Court of Appeal: Concepcion Kills Gentry

It's hard to keep up with arbitration law in California.  Can you waive class actions? Must you attach the entire rule set to the arbitration agreement?  Must you serve a nutritious meal when you provide the arbitration agreement?  It never ends. 

The tension between California case law and case law interpreting the Federal Arbitration Act causes these problems. Last year the U.S. Supreme Court decided in ATT Mobility v. Concepcion that the Federal Arbitration Act allows parties to limit arbitration agreements to single-plaintiff claims.  The Court overruled the Califoria Supreme Court's decision in Discover Bank v. Superior Court.  We posted about that here.

Discover Bank was about a consumer class action for small dollars / cents per claim. In Gentry v. Superior Court (2007) 42 Cal.4th 443, the California Supreme Court extended Discover Bank  to wage-hour class actions. The Court held that a class waiver should not be enforced if "class arbitration would be a significantly more effective way of vindicating the rights of affected employees than individual arbitration."

The U.S. Supremes never mentioned Gentry. So what happened to it after Concepcion?

GENTRY

The Court of Appeal in Iskanian v. CLS Transportation- Los Angeles  (opinion here) decided that Gentry is no more. The real news here, though, is that this decision may dispose of - or severely restrict -- the entire body of anti-arbitration case law that has been developed over the past 10 years in California.  The language I've quoted below seems to sound the death knell to California courts' hostility to arbitration on "public policy" grounds (assuming this case remains on the books):

Now, we find that the Concepcion decision conclusively invalidates the Gentry test.  . . . Concepcion thoroughly rejected the concept that class arbitration procedures should be imposed on a party who never agreed to them. ... This unequivocal rejection of court-imposed class arbitration applies just as squarely to the Gentry test as it did to the Discover Bank rule. 

Second, Iskanian argues that the Gentry rule rested primarily on a public policy rationale, and not on Discover Bank‟s unconscionability rationale. While this point is basically correct, it does not mean that Gentry falls outside the reach of the Concepcion decision. ....

Third, the premise that Iskanian brought a class action to "vindicate statutory rights" is irrelevant in the wake of Concepcion. As the Concepcion court reiterated, "States cannot require a procedure that is inconsistent with the FAA, even if it is desirable for unrelated reasons." (131 S.Ct. at p. 1753.) ....

PAGA
 This Court then decided that Concepcion applies to PAGA claims too. The Court disagreed with
Brown v. Ralphs Grocery Co. (2011) 197 Cal.App.4th 489. "Brown held that the Concepcion holding does not apply to representative actions under the PAGA, and therefore a waiver of PAGA representative actions is unenforceable under California law."
This Court disagreed and held that Concepcion would not allow courts to invalidate arbitration agreements merely because they preclude PAGA claims:

Respectfully, we disagree with the majority‟s holding in Brown. We recognize that the PAGA serves to benefit the public and that private attorney general laws may be severely undercut by application of the FAA. But we believe that United States Supreme Court has spoken on the issue, and we are required to follow its binding authority.

HORTON

The Court then went for the Tri-Fecta and disagreed with the National Labor Relations Board's decision in DR Horton, too. D. R. Horton  (2012) 357 NLRB No. 184

In D.R. Horton, the NLRB held that a mandatory, employer-imposed agreement requiring all employment-related disputes to be resolved through individual arbitration (and disallowing class or collective claims) violated the National Labor Relations Act (NLRA) because it prohibited the exercise of substantive rights protected by section 7 of the NLRA.

 The Court decided that it was not bound to follow DR Horton:

We decline to follow D.R. Horton. In reiterating the general rule that arbitration agreements must be enforced according to their terms, Concepcion (which is binding authority) made no exception for employment-related disputes. Furthermore, the NLRB‟s attempt to read into the NLRA a prohibition of class waivers is contrary to another recent United States Supreme Court decision. In CompuCredit Corp. v. Greenwood (2012) __ U.S. __, __ [132 S.Ct. 665, 668] (CompuCredit), plaintiff consumers filed suit against a credit corporation and a bank, contending that they had violated the Credit Repair Organizations Act (CROA) (15 U.S.C. § 1679 et seq.).5 The plaintiffs brought the matter as a class action, despite having previously agreed to resolve all disputes by binding arbitration. The Supreme Court rejected their efforts to avoid arbitration, finding that unless the FAA‟s mandate has been "„overridden by a contrary congressional command,‟" agreements to arbitrate must be enforced according to their terms, even when federal statutory claims are at issue. (CompuCredit, at p. 669, citing (1987) 482 U.S. 220, 226.) The Supreme Court held: "Because the CROA is silent on whether claims under the Act can proceed in an arbitrable forum, the FAA requires the arbitration agreement to be enforced according to its terms." (CompuCredit, at p. 673.)

The D.R. Horton decision identified no "congressional command" in the NLRA prohibiting enforcement of an arbitration agreement pursuant to its terms. D.R. Horton’s holding—that employment-related class claims are "concerted activities for the purpose of collective bargaining or other mutual aid or protection" protected by section 7 of the NLRA, so that the FAA does not apply—elevates the NLRB‟s interpretation of the NLRA over section 2 of the FAA. This holding does not withstand scrutiny in light of Concepcion and CompuCredit.

ARMENDARIZ?

Well, all that is left is Armendariz.  This Court did not touch it expressly. So, stay tuned.... The California Supreme Court is considering related issues. My bet is that the Court will take this case up as well if the parties seek review.

DGV

Employer SLAPPed for Suing Ex-Employee

Robert Rogers is a former officer of Summit Bank, a local, Oakland bank.  When Summit learned there were a number of anonymous, negative posts about it on Craigslist, it decided to sue Rogers for defamation. Here are some of his posts, according to the court:

The June 7, 2009 post: ―Being a stockholder of this screwed up Bank, this year there was no dividend paid. The bitch CEO that runs this Bank thinks that the Bank is her personel [sic] Bank to do with it as she pleases. Time to replace her and her worthless son.

 The June 21, 2009 post: ―Whats [sic] up at this problem Bank. The CEO provides a [sic] executive position to her worthless, lazy fat ass son Steve Nelson. [¶] This should not be allowed. Move your account now.

