrowed from a test the state Division of Labor Standards Enforcement developed, and added an additional criterion:

First, leave that is granted infrequently tends to support the assertion that the leave is intended to retain experienced employees who have devoted a significant period of service to the employer. Every seven years is the traditional frequency and it seems an appropriate starting point for assessing corporate sabbaticals, as well. In many cases, an interval of seven years would be long enough for an employee to gain experience and demonstrate expertise that an employer might want to retain. Greater or lesser frequency could be appropriate depending upon the industry or particular company involved.

Second, the length of the leave should be adequate to achieve the employer's purpose. Since we are concerned here with unconditional sabbaticals given for the purpose of reenergizing the employee then, as the Labor Commissioner suggested, the length of the leave should be longer than that “normally” offered as vacation. Since regular vacation time may be used for rest, a sabbatical ought to provide the extended time off work that regular vacation does not.

Third, a legitimate sabbatical will always be granted in addition to regular vacation. . . .Because an employer could offer a minimal vacation plan and reward senior staff with sabbaticals as a way to avoid the financial liability of a more generous vacation plan, the employer's regular vacation policy should be comparable to the average vacation benefit offered in the relevant market.

A fourth factor is one that is implicit in the DLSE test but is not called out specifically. Since a sabbatical is designed to retain valued employees, then a legitimate sabbatical program should incorporate some feature that demonstrates that the employee taking the sabbatical is expected to return to work for the employer after the leave is over.

Applying this test, the court decided that AMD's plan raised a triable issue of fact regarding whether it was a true sabbatical or deferred vacation. The court's central concern was the purpose of establishing the program:  is it just added vacation for long term employees, or is it an incentive for employees to remain employed with AMD and improve their productivity upon return to work (sabbatical).  So, the court remanded the case for trial.

The decision is Paton v. Advanced Micro Devices and the opinion is here.

California Legislature Clarifies Paid Bone Marrow Leave

Governor Brown just signed SB 272, which clarifies last year's paid bone marrow /organ donation leave law.  That law requires employers to grant up to five days' paid leave for bone marrow donation and up to 30 days' paid leave for organ donation.

Key changes: The new bill clarifies a few thing: the time off for bone marrow / organ donation leave is measured in "business days" rather than calendar days.  The employer may require the employee to use up to five days of PTO for bone marrow leave and up to two weeks of PTO for organ donation leave. The 12 month period for measuring entitlement is "rolling" based on the date of the leave request.

The new bill is here.

Court of Appeal: Employee Repudiated Settlement Agreement

So, Thomas Ferguson was a bad policeman, having been picked up in a sting, for soliciting a prostitute.  Facing discharge, he made a deal with his employer, Cathedral City, and settled for a suspension. But part of the settlement depended on the resolution of criminal charges pending, i.e., if he was found guilty, he would resign.  Ferguson's lawyer wrote the city, complaining they were trying to influence the DA in Ferguson's criminal case. He went too far, though, and said the settlement agreement was void.  No settlement agreement, no suspension.  The city fired Ferguson, even though his NEW lawyer tried to take back the repudiation of the settlement.

No dice. Upholding the discharge, the Court of Appeal addressed repudiation of a contract and a settlement agreement in particular:

once Ferguson committed his anticipatory breach on June 23, 2007, the City could then elect its remedies, which in this instance meant the reinstatement of Ferguson‟s discharge. The City was no longer bound by the separation agreement and was excused from further performance: “The real operation of a declaration of intention not to be bound appears to give the promisee the right . . . to act upon the declaration and treat it as a final assertion by the promisor that he is no longer bound by the contract, and as a wrongful renunciation of the contractual relation into which he has entered. If [the promisee] elects to pursue the latter course, it becomes a breach of contract, excusing performanceon his part and giving him an immediate right to recover upon it as such. Upon such election the rights of the parties are to be regarded as then culminating, and the contractual relation ceases to exist, . . . [Emphasis added.]”

In English, the employer has two options: treat the agreement as canceled, relieving the employer of obligations under the settlement agreement (such as a neutral reference, COBRA, unpaid settlement sums), or sue for breach of the agreement to recover the settlement proceeds and any damages occasioned by the breach.

Of note, the court held also that Ferguson's attorney had the power to repudiate Ferguson's agreement.

Although a public sector case, the discussion re breach of settlement agreements is generally applicable.

The case is Ferguson v. City of Cathedral City and the opinion is here.

2011 IRS Mileage Reimbursement Rate Went Up mid-year!

The IRS just increased the standard mileage reimbursement rate.  This is the default rate most companies use to pay employees for using their own cars for business.  The new rate, effective July 1, 2011, is $0.55, which will remain in effect through December 31, 2011.

The IRS's new rate for computing deductible medical or moving expenses will also increase by 4.5 cents to 23.5 cents a mile, up from 19 cents for the first six months of 2011. The rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14 cents a mile.



The IRS announcement is here. 

DGV

Court of Appeal Steps Around Concepcion

So, you may have heard (over and over again), the U.S. Supreme Court in AT&T Mobility Services v. Concepcion (discussed here, article here)  decided that California cannot hold arbitration agreements unconscionable because they require only individuals to arbitrate and prohibit class actions in arbitration.

The first Court of Appeal to address post-Concepcion arbitration agreements is in Brown v. Ralphs Grocery.   A wage-hour class action, the plaintiffs also sought relief under California's Private Attorney General Act, or PAGA, which allows recovery of penalties on behalf of the named plaintiff and other, unnamed, aggrieved employees.  The penalty money is split 75/25 with the state.  See generally Labor Code Section 2699.

The trial court held that the class action waiver in Ralphs arbitration agreement was unconscionable, following the California Supreme Court's decision in Gentry v. Superior Court.  But the U.S. Supreme Court invalidated Gentry in the Concepcion case.

The Court of Appeal neatly side-stepped that little problem. Instead, the court held that the plaintiff failed to establish via "substantial evidence" that the class action waiver was indeed unconscionable under Gentry.

In doing so, the Court established that class action waivers are not automatically unconscionable under Gentry, and that the plaintiff had to produce evidence satisfying Gentry's four-factor test. Of course, this is all moot, because Gentry is not good law.