 The July 14, 2009 post: ―The FDIC and the California Department of Financial Institutions are looking at Summit Bank. This is the third time in less than one year. This is not a good thing, move your accounts ASAP.‖

The July 25, 2009 post: ―I had banked at Summit Banks [sic] Hayward Office. Service was poor and Summit Bank closed this office. Whats [sic] up with that. [¶] All the customer [sic] were left high and dry. This is a piss poor Bank. I would suggest that anyone that banks at Summit Bank leave before they close. 

The second July 25, 2009 post: ―Move your accounts now before its [sic] too late.

The Bank learned that Rogers was the author of the anonymous posts and named him in the lawsuit as the defendant.

Rogers then brought an "anti-SLAPP" motion, used to strike lawsuits that arise from protected speech.  The Bank argued that Rogers' speech was not protected, because making false allegations about a bank's financial condition is criminal conduct under California law.  (When the conduct upon which a lawsuit is based is criminal, a SLAPP motion is barred.)

The trial court denied Rogers' motion because the trial court believed that Rogers' conduct was actionable as defamation and that the Bank was likely to win.  Rogers appealed.

The Court of Appeal, though, decided that the trial court should have granted Rogers' Motion to Strike.  First, the Court of Appeal held that Financial Code Section 1327 (which criminalizes false statements about a bank's financial condition) is an unconstitutional violation of freedom of speech.

The Court then decided that Rogers' posting on an internet bulletin board was speech in furtherance of the public interest in stable, financially sound banking, entitling him to the protection of the anti-SLAPP statute.   Rogers therefore satisfied step one of the two-step analysis applicable to anti-SLAPP motions.

Step 2 involves an analysis regarding whether the plaintiff (Bank) is likely to succeed on its defamation claim against Rogers' posts.  The Court of Appeal decided that the Bank could not win on its defamation suit because Rogers' posts were expressions of (1) true facts - such as financial difficulties the bank had experienced or (2) "opinion" rather than fact. The Court took into consideration that the posts were on the "Rants and Raves" part of Craigslist, that bulletin boards are known for hyperbole and strong opinions, and that in context, even the arguably factual statements were more likely to be understood as opinion.

This case proves it can be hard to sue disgruntled ex-employees for defamation based on anonymous web postings.  The CEO, called a "bitch," and basically accused of stealing money, has no remedy against Rogers.  The Bank, accused of stiffing customers of a closed branch (untrue allegedly), also has no remedy. And because Rogers won his anti-SLAPP motion, he gets his attorney's fees. What a country!

The case is Summit Bank v. Rogers and the opinion is here.

9th Circuit Agrees that Medical Marijuana Users Not Protected by ADA

In 2008, the California Supreme Court held in Ross v. Ragingwire Telecomm. Inc. that the California Fair Employment and Housing Act does not protect current users of medical marijuana.  Post here.  Article here.

The Ninth Circuit just held (2-1) that the federal ADA excludes from coverage current illegal drug users and that "illegal" includes marijuana use that would be lawful in California, but is unlawful under federal law:

We hold that doctor-recommended marijuana use permitted by state law, but prohibited by federal law, is an illegal use of drugs for purposes of the ADA, and that the plaintiffs' federally proscribed medical marijuana use therefore brings them within the ADA's illegal drug exclusion. This conclusion is not altered by recent congressional actions allowing the implementation of the District of Columbia's local medical marijuana initiative.

The case is James v. Costa Mesa and the opinion is here.

Court of Appeal Won't Enforce Botched Arbitration Agreement

Few lawyers, and even fewer non-lawyers, pay attention to legal-sounding mumbo jumbo in releases and employment agreements.  Until they matter.

Employer American Management Services had a broad arbitration provision that applicant Brandon Grey signed (called an issue resolution agreement or "IRA").  But Grey's offer letter contained a narrower arbitration clause, which the employee duly signed as well. That offer letter said it was "integrated," meaning that its provisions superseded all prior agreements.  Yep, the integration clause killed the prior, broader, arbitration provision in the IRA.

The contract contains an integration clause. It provides, in part: ?This Agreement is the entire agreement between the parties in connection with Employee‟s employment with [AMS], and supersedes all prior and contemporaneous discussions and understandings.
 ***
 Construing the clause as a whole, we interpret it to mean the contract is the final expression of the parties‟ agreement with respect to Grey‟s employment and it supersedes the IRA. * * *

Well, Grey arbitrated his claims and lost.  Then he petitioned the court vacate the arbitration award, presumably on the ground that he had not agreed to arbitrate.  Grey had sued for discrimination, harassment based on sexual orientation, and other claims not based on a breach of his employment contract per se.  Grey claimed the language of the offer letter was narrow and he was not required to arbitrate such claims.  The court of appeal agreed:

The scope of the arbitration clause in the employment contract only applies to claims arising from a breach of that contract and does not encompass all claims an employee may have against AMS. All of Grey‟s claims are for statutory violations, and none arises from a breach of the employment contract. We agree with both parties that Grey is not required to arbitrate his claims under these terms. 

 So, Grey gets another bite at the apple, but in court this time. 

The case is Grey v. American Management Services and the opinion is here.

Court of Appeal: Let Jury Decide Co-Worker Harassment Case

The Court of Appeal issued a "writ" of mandate, overturning a summary judgment order on a harassment claim.  Mustafa Rehmani worked for Ericsson in Silicon Valley.  He is Pakistani. Many of his co-workers are Indian. Rehmani claimed the Indian co-workers gave him a rough ride.  The court describes a series of incidents, over a few months, in which there were political jokes, terrorism jokes, and the like.  However, these jokes were pretty isolated, occurring about a month apart. 

The court decided that the allegations were enough to send the case to a jury and that the trial court should not have granted summary judgment.  The court also held that the company's management had sufficient notice of the conduct, and there was insufficient evidence of an adequate response to the conduct to justify summary resolution.

If you believe the plaintiff's version of events (which the court had to do), he told his manager repeatedly about his co-workers' anti-Pakistani / anti-Muslim jokes.  But she brushed them off.  So, a very thin case of national origin harassment will go to a jury, or a mediator.  A little management training (or better training) could have helped here.

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

NLRB's General Counsel Issues New Guidance for "R" Cases

The NLRB revised its procedures for handling "representation" cases - the NLRB proceedings that relate to elections.  We recently wrote an article about the main revisions here. The NLRB's acting General Counsel issued a memorandum explaining how to implement the new procedures here. You can find some FAQs from the Board here.