The Court's second task was to consider whether the PAGA claim-waiver in the arbitration agreement was unconscionable.  Here, the Court decided Concepcion did not apply. That is because, the court reasoned, a PAGA claim is asserted by the individual, not a "class."  Without a class, Concepcion would not apply - directly.   Rather, the plaintiff would go to arbitration and litigate the PAGA claim. If successful, the plaintiff would distribute the "bounty" of the penalties to the state and keep 25% for him or herself. Given there was a waiver of PAGA claims in the arbitration agreement, though, the court said that the agreement prohibiting arbitration of PAGA claims was unconscionable.

The decision may not survive on the books if the Supreme Court (California or US) decides to accept review.  On review, it will be interesting to see if, following Concepcion, the parties to an arbitration agreement may carve-out claims that can and cannot be arbitrated.  In this instance, the question would be who would be authorized to pursue a PAGA claim if every employee signed an arbitration agreement.  If the PAGA waiver is enforceable, the result might be no one. That's something that the courts might find troubling.  

The plaintiff's bar is cheering this Brown decision as an end-run around Concepcion. But everyone should keep the corks in the champagne. There are other legal battles left to fight.  For example, is it ok for the parties to let the arbitrator decide whether an arbitration clause is unconscionable, and avoid some courts' rather anti-arbitration posture regarding employment arbitration agreements. (There, I said it).   The California courts have not yet definitively decided this issue just yet:

We note that in general, the question whether an arbitration agreement is unconscionable or contrary to public policy is for the court, not the arbitrator, to decide. [Citation.] Recently, the Supreme Court held, in a case brought in federal court, that the question of unconscionability of an arbitration agreement may be for the arbitrator to decide when the agreement has clearly and unmistakably delegated that issue to the arbitrator. (Rent-A-Center[, supra,] 561 U.S. , [177 L.Ed.2d 403, 130 S.Ct. 2772, 2778–2779].) Sonic[-Calabasas A, Inc.] has not contended that the arbitration agreement delegates responsibility to the arbitrator to decide questions of the agreement's unconscionability or violation of public policy. We thus have no need to decide whether Rent-A-Center's five-to-four decision applies to actions brought in state court (see Preston [v. Ferrer (2008)] 552 U.S. 346, 363 [169 L.Ed.2d 917, 128 S.Ct. 978] (dis. opn. of Thomas, J.) [reaffirming the view of Justice Thomas that the FAA does not apply to state court proceedings]), nor whether we would adopt a similar rule as a matter of state law.”

Hartley v. Superior Court, 2011 Cal. App. LEXIS 824 (Cal. App. 4th Dist. June 28, 2011) (quoting (Sonic-Calabasas A, Inc. v. Moreno (2011) 51 Cal.4th 659, 688, fn. 12).

The fat lady is not singing, but she is kind of confused. Time will tell!  In the meantime, wait to see if Brown remains good law. If it does, don't include PAGA waivers in your arbitration agreements.  And talk to your lawyer about including clear and unmistakable language in your arbitration agreement concerning whether the court or the arbitrator will decide unconscionability.

The opinion in Brown v. Ralphs Grocery is here.

DGV

Court of Appeal on Discovery of Co-Workers' Files in Discrimination Cases

The appellate courts rarely get involved in discovery issues. It's usually up to the trial courts and parties to fight about what is relevant, what is a privacy issue, etc. So, guidance from the Court of Appeal is a welcome development.

Timothy Joyce sued his former employer, Life Technologies Corporation (LTC), for age discrimination and retaliation. In essence, Life Technologies merged with Joyce's former employer and he was laid off. He alleged that he was on a hit-list of over 40 employees, and that he was set up for termination, among other things.

In litigation, Joyce sought through interrogatories data about co-workers including:

(a) The names of all employees terminated during a two-year period, November 1, 2008 to June 28, 2010. 

(b) The department each worked for when terminated. 

(c) The date of termination. 

(d) The age of each at termination. 

(e) The reason for termination. 

(f) Whether severance benefits were offered.

(g) Whether offered severance benefits were accepted. 

(h) A description of any offered severance benefits. 

(i) A detailed explanation of reasons for any failure to offer severance benefits. 

(j) The identity (including name, address and telephone number) of all former Applied Biosystems employees still employed by LTC after the RIF. 

(k) Whether the terminated employees were former employees of Appelera or Applied Biosystems.

LTC and Joyce became involved in a discovery dispute, which resulted in a trial court order granting access to the information, but requiring the parties to first send a letter to employees notifying them of the proposed disclosure. the information would be disclosed unless the employees at issue filed a motion for protective order.  The court of appeal noted that there was no provision for protection of the information and no "opt-out" other than via a formal motion. 

The court first noted that statistical information could be relevant to a disparate impact claim and that the RIF provided for the requisite facially neutral practice.  Joyce also wanted the data for a disparate treatment claim, i.e., intentional discrimination.  The court of appeal pointed out that statistical evidence is far less important in disparate treatment cases:

Statistical evidence may also be utilized in a disparate treatment case. However, because discriminatory intent must be shown in such a case, statistical evidence must meet a more exacting standard. “[T]o create an inference of intentional discrimination, statistics must demonstrate a significant disparity and must eliminate nondiscriminatory reasons for the apparent disparity. Aragon [v. Republic Silver State Disposal Inc. (9th Cir. 2002) 292 F.3d 654, 663 (Aragon) (finding that statistics unsupported by other probative evidence of discrimination was insufficient to show pretext and to demonstrate discrimination); see also Coleman v. Quaker Oats Co. (9th Cir. 2000) 232 F.3d 1271, 1283 (holding that to raise a triable issue of fact regarding pretext based solely on statistical evidence, the statistics „must show a stark pattern of discrimination unexplainable on grounds other than age‟); United States v. Ironworkers Local 86 (9th Cir. 1971) 443 F.2d 544, 551, fn. omitted] . . . (holding that use of statistical evidence „is conditioned by the existence of proper supportive facts and the absence of variables which would undermine the reasonableness of the inference of discrimination which is drawn.‟).” (Gratch v. Nicholson (N.D.Ca. 2005, No. C04-03028 JSW) 2005 WL 2290315, *4.) 