NLRB Poster Takes Another Hit

The D.C. Circuit Court of Appeals enjoined the NLRB's implementation of the poster in an order  here.  What poster? See here.  What NLRB?  See here. Thanks, Cal Chamber.

Ninth Circuit Holds Regular Attendance Is Essential Job Function for a Nurse

Some welcome, common sense ADA analysis.  When a job must be performed at the job site, and the employee is not a fungible member of a group of similar workers who can each replace each other, the employer can require regular attendance as a job requirement.

Monika Samper was a neo natal nurse at a Providence Hospital.  She claimed to have Fibromyalgia, which resulted in poor attendance. She violated the attendance policy and was fired.  She wanted essentially a waiver from the policy.

No sale.

It is a “rather common-sense idea . . . that if one is not able to be at work, one cannot be a qualified individual.” Waggoner v. Olin Corp., 169 F.3d 481, 482 (7th Cir. 1999). Both before and since the passage of the ADA, a majority of circuits have endorsed the proposition that in those jobs where performance requires attendance at the job, irregular attendance compromises essential job functions. Attendance may be necessary for a variety of reasons. Sometimes, it is required simply because the employee must work as “part of a team.” Hypes v. First Commerce Corp., 134 F.3d 721, 727 (5th Cir. 1998). Other jobs require face-to-face interaction with clients and other employees. Nowak v. St. Rita High Sch., 142 F.3d 999 (7th Cir. 1998) (teacher); Nesser v. Trans World Airlines, Inc., 160 F.3d 442 (8th Cir. 1998) (airline customer service agent); Tyndall v. Nat’l Educ. Ctrs., 31 F.3d 209 (4th Cir. 1994) (teacher). Yet other jobs require the employee to work with items and equipment that are on site. EEOC v. Yellow Freight Sys., Inc., 253 F.3d 943 (7th Cir. 2001) (en banc) (dockworker); Jovanovic v. In-Sink-Erator, 201 F.3d 894 (7th Cir. 2000) (tool and die maker); Waggoner, 169 F.3d 481 (production worker); Corder v. Lucent Techs., Inc., 162 F.3d 924 (7th Cir. 1998) (telephone customer support); Halperin v. Abacus Tech. Corp., 128 F.3d 191 (4th Cir. 1997) (computer consultant); Rogers v. Int’l Marine Terminals, Inc., 87 F.3d 755 (5th Cir. 1996) (mechanic); Jackson v.Veterans Admin., 22 F.3d 277 (11th Cir. 1994) (housekeeping aide); Carr v. Reno, 23 F.3d 525 (D.C. Cir. 1994) (coding clerk under the Rehabilitation Act); Law v. U.S. Postal Serv., 852 F.2d 1278 (Fed. Cir. 1988) (mail handler under the Rehabilitation Act).

The common-sense notion that on-site regular attendance is an essential job function could hardly be more illustrative than in the context of a neo-natal nurse. This at-risk patient population cries out for constant vigilance, team coordination and continuity. As a NICU nurse, Samper’s job unites the trinity of requirements that make regular on-site presence necessary for regular performance: teamwork, faceto-face interaction with patients and their families, and working with medical equipment face interaction with patients and their families, and working with medical equipment. Samper herself admits that her absences sometimes affected “teamwork and cause[d] a hardship for [her] coworkers who must cover for [her].” Similarly, once at work, Samper’s tasks required her to “lift babies, push cribs and isolettes.” More critically, she had to “get up at a moment’s notice to answer alarms [and] . . . [o]ften . . . run to codes.”
****
Samper’s performance is predicated on her attendance; reliable, dependable performance requires reliable and dependable attendance. An employer need not provide accommodations that compromise performance quality—to require a hospital to do so could, quite literally, be fatal.

Zing. The case is Samper v. Providence St. Vincent Med. Ctr. and the opinion is here.

The California Labor Commissioner Updates Its Wage Theft Forms

Effective 4/12/12, the DLSE updated its templates and FAQs to help employers comply with the Wage Theft Prevention Act.  You can find the page of forms here.   I guess they couldn't wait until the Brinker hoopla died down a little?

There are clarifications such as related to who is responsible for the notice when an employer hires a temp from a staffing agency (the agency), etc.  Fortunately, the DLSE also says that employers don't have to distribute new notices every time the DLSE issues an update.  Whew!

DGV

District Court Kills the NLRB Poster?

Our friends at the California Chamber of Commerce just let me know that the U.S. District Court for the District of South Carolina held in Chamber of Commerce v. NLRB (opinion here) that the NLRB did not have authority to require employers to post a poster informing employees of their rights under the National Labor Relations Act. (Poster information here and here.)  A district court previously held the NLRB did have the authority to require the poster, but did not have the power to create a new "unfair labor practice" when employers do not comply.   See National Ass’n of Manufacturers v. NLRB, No. 11-1629, 2012 WL 691535 (D.D.C. Mar. 2, 2012) (opinion here).

So, this is going to shake out in the Courts of Appeals or the U.S. Supreme Court.  Perhaps the Board will "delay" the implementation date again. Stay tuned.

Random Post-Brinker Thoughts

I have taken more time to read Brinker.  Here are some thoughts to add on to yesterday's post.

1.  The Supreme Court tried to clarify when class actions should be certified.  The trial court will have a  lot of latitude to decide certification, as it has been since 2004's Sav-on decision.  But this opinion will give trial courts more encouragement to certify class actions. The Court limited the trial court's examinations of whether a case has legal merit at the class action stage to resolving a legal issue that affects common issues so much that class certification would be improper. The trial courts will still wrestle with this issue and class action practice is likely safe under this analysis.  As explained below, the Court's application of class action rules means that class actions based on common policies (such as rest periods) may be authorized more freely than courts have been allowing up to now.

1.5 The summary judgment motion will be a very important part of class action defense and should be considered early in the process to avoid class certification of claims that are based on a common policy, but have no merit.

2.  Rest period law:  The Court precisely explained to employers the rest period rules.  Policies must be drafted in accordance with this formula:  "the rest time that must be permitted as the number of hours worked divided by four, rounded down if the fractional part is half or less than half and up if it is more (a “major fraction”), times 10 minutes."