Thus, “[a]lthough use of statistics is permissible [in a disparate treatment case], statistical evidence „rarely suffices to rebut an employer‟s legitimate, nondiscriminatory rationale for its decision to dismiss an individual employee.‟ Aragon[, supra, at p. 663, fn. 6.] . . . [T]his is so because „in disparate treatment cases, the central focus is less on whether a pattern of discrimination existed [at the company] and more how a particular individual was treated and why. As such, statistical evidence of a company‟s general hiring patterns, although relevant, carries less probative weight than it does in a disparate impact case.‟ [Ibid., citing LeBlanc v. Great Amer. Ins. Co. (1st Cir. 1993) 6 F.3d 836, 848-49.]” (Gratch v. Nicholson, supra, at p. *4, fn. 4.)

The court therefore found that at least some of the information sought would be arguably relevant to Joyce's claims. But the court then turned to privacy analysis.  

The court held that Joyce had made no showing that the identities, addresses and other private information of co-workers, particularly those who were not contended to be witnesses to any discriminatory conduct against Joyce, were sufficiently "needed" to overcome the individuals' privacy interests.  The court distinguished the "class action" discovery cases because the identities of class members are really the identities of potential witnesses, and because of the specific issues that arise in class certification proceedings.

Significantly, the court pointed out that there was no reason why statistics could not be developed without disclosure of individuals' personal information, absent a showing that LTC would provide unreliable data without giving out names and addresses, etc.  Joyce also failed to adequately demonstrate the need for the breadth of information he sought. 

The court also criticized the court's order because it placed too high a burden on objecting employees.  The court noted that if the information had been subpoenaed, a simple objection by the third party could stop the disclosure, rather than a formal motion.  Also, the court would have permitted the plaintiff to send out a notice to third parties, thereby requiring disclosure of names and addresses before the employees had a chance to object.

Finally, the trial court did not put any safeguards in place regarding the use or custody of the needed information via a suitable protective order.

Disputes such as these are common in employment law.  Therefore, when "meeting and conferring," lawyers may use this case to limit disclosure of private personnel information absent a sufficient showing of need, and ensure that private information is kept that way during and after litigation.

The opinion is Life Technologies Corporation v. Superior Court and the opinion is here.  

Court of Appeal: That's Not a Split Shift

Under California's Wage Orders - 

“Split shift” means a work schedule, which is interrupted by non-paid non-working periods established by the employer, other than bona fide rest or meal periods. 
And "when an employee works a split shift, one (1) hour’s pay at the minimum wage shall be paid in addition to the minimum wage for that workday, except when the employee resides at the place of employment."

The question is: If you work an over night shift, such that you start at 10:p.m., end your shift at 7:00 a.m., and then return to work later the same day, is that a split shift?  No, said the Court of Appeal in Securitas Security Services, Inc. v. Superior Court (opinion here).

So, DLSE? You don't have to issue that opinion letter I asked you to issue years ago. (!)

DGV

California Supreme Court: Out of State Employers Bound by California Overtime Law...

...when employees work in California for at least a day or a week at a time.

Sullivan v. Oracle is a wage hour class action we addressed here.  If you don't remember, you're forgiven. This was back in 2008.  I had more and darker hair; Lehman Brothers was a functioning company.  You could buy a Pontiac. Remember?

Anyway, so Sullivan and his class were employees who periodically worked in California.  They wanted California wage law to apply during any full day in which they worked in California. The federal court of appeals asked the California Supreme Court to answer "certified questions."

First, does the California Labor Code apply to overtime work performed in California for a California-based employer by out-of-state plaintiffs in the circumstances of this case, such that overtime pay is required for work in excess of eight hours per day or in excess of forty hours per week?

Here, the Court said "yes." When employees visit California from other states, California overtime laws apply:

To exclude nonresidents from the overtime laws’ protection would tend to defeat their purpose by encouraging employers to import unprotected workers from other states.  Nothing in the language or history of the relevant statutes suggests the Legislature ever contemplated such a result.

The Court ensured its holding was limited to overtime, not necessarily to other wage-hour laws:

the case before us presents no issue concerning the applicability of any provision of California wage law other than the provisions governing overtime compensa­tion.  While we conclude the applicable conflict-of-laws analysis does require us to apply California’s overtime law to full days and weeks of work performed here by nonresidents (see post, at p. 12), one cannot necessarily assume the same result would obtain for any other aspect of wage law.  California, as mentioned, has expressed a strong interest in governing overtime compensation for work performed in California.  In contrast, California’s interest in the content of an out-of-state business’s pay stubs, or the treatment of its employees’ vacation time, for example, may or may not be sufficient to justify choosing California law over the conflicting law of the employer’s home state.  No such question is before us.

The court then turned to the second question:

Second, does [Business and Professions Code section] 17200 apply to the overtime work described in question one?  Third, does [section] 17200 apply to overtime work performed outside California for a California-based employer by out-of-state plaintiffs in the circumstances of this case if the employer failed to comply with the overtime provisions of the FLSA?”

The Supreme Court noted it already has held that the UCL applies to overtime claims. Therefore, the Court answered "the second certified question as follows:  Business and Professions Code section 17200 does apply to the overtime work described in question one. "

As for the third question, the Supreme Court decided that out of state plaintiffs could not sue a California-based employer for overtime violations occurring outside of California.  Thus, merely because an employer is headquartered in CA, that does not make the employer subject to suit under the UCL for alleged wrongs entirely occurring somewhere else.

The case is Sullivan v. Oracle Corp. and the opinion is here.

Facebook -

No, not the NLRB again. On this fifth anniversary of the blog, we are proud to launch our Facebook page here.  Yeah, we know, we're a few years late to the party.  Please "like" us to pieces anyway. We'll be BFF. TTFN.

DGV

Ninth Circuit En Banc Expands ERISA liability

The Ninth Circuit issued an "en banc" opinion to set the law in the Circuit regarding who is a proper defendant in certain ERISA cases.