You don't like math?  Well they explain it even better here, because they incorporate the fact that employees with shifts of fewer than 3.5 hours in length are not entitled to any rest period: "Employees are entitled to 10 minutes’ rest for shifts from three and one-half to six hours in length, 20 minutes for shifts of more than six hours up to 10 hours, 30 minutes for shifts of more than 10 hours up to 14 hours, and so on.... an employee would receive no rest break time for shifts of two hours or less, 10 minutes for shifts lasting more than two hours up to six hours, 20 minutes for shifts lasting more than six hours up to 10 hours, and so on." 

Caveat re scheduling:  although the court added up the rest-period minutes above, the law requires paid, 10-minute rest periods during each four hour work period.  So, the employer should draft its policies such that the rest periods fall somewhere in the middle of each four-hour work period.  Here is the rule regarding timing:

Employers are thus subject to a duty to make a good faith effort to authorize and permit rest breaks in the middle of each work period, but may deviate from that preferred course where practical considerations render it infeasible. ....

in the context of an eight-hour shift, “[a]s a general matter,” one rest break should fall on either side of the meal break. (Ibid.)

3. The Court then held that the trial court properly certified a rest-period class because Brinker's rest-period policy was uniformly applied and was vague enough to permit the argument that it violated the law because it did not specifically authorize rest periods when employees work "major fractions" of four-hour periods.  Here is the policy:

Under the written policy, employees receive one 10-minute rest break per four hours worked: “If I work over 3.5 hours during my shift, I understand that I am eligible for one ten minute rest break for each four hours that I work.”

As you can see, this policy permits the argument that employees who worked 6.5 hours were not given a second rest period, even under the policy.  So, the Court's holding re class certification re-opens the door for rest period class actions. Therefore, employers must have a more detailed rest-period policy that spells out rest periods are authorized and permitted in accordance with the formula above, or a class action lawyer can argue that the vague, common policy is applied contrary to law.  Additionally, management must be educated to enforce rest period policies in accordance with their terms when they schedule. Make with the drafting!

4.  Meal periods.   I pulled the quotes in my post yesterday.  Here are some more thoughts.
- Meal period policies should emphasize they are "duty free," meaning the employee can come and go and leave the premises as desired.

the wage order’s meal period requirement is satisfied if the employee (1) has at least 30 minutes uninterrupted, (2) is free to leave the premises, and (3) is relieved of all duty for the entire period.

Under the class action rule the Court developed, a vague policy is subject to an argument that the common policy violates the law.  So, policies should be explicit.

- Employers will be liable for regular straight time or overtime pay when the know or should have known that employees work through meal periods.  That's normal, because you have to pay employees when you "suffer or permit" them to work.  So, if employees don't punch out for meals, you cannot "auto-deduct" meal period time. As we have said before, the remedy for employees who do not comply with policies is discipline, not docking pay.

- Managers who prevent employees from taking meal periods per policy (such as discouraging meal periods) may expose the company to liability for meal period premiums.  When there is a "corporate culture" of discouraging the meal period, look for class actions based on a "common de facto policy."

- The legally compliant policy must provide that a meal period must start before the sixth hour of work begins.  That means, an employee who starts at 9 must be given a meal break by 2 pm.  Again, employers do not have to police the requirement, but the policy should be explicit to avoid the argument that the policy allows for illegal lunches.

- The legally compliant policy also should provide for a second meal period that starts before the eleventh hour of work begins.  There is a waiver of the second meal period allowed upon certain conditions, and that can be included as well.

- Caveat:  Know your business's wage order!  I am going over the general rules here (Wage Order 4, 5, 7 - the biggies).  There are different meal period provisions in some of the lesser used wage orders, such as Wage Order 12, applicable in the film industry. That Wage Order requires meals at six-hour intervals, not before the sixth hour and before the eleventh hour.

5.  Off the clock.  The Supreme Court decided that no "off the clock" work class would be allowed because (1) Brinker had an express and specific policy prohibiting off the clock work and (2) the only evidence in support of class certification was anecdotes about specific instances.  The Court noted the absence of a "de facto" policy requiring workers to work off the clock.  So, it pays to have a policy barring off the clock work.  We also like sign offs on time cards / time sheets certifying that employees reported all time worked, and verifying they know not to work off the clock.

Well, that's it for now.  I'm sure we'll have more down the road.  I hope this has been helpful.

Greg

Brinker: Employers Need Not Force Meal Periods

I will digest the Court's unanimous Brinker opinion a bit later. Those of you waiting to read it, it is here.

There is a long discussion of class certification in wage hour cases, which I will analyze later.  But
here are the money quotes on rest periods / meal periods.  At first read, this is total victory for the employer's position:

Rest periods:

Employees are entitled to 10 minutes’ rest for shifts from three and one-half to six hours in length, 20 minutes for shifts of more than six hours up to 10 hours, 30 minutes for shifts of more than 10 hours up to 14 hours, and so on.* * * 

Hohnbaum asserts employers have a legal duty to permit their employees a rest period before any meal period. Construing the plain language of the operative wage order, we find no such requirement and agree with the Court of Appeal, which likewise rejected this contention.

* * *

in the context of an eight-hour shift, “[a]s a general matter,” one rest break should fall on either side of the meal break. (Ibid.) Shorter or longer shifts and other factors that render such scheduling impracticable may alter this general rule.

Meal Periods:

Hohnbaum contends that an employer has one additional obligation: to ensure that employees do no work during meal periods. . . . We are not persuaded. The difficulty with the view that an employer must ensure no work is done—i.e., prohibit work—is that it lacks any textual basis in the wage order or statute.

* * *

If work does continue, the employer will not be liable for premium pay. At most, it will be liable for straight pay, and then only when it “knew or reasonably should have known that the worker was working through the authorized meal period.”

Proof an employer had knowledge of employees working through meal periods will not alone subject the employer to liability for premium pay; employees cannot manipulate the flexibility granted them by employers to use their breaks as they see fit to generate such liability. On the other hand, an employer may not undermine a formal policy of providing meal breaks by pressuring employees to perform their duties in ways that omit breaks.

* * *

To summarize: An employer’s duty with respect to meal breaks under both section 512, subdivision (a) and Wage Order No. 5 is an obligation to provide a meal period to its employees. The employer satisfies this obligation if it relieves its employees of all duty, relinquishes control over their activities and permits them a reasonable opportunity to take an uninterrupted 30-minute break, and does not impede or discourage them from doing so. What will suffice may vary from industry to industry, and we cannot in the context of this class certification proceeding delineate the full range of approaches that in each instance might be sufficient to satisfy the law.

On the other hand, the employer is not obligated to police meal breaks and ensure no work thereafter is performed. Bona fide relief from duty and the relinquishing of control satisfies the employer’s obligations, and work by a relieved employee during a meal break does not thereby place the employer in violation of its obligations and create liability for premium pay under Wage Order No. 5, subdivision 11(B) and Labor Code section 226.7, subdivision (b).

And finally - no "rolling 5 hour" meal periods.

We conclude that, absent waiver, section 512 requires a first meal period no later than the end of an employee’s fifth hour of work, and a second meal period no later than the end of an employee’s 10th hour of work. We conclude further that, contrary to Hohnbaum’s argument, Wage Order No. 5 does not impose additional timing requirements.

   

Brinker Meal Period Opinion To Be Released Thursday 4/12

I think we're finally going to find out what the law is on meal periods in California.  But I have no idea if employers are going to like it or not.  

Here's the Supreme Court's announcement.
BRINKER RESTAURANT v. S.C. (HOHNBAUM)
Case: S166350, Supreme Court of California
Event Description:   Notice of forthcoming opinion posted
To be filed on Thursday, April 12, 2012 at 10 a.m.

Our announcement is that Shaw Valenza will be conducting a webinar on Brinker on April 25.  Find out about it here.

U.S. Supreme Court Holds No Self-Care FMLA Claims Against State

I know it's been a while. I'm on strike waiting for Brinker.  In the meantime, though, the U.S. Supreme Court held that the Family and Medical Leave Act's "self-care" provision is not applicable to the states (and their agencies) in federal courts because of the Eleventh Amendment to the Constitution.

While interesting to constitutional law scholars and state governments, the Court's decision in Coleman v. Court of Appeals of Maryland (opinion here) does not affect FMLA claims against private employers at all.  It also does not disturb the Court's prior decision in Nevada Dept. of Human Resources v. Hibbs, 538 U. S. 721 (2003), in which the Court held that FMLA claims based on leave to care for family members or baby bonding are authorized against the states.

The difference between this case and Hibbs is that the Fourteenth Amendment to the U.S. Constitution permits Congress to implement its guarantee of due process and equal protection via "appropriate legislation."  In Hibbs, the Court decided that baby-bonding and family care leave are "appropriate" because Congress was concerned with sex discrimination, and that there was evidence that states were engaging in sex discrimination against parents and women caring for family members.  The "self-care" provision, though, is applicable to both sexes and is intended to remedy the costs of losing a job when one is ill.  That subject is not appropriate for legislation under the Fourteenth Amendment. As the plurality opinion put it:

what the family-care provisions have to support them, the self-care provision lacks, namely evidence of a pattern of state constitutional violations accompanied by a remedy drawn in narrow terms to address or prevent those violations.

There, you're all constitutional lawyers now.  The decision was fractured, with only 4 justices signing the lead opinion (Kennedy, Thomas, Roberts and Alito).  Four justices dissented, joining an opinion written by Justice Ginsburg (Kagan, Sotomayor, and Breyer).  Justice Scalia did not join the opinion, but agreed that the FMLA's self-care section does not apply to the states.  Justice Scalia's concern is that the analysis the Court uses to decide if the Eleventh Amendment bars a lawsuit against a state is mushy and should be revised.

New U.S. Supreme Court Opinion May Signal End of California Courts' Arbitration Jurisprudence

In West Virginia, the state Supreme Court held that, as a matter of "public policy," pre-dispute arbitration agreements covering claims for personal injury arising from nursing home patronage are void.  In a terse, unsigned opinion, the U.S. Supreme Court reversed the state high court.

West Virginia's prohibition against predispute agreements to arbitrate personal-injury or wrongful-death claims against nursing homes is a cate- gorical rule prohibiting arbitration of a particular type of claim, and that rule is contrary to the terms and coverage of the FAA.

 

The West Virginia Supreme Court alternatively held that the arbitration agreement at issue was "unconscionable,"  a state law defense that is a valid exception to the Federal Arbitration Act. 
The U.S. Supreme Court also vacated that alternative holding:

in its discussion of the alternative holding, the state court found the arbitration clauses unconscionable in part because a predispute arbitration agreement that applies to claims of personal injury or wrongful death against nursing homes "clearly violates public policy." Id., at 91a.

On remand, the West Virginia court must consider whether, absent that general public policy, the arbitration clauses in Brown's case and Taylor's case are unenforce-able under state common law principles that are not specific to arbitration and pre-empted by the FAA

Here's why you may care - In California, the Supreme Court and the courts of appeal have fashioned special rules for enforcing arbitration of certain kinds of employment claims (arising from statute or public policy).  Rather than banning agreements to arbitrate outright (as in the West Virginia case), the California courts have come up with a gauntlet of impediments, making it easy to hold arbitration agreements "unconscionable" based on criteria that would not apply to any other kind of contract.  Thus, the California courts apply different rules to agreements to arbitrate certain kinds of claims, but not others. 

Given the Supreme Court's recent case law, these state law rules may not be long for this world. Of course, Congress could amend the Federal Arbitration Act or the Supreme Court's membership might change, in which case all bets are off.

This case is Marmet Healthcare Center v. Brown and the opinion is here.

US DOL Proposing New FMLA Regulations

The U.S. Department of Labor has issued a notice of proposed regulations regarding a couple of FMLA issues.  The draft regulations implement recent modifications to the FMLA contained in the 2010 National Defense Authorization Act.

There will be changes to military servicemember leave. There also will be new rules for certain airline employees, who would otherwise be ineligible for leave.  According to the DOL, the proposed
regulations cover the following:

• the extension of military caregiver leave to eligible family members of recent veterans with a serious injury or illness incurred in the line of duty;
• a flexible, three-part definition for serious injury or illness of a veteran;
• the extension of military caregiver leave to cover serious injuries or illnesses for both current servicemembers and veterans that result from the aggravation during military service of a preexisting condition;
• the extension of qualifying exigency leave to eligible employees with covered family members serving in the Regular Armed Forces;
• inclusion of a foreign deployment requirement for qualifying exigency leave for the deployment of all servicemembers (National Guard, Reserves, Regular Armed Forces);
• the addition of a special hours of service eligibility requirement for airline flight crew employees; and
• the addition of specific provisions for calculating the amount of FMLA leave used by airline flight crew employees.