Laura Cyr worked for CTI as a  vice president.  CTI offered long term disability benefits through Reliance Insurance.  Reliance ultimately controlled whether benefits would be awarded, but it was not the "plan administrator" under ERISA.  Cyr sued CTI for unequal pay, resulting in a settlement and a retroactive adjustment to her salary.   She was on a "long term disability" at the time, and sought an increase to her benefits. Reliance allegeldy denied that application. So Cyr sued CTI as the plan administrator, CTI's Long Term Disability Plan, and Reliance under different sections of ERISA and the common law.

In the 9th Circuit, beneficiaries were limited to suing the plan and plan administrator for denial of benefits under ERISA plans.  But no more.  The en banc court overruled prior decisions to that effect.

We conclude, therefore, that potential liability under 29  U.S.C. § 1132(a)(1)(B) is not limited to a benefits plan or the  plan administrator. Reliance is a proper defendant in a lawsuit  brought by Cyr under that statute.

As a result, insurance companies will now be sued where they have a role in denying benefits independent of the plan administrator, which apparently was the case here.  It's unclear whether this decision will result in increased premiums and legal costs, not to mention conflicts of interest between insurers and employers. We shall see.

The case is Cyr v. Reliance Standard Life Ins. Co. et al. and the opinion is here.

U.S. Supreme Court on FELA Liability

Most of you don't care about this, but when the U.S. Supremes decide an employment law case, I just have to post.

The Federal Employers’ Liability Act (FELA), 45 U. S. C. §51 et seq. renders railroads liable for employees’ injuries or deaths “resulting in whole or in part from [carrier] negligence.”  This is basically in lieu of workers' compensation benefits for railroad employees covered by the FELA.

Robert McBride, a locomotive engineer, injured his hand while operating a manual brake.  He brought suit against his employer, CSX.

The issue was what is the causation standard under the FELA.  Must the railroad's negligence be the "proximate" cause of the injury (i.e., the harm was the probable consequence of the risk), or does some other standard apply?  

The Court held that a much lower standard applies under FELA than under traditional negligence cases. Surveying years of precedent, the Court upheld the lower courts' jury instruction:  

defendant railroad “caused or contributed to” a railroad worker’s injury “if [the railroad's] negligence played apart—no matter how small—in bringing about the injury.” That, indeed, is the test Congress prescribed for proximate causation in FELA cases. 

Again, this decision is limited to injuries under the FELA. So, it is not applicable to most employers.  

The case is CSX Transportation, Inc.  v.  McBride and the opinion is here. 

Supreme Court Rules on Dukes v. Walmart

The U.S. Supreme Court issues its opinion in Dukes v. Walmart.  Here is the opinion.

Wal-Mart, the country's largest employer, faces the largest employment law class action ever.  We've posted about it a number of times as it made its way through the courts.  The U.S. Supreme Court decided to review the case to see if the Federal Rules of Civil Procedure authorizes a class action under the facts presented.  

The facts that give rise to the discrimination claims are as follows:

Pay and promotion decisions at Wal-Mart are generally committed to local managers’ broad discretion, which is exercised “in a largely subjective manner.” 222 F. R. D. 137, 145 (ND Cal. 2004). Local store managers may increase the wages of hourly employees (within limits) with only limited corporate oversight. As for salaried employees, such as store managers and their deputies, higher corporate authorities have discretion to set their pay within preestablished ranges. 

Promotions work in a similar fashion. Wal-Mart permits store managers to apply their own subjective criteria when selecting candidates as “support managers,” which isthe first step on the path to management. Admission to Wal-Mart’s management training program, however, does require that a candidate meet certain objective criteria,including an above-average performance rating, at least one year’s tenure in the applicant’s current position, and a willingness to relocate. But except for those requirements, regional and district managers have discretion to use their own judgment when selecting candidates for management training. Promotion to higher office—e.g., assistant manager, co-manager, or store manager—is similarly at the discretion of the employee’s superiors after prescribed objective factors are satisfied.

Thus, there is no "corporate wide" policy of intentional or even unintentional discrimination. Rather, the plaintiffs asserted the following theory regarding class-wide discrimination on behalf of hundreds of thousands of store level employees and supervisors:

local managers’ discretion over pay and promotions is exercised disproportionately in favor of men, leading to anunlawful disparate impact on female employees, see 42 U. S. C. §2000e–2(k). And, respondents say, because Wal-Mart is aware of this effect, its refusal to cabin its managers’ authority amounts to disparate treatment, see §2000e–2(a). . . . [T}the discrimination to which they have been subjected is common to all Wal-Mart’s female employees. The basic theory of their case is that a strong and uniform “corporate culture” permits bias against women to infect, perhaps subconsciously, the discretionary decisionmaking of each one of Wal-Mart’s thousands of managers—thereby making every woman at the company the victim of one common discriminatory practice.

The plaintiffs sought injunctive relief, monetary relief that is considered "equitable" such as back pay, and punitive damages. They did not seek individual compensatory damages for emotional distress or front pay, because doing so would be unauthorized by Federal Rule of Civil Procedure 23.

Federal Rule of Civil Procedure 23,  contains a number of requirements.  The plaintiff must satisfy all of the 23(a) provisions:

“(1) the class is so numerous that joinder of all members is impracticable,“(2) there are questions of law or fact common to the class, “(3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and “(4) the representative parties will fairly and adequately protect the interests of the class”

The Supreme Court held that there was insufficient common law or fact questions.  5-4, the Court explained what "common questions of law or fact" means:

Commonality requires the plaintiff to demonstrate that the class members “have suffered the same injury,” Falcon, supra, at 157. This does not mean merely that they have all suffered a violation of the same provision of law. Title VII, for example, can be violated in many ways—by intentional discrimination, or by hiring and promotion criteria that result in disparate impact, and by the use of these practices on the part of many different superiors in a single company. Quite obviously,the mere claim by employees of the same company that they have suffered a Title VII injury, or even a disparate impact Title VII injury, gives no cause to believe that all their claims can productively be litigated at once. Their claims must depend upon a common contention—for example, the assertion of discriminatory bias on the part of the same supervisor. That common contention, moreover, must be of such a nature that it is capable of classwideresolution—which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke.

The  Court, 5-4, squarely rejected that a common policy of decentralized decisions can support a class action where the standard requries proof of common issues of fact:

The only corporate policy that the plaintiffs’ evidence convincingly establishes is Wal-Mart’s “policy” of allowing discretion by local supervisors over employment matters.On its face, of course, that is just the opposite of a uniform employment practice that would provide the commonality needed for a class action; it is a policy against having uniform employment practices.

To sustain a class action under the federal rules, the plaintiff must establish one of the elements under Rule 23(b).  The plaintiffs in Dukes relied on Rule 23(b)(2):

Rule 23(b)(2) allows class treatment when “the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole.” 

Therefore, Dukes did not rely on (b)(3), which is the familiar standard permitting damages when "common issues" predominate.  This is the basis for most class actions seeking money.  Unlike (b)(2), classes under (b)(3) are entitled to "opt out," and must receive adequate notice.  Rule 23(b)(2) is more concerned with injunctive and declaratory relief.

The question was whether the monetary relief that the plaintiffs sought was authorized under  Rule 23(b)(2). The Court (9-0) held that it was not:

Rule 23(b)(2) applies only when a single injunction or declaratory judgment would provide relief to each member of the class. It does not authorize class certification when each individual class member would be entitled to a different injunction or declaratory judgment against the defendant.

The Supreme Court held that "backpay" was not authorized generally by Rule 23(b)(2), and the only monetary relief available would be when it was intertwined with a particular injunction.  In Dukes' case, the injunction would not be common to each member of the class, anyway, so there could be no common monetary relief either.

So, we'll have an article, and you'll be hearing a lot about this case in the coming days.  I hope this brief summary was helpful.  It will result in less blockbuster class actions in federal court.  However, it does not necessarily mean that smaller class actions will be limited when there is a common practice causing a common injury.

HAPPY 5TH ANNIVERSARY TO SHAW VALENZA

We made it 5 years! So, this is going to be one of those self-promoting / congratulatory posts.... 

We opened our doors 6/19/06. And we started this little blog thing of ours on 6/26/06.  Seems like it was just yesterday. And by "yesterday" I mean Saturday, 20 years ago.  

We've been so fortunate to work with great people and organizations.  We wanted to honor our clients in some way to thank them for our success. But many are not local, and many have anti-gift policies now. So,  rather than throw a party or send gifts, we made a donation to Guide Dogs for the Blind.  Yes, you can call them to make sure.

We have a terrific team of lawyers and non-lawyers in our Sacramento and San Francisco offices.  Since they are local and certainly have no non-gifting policies, we celebrated with a dinner.  We also thank our departed staff and lawyers, who helped us in our formative years.  We hope you had dinner somewhere equally wonderful.

Speaking of offices, we just moved to new space in Sacramento (980 9th St., Ste. 2300, if you are planning on, you know.....visiting.  Or visiting. 

Our "refreshed" website will roll out imminently, as will our new Facebook presence. It seems Facebook and Twitter may have replaced blogging as a medium for timely updates. But we're stubborn and committed, and somewhat retro. So, we will press on here until we are posting to an empty room.  In case you prefer Twitter, go here.  And we're putting the finishing touches on our Facebook page.  So you will be able to "like" us to your heart's content. We are nothing if not accessible.  And wordy.

So, thanks for hanging in there with us for these 5 years, loyal clients, and the other readers (yes, Dad, I mean you. And happy father's day, by the way). 

Jennifer and Greg

Upcoming Training Scheduled

PREVENTING HARASSMENT AND OTHER EEO ISSUES AT WORK: IT’S ALL ABOUT RESPECT (AB 1825 COMPLIANCE)

This interactive, engaging, and practical seminar complies with and exceeds California's sexual harassment prevention training requirements (as described in Assembly Bill 1825/Government Code section 12950.1). Through real world examples, hypothetical scenarios, practical guidance, and humor, we address the "gray" areas in equal employment opportunity compliance. We address a number of topics, including:

• Harassment, discrimination and retaliation prevention
• Supervisors' responsibilities to identify and report policy violations
• The difference between law and policy
• Principles of mutual respect and the Platinum Rule
• Responsibility for "out-of-work" conduct
• The internal complaint process, including the "15-minute rule"
• "Bad" vs. unlawful conduct

Employees love this program! Certificates are provided upon seminar completion.

Trainers:	Jennifer Brown Shaw, Esq.
Date:	June 14, 2011
Time:	8:30 a.m. - 11:30 a.m. (Registration at 8:00 a.m.)
Location:	600 I Street Commission Room Sacramento, CA 95814
Cost:	$65.00

Court of Appeal Rejects Same-sex Harassment Claim

As stated by the court of appeal,

Patrick Kelley was an apprentice ironworker employed by respondent The Conco Companies (Conco). He complained that he was subjected to a barrage of sexually demeaning comments and gestures by his male supervisor, and later to similar comments by male coworkers, and that he was also subjected to physical threats by coworkers in retaliation for his complaints about his supervisor. Kelley‘s employer changed his work site to separate him from his harassers, but Kelley was later suspended by his union from its apprenticeship program rendering him ineligible for employment. After the suspension expired, he was not rehired by Conco.

Sounds like sexual harassment? Wrong. The court of appeal decided that the supervisor's verbal abuse was not truly based on Kelley's sex. Therefore, although rude, the conduct was not actionable under the Fair Employment and Housing Act:

The sine qua non of any sexual harassment claim is that the plaintiff suffered discrimination because of sex. (Lyle, supra, 38 Cal.4th at pp. 279–280; Oncale v. Sundowner Offshore Services, Inc. (1998) 523 U.S. 75, 81 (Oncale).) ― ‗ ―The critical issue . . . is whether members of one sex are exposed to disadvantageous terms or conditions of employment to which members of the other sex are not exposed.‖ ‘ [Citations.]‖ (Lyle, at pp. 279–280, quoting Oncale, at p. 80.) A FEHA plaintiff must show ― ‗ ―that gender is a substantial factor in the discrimination, and that if the plaintiff ‗had been a man she would not have been treated in the same manner.‘ [Citation.]‘ [Citations.] Accordingly, it is the disparate treatment of an employee on the basis of sex . . . that is the essence of a sexual harassment claim.