The DOL has created a web page containing links to the proposal, fact sheets, and more here.

Employers may comment on the draft regulations before April 16, 2012.  For details on how to comment, see the Notice of Proposed Rulemaking here.  Instructions regarding comments are at the beginning of this document.

DGV

New "Hiring Goal" for Federal Contractors

The OFCCP, the arm of the US Department of Labor, handles affirmative action obligations for federal contractors. For employers subject to OFCCP jurisdiction - The agency has proposed new regulations that would establish a "goal" for employers to employ individuals with disabilities.  The goal is 7%.  You can find the proposed rule and other information from the DOL here.

State High Court Orders Review of Case to Clarify Legality of Rounding Timecard Entries - California Chamber of Commerce

The California Supreme Court directed the Fourth District Court of Appeal to review a case involving whether "rounding" time clock entries is lawful under California law. Federal law permits rounding, and the California Division of Labor Standards Enforcement has permitted as a matter of policy, so long as the "rounding" evens out or favors the employee. A trial court recently ruled that a class action involving rounding could proceed against an employer, See's Candies. See's sought a writ in the Court of Appeal, which summarily denied the Petition. The Supreme Court, however, unanimously voted to Order the Court of Appeal to hear See's petition on the merits.

The petition for review is granted. The matter is transferred to the Court of Appeal, Fourth Appellate District, Division One, with directions to vacate its order denying mandate and to issue an order directing respondent Superior Court to show cause why the relief sought in the petition should not be granted. Votes: Cantil-Sakauye, C.J., Kennard, Baxter, Werdegar, Chin, Corrigan, Liu, JJ.

This does not mean See's will win. The Court of Appeal may decide in favor of the employee. But at least we'll have our first appellate decision on the issue of rounding.

I will let you know when the Court of Appeal decides the case. If you want to follow along the docket is here.

Thanks to the CalChamber for letting us know about this.

DGV

California Supreme Court to Revisit Arbitration Ruling

The U.S. Supreme Court in November ordered the California Supreme Court to revisit its decision in Sonic-Calabasas A v. Moreno.  So, the California Supreme Court just issued the following order:

In light of the United States Supreme Court's order vacating our judgment in the above-entitled case and remanding the cause to this court "for further consideration in light of AT&T Mobility LLC. v. Concepcion, 563 U.S. __ (2011) [131 S.Ct. 1740]," the parties are requested to brief the significance of that case. The parties are requested to file and serve simultaneous briefs by February 10, 2012, and may file and serve reply briefs by February 24, 2012.

We posted about Sonic-Calabasas here.


What's going on here, is that the California Supreme Court decided in Sonic-Calabasas A, 4-3, that an arbitration agreement requiring employees to arbitrate instead of going through the labor commissioner's informal hearing procedure was unlawful. The decision in my opinion cannot survive the Fedreal Arbitration Act, particularly after the U.S. Supreme Court's decision in AT&T v. Concepcion (discussed here).


So, there will be a round of briefing and then the Court will probably schedule oral argument in the future and issue a new opinion.

DGV

Court of Appeal Holds Arbitration Agreement Invalid

Yes, again.This time, the court refused to enforce an arbitration agreement that was included in an application form. (Don't do this).  The key issues for the court were (1) that the agreement was written in the first person so as to suggest it was one-way (2) that the agreement referenced the AAA arbitration rules, but did not attach them to the agreement (3) that there was no language explaining that "binding arbitration" means you give up the right to trial in court and (4) that the agreement was "take it or leave it."

The one-way language and the inclusion of the agreement to arbitrate in the application materials probably weakened this arbitration agreement such that it was easy to invalidate. But on the issue of "arbitration rules," the court does not mention that the AAA employment rules are modeled after the California Supreme Court's decision in Armendariz, that they provide more employee protection than the statutory arbitration acts, and that Armendariz itself does not require attaching the rules.  Indeed, Armendariz allows for implying the statutory rules if an arbitration agreement is silent regarding matters such as discovery.

On the issue of explaining what "binding arbitration" means, Armendariz does not require that either.  The term "binding" is not too complex.

The labyrinth of requirements the courts are imposing in the name of "unconscionability" is going to make it hard for employers to create a "bullet-proof" agreement.  Sooner or later, a court will consider whether the unconscionability doctrine has been stretched too far, and that it is a back-door attack on the Federal Arbitration Act's preemption law.  Until then, employers should be aware that arbitration agreement law is in flux and that their agreements may be challenged on a variety of grounds that may not always be obvious.

This case is Wisdom v. Accentcare and the opinion is here.

U.S. Supreme Court on Ministerial Exception to Title VII

The U.S. Supreme Court decided for the first time that there is a "ministerial exception" to anti-discrimination laws such as the ADA. The lower courts for many years recognized that exception.

At issue was Hosanna-Tabor Evangelical Lutheran Church and School and its discharge of a former teacher, Cheryl Perich. Perich was classified as a "called" teacher, rather than a "lay" one. Called teachers have to satisfy certain requirements, cannot be removed except for cause and by a vote of the congregation, and hold the title “Minister of Religion, Commissioned.”

As a called teacher, Perich 

taught math, language arts, social stud- ies, science, gym, art, and music. She also taught a reli- gion class four days a week, led the students in prayer and devotional exercises each day, and attended a weekly school-wide chapel service. Perich led the chapel service herself about twice a year.

Perich developed symptoms of narcolepsy, which resulted in her inability to perform her job. She later was discharged, after she threatened to file a Charge. The EEOC took up her case and sued on her behalf.

The District Court dismissed the case; the Sixth Circuit reversed, holding that a retaliation claim under the ADA could proceed against the Church.
The unanimous Court, recognizing there is a ministerial exception, put it this way:

We agree that there is such a ministerial exception. The members of a religious group put their faith in the hands of their ministers. Requiring a church to accept or retain an unwanted minister, or punishing a church for failing to do so, intrudes upon more than a mere employment decision. Such action interferes with the internal governance of the church, depriving the church of control over the selection of those who will personify its beliefs. By imposing an unwanted minister, the state infringes the Free Exercise Clause, which protects a religious group’s right to shape its own faith and mission through its appointments.