The court then surveyed the law and held that sexual harassment is not actionable under FEHA unless there is some link to sexual desire, or treatment that occurs only because of the victim's sex.  That is, merely because Kelley's boss used vicious slurs against Kelley, calling him a number of names and using sexually suggestive language, the boss did so out of anger, and not sexual desire or motivation.

The court, however, revived Kelley's retaliation claim because even though Kelley did not have a viable harassment claim, he had a good faith claim of retaliation.

This case, if it stays on the books, may change some folks' understanding of what "harassment" is.  But it should not change employers' responses to the kind of conduct that occurred in the facts of the opinion, nor should employers rely on this opinion as a way to give a harasser a free pass.  Trust me, when you read the facts, you'll see what I mean.

The case is Kelley v. The Conco Companies, Inc. and the opinion is here.

Supreme Court Unanimously Limits Employers' Right to Attorneys' Fees in Discrimination Cases

In federal cases alleging discrimination, harassment, retaliation and violations of civil rights, when may a defendant employer recover attorneys' fees?  It is long settled that defendants may recover only when the plaintiff's claims are "frivolous, unreasonable or without foundation."  What about when just some of the claims are frivolous?  The Supreme Court answered that question, unanimously, with Justice Kagan writing the opinion:

Section 1988 allows a defendant to recover reasonable attorney’s fees incurred because of, but only because of, a frivolous claim. Or what is the same thing stated as a but-for test: Section 1988 permits the defendant to receive only the portion of his fees that he would not have paid but for the frivolous claim.

The Court then went on to hold that if the defendant spends fees on issues that deal with both frivolous and nonfrivolous claims simultaneously, the defendant may not recover fees:

But if the defendant would have incurred those fees anyway, to defend against non-frivolous claims, then a court has no basis for transferring the expense to the plaintiff. Suppose, for example, that a defendant’s attorney conducts a deposition on matters relevant to both a frivolous and a non-frivolous claim—and more, that the lawyer would have taken and committed the same time to this deposition even if the case had involved only the non-frivolous allegation. In that circumstance, the work does not implicate Congress’s reason for allowing defendants to collect fees. The defendant would have incurred the expense in any event; he has suffered no incremental harm from the frivolous claim. In short, the defendant has never shouldered the burden that Congress, in enacting §1988, wanted to relieve. The basic American Rule thus continues to operate.

Thus, the Supreme Court unanimously made sure that defendants will have a tough time recovering fees in cases including both frivolous and non-frivolous claims, just like the Ninth Circuit decided in Harris v. Maricopa County, which I discussed  here. Yes, I thought the Court of Appeals was out to lunch. I was wr-wr-wr... incorrect.  No wonder I don't have a vote on either court.  My opinion, though, remains the same. The Supreme Court joins the Ninth Circuit in making it very difficult for defendants to recover attorneys' fees in frivolous discrimination cases, unless the case is entirely frivolous. There is little incentive for the plaintiff to dismiss the frivolous component.

The Supreme Court decision is Fox v. Vice and the opinion is here.

U.S. Supreme Court: States May Require E-Verify

Arizona has a mandatory "E-verify" law. Arizona's law suspends or revokes businesses' licenses if they employ illegal aliens unauthorized to work in the U.S. It also mandates the use of "E-Verify," a federal program permitting electronic verification of an employee's authorization to work in the US.
The Chamber of Commerce and civil rights groups argued that the Arizona law is preempted by federal immigration law.  All lower courts disagreed, and so did the Supreme Court.
In a fractured opinion, the Court held that the federal Immigration Reform and Control Act does not stop Arizona from either suspending business licenses or requiring use of E-Verify. In fact, the law only requires employers to use E-Verify if they wish to rely on a "good faith" defense to proof that the employer is employing unauthorized workers. 
Justice Kagan did not participate, and only four justices concurred in parts of the opinion. However, the continued viability of the Arizona law was upheld 5-3.  So, Arizona is free to require employers to employ only authorized workers or risk losing the right to operate in Arizona.
The case is Chamber of Commerce v. Whiting and the opinion is here.

U.S. Supreme Court on ERISA Remedies

Cigna Corporation changed its pension plan back in 1998. Janice Amara, on behalf of herself and 25,000 beneficiaries sued under ERISA, claiming CIGNA's changes violated the law.  In particular, the plaintiffs challenged the notice of changes CIGNA provided.

The district court agreed CIGNA's notice provisions were improper, particularly in a newsletter that, the court found, painted too-rosy of a picture of the impending changes and ordered monetary relief based on the conclusion that the disclosures caused "likely harm." 
On review, the Supreme Court decided the district court's reasoning was wrong, but that it reached a nearly correct result.  The Court discussed the available remedies under ERISA.

The Court held that district court have broad discretion to fashion remedies as "equitable" relief.  Without a lot of legal mumbo jumbo, equitable remedies normally are injunctions, but there are some that include money.  In the CIGNA case, the district court had held that only those plaintiffs who "relied" on the erroneous information to their detriment could recover money.  The Supreme Court disagreed, saying that not all "equitable" remedies required a showing of reliance. .

A key take-away for non-ERISA people is that the courts here found that a newsletter previewing potentially detrimental changes to the plan was incomplete and misleading. So, HR practitioners, beware of informal communications regarding changes to your ERISA covered benefit plans.

The opinion is Cigna Corp. v. Amara and the opinion is here.

DGV

Another Meal / Break Class Action Dies; Everyone Waiting for Brinker

Selections from the Supreme Court mailbag re Brinker meal period case.
Dear Supreme Court. The suspense is killing us. Please send Brinker soon - Love Plaintiff's bar.
Dear Supreme Court:  Take your time. - Best wishes, Defense bar.

The letter writers wait for the Supreme Court's decision in Brinker (on what the meal period laws require).  Meanwhile, the Courts of Appeal keep cranking out decisions that consistently hold meal periods do not have to be forced, and therefore meal period class actions are properly not certified when the employer demonstrates it "provides" the opportunity to take them.

The latest opinion re meal period class actions is called Lamps Plus Overtime Cases, or Flores v. Lamps Plus. As stated, the court decided that the class certification was properly denied, and along the way held that meal periods need not be forced, but merely must be authorized and permitted. The opinion is here.

Court of Appeal Affirms Denial of Class Certification in Retail Store Exemption Case

The Court of Appeal in Mora v. Big Lots Stores held the trial court did not abuse its discretion in refusing to certify a class of hundreds of Big Lots store managers. This is another exemption class action decision, but it's interesting for a few reasons.

First, the plaintiffs went after store managers of  HUGE discount stores, where the store manager was the only exempt manager, supervising dozens of employees. They should stop doing that. (They're not going to listen).

Second, the courts are tired of the argument that larger corporations standardize their policies such that managers are necessarily non-exempt. As I just discussed in the Marlo v. UPS post, that argument does not fly. (Good news for you larger corporations).

Third, the trial court credited the employer's detailed and individualized declarations of its managers over the boiler-plate declarations submitted by the plaintiffs. Winning a class certification motion may well turn on the quality of the declarations and other evidence submitted.

Finally, the court's opinion is a good example of how the Supreme Court's decision inSav-On Drug Stores, Inc. v. Superior Court  (2004) 34 Cal.4th 319 has affected class action law in California. The Court of Appeal does not disturb class certification decisions if (1) there is substantial evidence to support the trial court's finding (either way) and (2) the trial court applies the right legal standards. This of course can cut in favor of either the employees or the employer, depending on who won in the trial court. Needless to say, it's important to win there.


The case is Mora v. Big Lots Stores and the opinion is here.

Court of Appeal Rejects Employment Application Class Action

Several years ago, the wage and hour "flavor of the month" was the employment application. (Lately, it's been "suitable seating" and paycheck stubs). Plaintiffs filed a series of class actions usually attacking employment applications' conviction inquiries. In California, an applicant is not required to disclose misdemeanor marijuana possession convictions more than two years old, you know.

Starbucks was sued under this theory some years ago. But the Court of Appeal held in 2008 that the plaintiffs lacked standing to sue because they did not have marijuana convictions that would have had to have been disclosed.

In Starbucks I, supra, 168 Cal.App.4th 1436, we held that neither plaintiffs nor the tens of thousands of job applicants they purported to represent were entitled to recover statutory penalties where they did not have any marijuana convictions to disclose. We stated, "Only an individual with a marijuana-related conviction falls within the class of people the Legislature sought to protect." (Id. Id. at p. 1451.)

After the appeal, the trial court dismissed the named plaintiffs as lacking "standing" to sue. The plaintiffs' lawyers, though, attempted to substitute new plainitffs to continue the class action. They also limited the complaint and class to those applicants with applicable convictions.  Then, they asked the trial court to compel Starbucks to review its own applications and identify to the plaintiffs' counsel anyone who filled out an application more than two years after incurring a marijuana-related conviction. (I don't know how Starbucks would know this).  Starbucks appealed this discovery order, too.

The court of appeal held that the plaintiffs were not entitled to the discovery. The court noted that California law protects the privacy of individuals with stale marijuana convictions. The plaintiffs wanted to invade that privacy to find a new plaintiff. But the court noted that there did not seem to be any interest in pursuing this class action among the potential 135,000 applicants to Starbucks during the relevant period, despite the prior published opinion.  So, the court denied discovery and let the superior court take the next step, to dismiss the class action (most likely).

The case is Starbucks v. Superior Court and the opinion is here.

 

Ninth Circuit Upholds De-Certification of Exemption Class Action

Michael Marlo was a supervisor for UPS.  He filed a class action alleging violation of California wage and hour laws, based on alleged mis-classification of his position as "exempt."  The district court initially certified a class, but later "de-certified" it, holding that common issues did not predominate over individual issues.
Marlo's individual claim went to trial. A jury found in his favor on some of the claims (that he was mis-classified in certain roles), but that he was exempt when he held an "on-road" supervisor position.  After judgment, Marlo appealed the district court's de-certification of the class.

On appeal, the Ninth Circuit affirmed the district court.  The court found that the plaintiff failed to establish that common issues predominate. First, the court of appeals rejected the plaintiff's argument that UPS's "blanket" classification of a group of employees established common issues:

Marlo contends that he satisfied his burden of establishing predominance by submitting evidence of UPS’s centralized control, and uniform policies and procedures. But a blanket exemption policy “ ‘does not eliminate the need to make a factual determination as to whether class members are actually performing similar duties.’ ” In re Wells Fargo Home Mortg. Overtime Pay Litig., 571 F.3d 953, 959 (9th Cir. 2009) (citation omitted). Specifically, the existence of a policy classifying FTS as exempt from overtime-pay requirements does not necessarily establish that FTS were misclassified, because the policy may have accurately classified some employees and misclassified others.

Of special significance, the court of appeals found that individual issues predominated because the employees' exempt status must be measured on a work-week by work-week basis:

Nor, contrary to Marlo’s assertion, did the district court err in requiring a week-by-week determination of exempt status. IWC Wage Order No. 9 states that in determining whether an employee is “primarily engaged” in exempt work, “[t]he work actually performed by the employee during the course of the workweek must, first and foremost, be examined and the amount of time the employee spends on such work . . .shall be considered.” Cal. Code Regs. tit. 8, § 11090(1)(A)(1)(e). California courts have construed this requirement to mean that “[u]nder California law, the Court must determine whether any given class members (or all the class members) spend more than 51% of their time on managerial tasks in any given workweek.” Dunbar v. Albertson’s, Inc., 47 Cal. Rptr.3d 83, 86 (Cal. Ct. App. 2006) (emphasis added). Therefore, the district court did not incorrectly apply California law by requiring a week-by-week showing of work the FTS actually performed.

The case is Marlo v. UPS, Inc. and the opinion is here.

Welcome Back, Arbitration?

I think the rumors of the demise of employment arbitration might have been exaggerated. I for one am guilty of presuming arbitration was dead. And who can blame me, what with the California courts and the 9th Circuit?

Well, today, the U.S. Supreme Court breathed new life into employment arbitration. The Court held that the Federal Arbitration Act preempts California case law prohibiting arbitration agreements that exclude class actions.