The Court did not set out a specific test, but noted that (1) the Church held Perich out to be a minister (2) the Church had a ceremony and the congregation was involved in her investiture (3) she had significant religious training as a prerequisite (4) she held herself out to be a minister and even took a special tax deduction applicable only to members of a ministry (5) her duties involved significant religious teaching activities.


Based on that, the Court decided that Perich met the standards of the ministerial exemption.  The Court was careful to note that the term "minister" was misleading because the exception applies to religions that do not include "ministers."  The Court also refused to address the "parade of horribles" the EEOC argued, such as that Church employers would be exempt from wage-hour or criminal violations towards "ministerial" employees.  


The case is Hosanna-Tabor Evangelical Lutheran Church and School v. Perich and the opinion is here.

NLRB Decide Class Action Waivers Violate the National Labor Relations Act

If you need more convincing that the National Labor Relations Board's work will affect the private-sector workplace (even after all the Facebook hoopla), here it is.

DR Horton, a home builder, imposed a mandatory arbitration agreement. The agreement required the employee to assert all claims related to his employment in arbitration.  The agreement further states:

that the arbitrator “may hear only Employee’s individual claims,” “will not have the author- ity to consolidate the claims of other employ- ees,” and “does not have authority to fashion a proceeding as a class or collective action or to award relief to a group or class of employees in one arbitration proceeding”

The NLRB first held, in agreement with its administrative law judge, that the arbitration agreement unlawfully precluded an employee from filing a charge with the NLRB.  So, arbitration agreements must carve-out the right to do so.

The groundbreaking part of the decision is that requiring an employee to arbitrate all claims and only on an individual basis violates the National Labor Relations Act's guarantee of the right to engage in "concerted activity":

[The arbitration agreement] requires employees, as a condition of their employment, to refrain from bringing collective or class claims in any forum: in court, because the [agreement] waives their right to a judicial forum; in arbitration, because the [agreement] provides that the arbitrator cannot consolidate claims or award collective relief. The [agreement] thus clearly and expressly bars employees from exercising substantive rights that have long been held protected by Section 7 of the NLRA.

The Board decided this case with just two members, because the lone Republican (Member Hayes) recused himself.  It is unfathomable why the Board did not wait until it had a full complement for such an important decision, but that's the way things go.  We'll see if the courts decide that the decision is invalid under the Supreme Court's decision in New Process Steel v. NLRB (discussed here) (Board must have three member quorum).  I did not research whether 2 + 1 recused member is sufficient or whether New Process Steel will apply.

The Board was careful to note that an arbitration agreement that permits class actions to be filed in court, while mandating arbitration of individual claims would be lawful:

We need not and do not mandate class arbitration in order to protect employees’ rights under the NLRA. Rather, we hold only that employers may not compel employees to waive their NLRA right to collectively pursue litigation of employment claims in all forums, arbitral and judicial. So long as the employer leaves open a judicial forum for class and collective claims, employees’ NLRA rights are preserved without requiring the availability of classwide arbitration. Employers re- main free to insist that arbitral proceedings be conducted on an individual basis.

This decision likely will be challenged in appeals court and then to the Supreme Court.  So, the arbitration see-saw is not going to stop swaying yet.  For now, though, arbitration agreements containing class action waivers are subject to attack before the National Labor Relations Board.  Plaintiff lawyers thinking of challenging arbitration agreements on this basis in court may run into something called "Garmon" preemption. :)

So, to sum up:
- class waivers in arbitration agreements are lawful, if the arbitration agreement applies only to claims brought on an individual basis;
- an arbitration agreement cannot prevent an employee from filing a charge
- this decision applies only to employers covered by the National Labor Relations Act (so it does not cover certain small employers, agriculture, government employees, etc.) Most private sector employers, union and non-union, are covered.
- this decision is subject to further review, and there will be lots of it.

The case is DR Horton and the decision is here.

DGV

President Appoints Three to NLRB

The "recess" appointments fill up the Board to 5 members.  Guess what?  The full Board is not stacked with pro-management Board members.  Read the announcement and bios here.

DLSE revises FAQs on Wage Theft Notice...

I posted about the Division of Labor Standards' Enforcement's template Notice here and about the FAQs here.  The DLSE apparently has thought better of its requirement that even current employees receive a notice (because that plainly was not in the statute).  So, the agency revised its FAQ's, here.  Slightly concerned employers I spoke with ... please take note.

DGV

Court of Appeal Finds "At Will" Insurance Agent Was Independent Contractor

Happy New Year!

Kimbly Arnold was an agent working for Mutual of Omaha.  She was non-exclusive, and sold other lines as well.  She was "at will" but was paid solely on commissions, had no office space unless she paid for it, had no supervisor or other personnel "managing her."  Her only job requirement was to submit at least one application for insurance every six months. 
Arnold took a job with another company requiring an exclusive relationship. She then brought a class action alleging failure to reimburse expenses under Labor Code Section 2802, and failure to pay wages at the time of termination.  Both of these claims require an "employment" relationship. 
Agreeing with the trial court, the Court of Appeal held that Arnold was an independent contractor, based in part on this evidence:

Mutual managers make themselves available to assist agents, as distinguished from supervising them. Training is generally not mandatory and is offered chiefly for the guidance of "new" agents. Training is required only with respect to compliance with state law directives. Managers provide assistance with sales or clients when an agent "wants them to assist." Software is provided by Mutual as a "best practice[e]" to enable agents to sell its products more successfully. Conference rooms, if available, are provided as a courtesy to agents seeking to set up a meeting and have no other space in the office. Mutual policy does not otherwise reimburse agents for regular business expenses, such as entertaining a client, although it does provide certain "prospecting" credits, beginning when an agent is newly appointed, by which the agent might apply for reimbursement for mailings, newsletters, and similar expenses to generate new business for Mutual products. The credits must be used and have no separate compensatory value. While Mutual pays its agents in two-week periods, payments are comprised of commissions and bonuses established by policy, and there is no guaranteed compensation; advances may be authorized only by a general manager in the event an agent has submitted an application for which a policy is likely to be issued. Advances are rare, due to the policy to pay commissions only on business actually issued, as opposed to routine advances for the purpose of regularizing payment amounts. . . ..