So, if arbitration agreements can require only individual arbitration, that means that employers may avoid those expensive California wage and hour class actions by properly implementing arbitration agreements.

The interesting question that the Supreme Court did not decide today is what about California case law imposing lots of other conditions and burdens on employment arbitration. The "Armendariz" line of cases impose special burdens on arbitration that do not apply equally to other kinds of contracts. If you read Concepcion a certain way, Armendariz will not be around long. For example consider this statement in the opinion:


Parties could agree to arbitrate pursuant to the Federal Rules of Civil Procedure, or pursuant to a discovery process rivaling that in litigation. Arbitration is a matter of contract, and the FAA requires courts to honor parties’ expectations. Rent-A-Center, West, 561 U. S., at ___ (slip op., at 3). But what the parties in the aforementioned examples would have agreed to is not arbitration as envisioned by the FAA, lacks its benefits, and therefore may not be required by state law.

Of course, I've been wrong before. Like when I thought arbitration was dead.

The case is AT&T Mobility LLC v. Concepcion and the opinion is here.

Court of Appeal Clarifies "Alter Ego" Liability for Employment Claims

Cooper was the sole shareholder and day to day operator of Auburn Honda, a corporation. A group of former employees sued Auburn Honda and Cooper for age discrimination and other things.  Cooper moved for summary judgment on the ground he could not be held liable, since only the employer is liable for employment discrimination. The plaintiffs argued Cooper indeed was the employer as an "alter ego" of the corporation.

The court did not permit the plaintiffs to claim Cooper was the alter ego of Auburn in opposition to the motion for summary judgment. So, small business owners, here is the discussion of application of the alter ego doctrine to a shareholder:

To succeed on their alter ego claim, plaintiffs must be able to show: (1) such a unity of interest and ownership between the corporation and its equitable owner that no separation actually exists, and (2) an inequitable result if the acts in question are treated as those of the corporation alone. (Sonora Diamond, supra, 83 Cal.App.4th at p. 538.)


Several factors are to be considered in applying the doctrine, among them are: “„[c]ommingling of funds and other assets, failure to segregate funds of the separate entities, and the unauthorized diversion of corporate funds or assets to other than corporate uses; . . . the treatment by an individual of the assets of the corporation as his own; . . . the failure to obtain authority to issue stock or to subscribe to or issue the same; . . . the holding out by an individual that he is personally liable for the debts of the corporation; . . . the failure to maintain minutes or adequate corporate records . . .; sole ownership of all of the stock in a corporation by one individual or the members of a family; . . . the failure to adequately capitalize a corporation; the total absence of corporate assets, and undercapitalization; . . . the use of a corporation as a mere shell, instrumentality or conduit for a single venture or the business of an individual or another corporation; . . . the concealment and misrepresentation of the identity of the responsible ownership, management and financial interest, or concealment of personal business activities; . . . the disregard of legal formalities and the failure to maintain arm's length relationships among related entities; . . . the use of the corporate entity to procure labor, services or merchandise for another person or entity; . . . the diversion of assets from a corporation by or to a stockholder or other person or entity, to the detriment of creditors, or the manipulation of assets and liabilities between entities so as to concentrate the assets in one and the liabilities in another; . . . the contracting with another with intent to avoid performance by use of a corporate entity as a shield against personal liability, or the use of a corporation as a subterfuge of illegal transactions; . . . and the formation and use of a corporation to transfer to it the existing liability of another person or entity.‟ . . . [¶] This long list of factors is not exhaustive. The enumerated factors may be considered „[a]mong‟ others „under the particular circumstances of each case.‟" (Morrison Knudsen Corp. v. Hancock, Rothert & Bunshoft, LLP (1999) 69 Cal.App.4th 223, 249-250, quoting Associated Vendors, Inc. v. Oakland Meat Co. (1962) 210 Cal.App.2d 825, 838-840.)

So, the court held that Cooper did not qualify as an alter ego under this list of factors because the Plaintiffs did not bring forth sufficient evidence.

The case is Leek v. Cooper and the opinion is here.

Court of Appeal Reconsiders, but then Re-Affirms Case re Work Week

We previously wrote about Seymore v. Metson Marine here.  Then we wrote an article covering it and other new wage-hour cases here.  This was the case in which the court held that the employer could not set a workweek to start on a day when the employees did not begin the week.

I am not so presumptuous to think the employer's lawyers or the court read my article, but maybe the they heard the other HOWLS from the employment bar about how bad a case this was.  So, the employer filed a petition for re-hearing, and the Court actually granted re-hearing and issued a new opinion.

The employer's lawyers submitted copious new case law, regulations, and new facts to support its argument that the employer can set the workweek for Monday when the employees start their 14-day hitches on Tuesday.  (That was the issue the Court of Appeal addressed in the initial opinion).

The Court on re-hearing remarked how much new information the employer's lawyers provided in support.  I think the Court was a bit miffed that the initial briefing was not as thorough as it might have been. Nevertheless, the Court affirmed its decision to reverse summary judgment. This time, however, the Court allowed more flexibility for employers to start the work-week on a different day than the employees' actual work begins, as long as there is a sufficient business reason for doing so (other than avoiding payment of overtime). The court hinted that Metson set up its work week for the purpose of avoiding certain wage-hour obligations.

So, the new opinion in Seymore v. Metson Marine is here.  It is now going to be up to the Supreme Court to de-publish or review this case.  On the bright side, the current version of the opinion is less dangerous for employers than the original one was.

DGV

Court of Appeal Says No Acommodation for Violent Threats

Disagreeing with the Ninth Circuit's ridiculous  insaneoutlier opinion  in Gambini v. Total Renal Care (in which the court of appeals said that a bi-polar employee who threw papers at her boss was immune from discharge), the Court of Appeal held that the Orange County Superior Court lawfully fired an employee who made violent threats against co-workers.  The Court of Appeal decided that a "bi-polar" employee does not have the right to threaten co-workers, even if that conduct is caused by the disability. Chalk one up for reasonable.
Oh the court also held that checkig the box for "denial of family care leave" on an administrative charge is NOT sufficient to exhaust administrative remedies on disability discrimination.
I've written about Gambini here. And here.
This decision is Wills v. Superior Court and the opinion is here.