Arnold used her own judgment in determining whom she would solicit for applications for Mutual‟s products, the time, place, and manner in which she would solicit, and the amount of time she spent soliciting for Mutual‟s products. Her appointment with Mutual was nonexclusive, and she in fact solicited for other insurance companies during her appointment with Mutual. Her assistant general manager at Mutual‟s Concord office did not evaluate her performance and did not monitor or supervise her work. Training offered by Mutual was voluntary for agents, except as required for compliance with state law. Agents who chose to use the Concord office were required to pay a fee for their workspace and telephone service. Arnold‟s minimal performance requirement to avoid automatic termination of her appointment was to submit one application for Mutual‟s products within each 180-day period. Thus, under the principal test for employment under common law principles, Mutual had no significant right to control the manner and means by which Arnold accomplished the results of the services she performed as one of Mutual‟s soliciting agents.
The additional factors of the common law test also weigh in favor of finding an independent contractor relationship. Although Mutual could terminate the appointment at will, a termination at-will clause for both parties may properly be included in an independent contractor agreement, and is not by itself a basis for changing that relationship to one of an employee.
Notably, Arnold was engaged in a distinct occupation requiring a license from the Department of Insurance, and was responsible for her own instrumentalities or tools with the exception of limited resources offered by Mutual to enhance their agents‟ successful solicitation of Mutual‟s products. Arnold was required to pay a fee for the use of Mutual‟s office space and telephone service. Although Mutual paid its agents in a systematic way every two weeks, Arnold‟s payment itself—chiefly commissions—was based on her results and not the amount of time she spent working on Mutual‟s behalf. Finally, both Arnold and Mutual believed, at the time of her appointment, they were creating an independent contractor relationship and not an employee relationship.

Thus, the court went through the typical analysis of an independent contractor relationship under California's "common law" test and came up with little evidence of an employer-employee relationship.  The court rejected Arnold's attempt to define employee more broadly by using a Labor Code Section that contains no definition of employee... (Lab. Code 2750).

Anyway, the case is Arnold v. Mutual of Omaha Ins. Co. and the opinion is here.

Wage Theft Protection Act - FAQs from the DLSE

Here are some FAQs regarding the new notices that must be provided to employees "at the time of hire."
Some thoughts:

1. The DLSE apparently takes the position that the notice must be provided to existing employees, although that requirement is not contained in the statute.  
2.  Remember that changes to any of the items in the notice have to be communicated, either by a proper wage statement or a new notice.
3.  It is not mandatory to use DLSE's template form.  Employers may create their own. However, all the information on the DLSE's form (even the information not specified in the statute, must be listed on a separate form, rather than incorporated into a larger contract, offer letter, or handbook).
4.  If the notice is given electronically, the DLSE requires some method of obtaining an acknowledgement from the employee.
5.  The DLSE's notice requires specification of whether there is an oral or written employment agreement.  Every employee is employed pursuant to an "agreement," even if the employee is "at will."  (An agreement is as simple as "I will pay you if you work today."  It also could include a written offer letter or a formal employment contract).   So, employers should specify whether the employment contract is oral or written without fear that this provision somehow compromises at-will employment.
6.  The penalty for non compliance is not specified in the law and, therefore, will likely be the "PAGA" penalties of $100 per employee per pay period for the initial violation and $200 per pay period per employee for subsequent violations.  So, it is wise to comply with this law.

Happy New Year anyway!

DGV

California Supreme Court Clarifies Administrative Exemption

The Supreme Court issued a unanimous decision rejecting the lower court's interpretation of the "administrative exemption."

Frances Harris and other claims adjusters sued Liberty Mutual Ins. Co., claiming that claims adjusters were mis-classified as exempt.  The Court of Appeal agreed, holding that claims adjusters are part of an insurance company's "production" and therefore cannot be performing "administrative" functions.  The Court of Appeal also included some disturbing language in its opinion regarding how "important" the administrative work must be, and that only work at a high level would count towards the exemption.

The Supreme Court disagreed.  However, the Court limited its holding to setting out the proper standards for determining whether someone is performing "administrative" work.   It did not rule one way or the other regarding whether the claims adjusters were exempt.

The Supreme Court summarized as follows:

Federal Regulations former part 541.205(a), (b), and (c) must be read together in order to apply the ―directly related‖ test and properly determine whether the work at issue satisfies the administrative exemption. For example, former part 541.205(b) supplied a general description of the types of duties that constitute ―administrative operations of the business. It included work performed by ―white-collar employees engaged in ̳servicing‘ a business as, for example, advising the management, planning, negotiating, [and] representing the company. The dissent below argued, ―That is what claims adjusters do—they negotiate settlements (and conclude some without seeking approval), advise management, and process claims.‖ The incorporation of former part 541.205(b) shows that whether work is part of the ―administrative operations‖ of a business depends, in part, on whether it involves advising management, planning, negotiating, and representing the company. It is not so narrowly limited as the majority below declared. 

In addition to the above regulations, the Supreme Court referred the Court of Appeal to the Wage Order definition of the administrative exemption.

Thus, the "duties test" for the administrative exemption is analyzed using former 29 CFR 541.205 (now 541.201-203) in its entirety. [Because these regulations have been amended, it will be important to find the 2001 version of the federal rules. ]

It remains to be seen how the courts interpret the Supreme Court's guidance. But if the Court of Appeal's test had been affirmed, it would have severely curtailed the exemption.  We at least know that the Supreme Court disagreed with that approach.

The opinion is Harris v. Superior Court (Liberty Mut. Ins. Co.) and the opinion is here.

More on AB 469 Notice "Template"

Per my previous post, the DLSE issued its "template" for compliant AB 469 disclosures.  See the post re DLSE template here.


An impolitic or imprudent employment lawyer might say that the DLSE's waiting until December 29 to issue a template implementing AB 469 disclosures (to begin on 1/1/12) was arrogant, unconscionable, and all but a gift to plaintiff lawyers. But I've never been one of those rash people.  :::whistling::::

What makes this all more galling is that the DLSE has imposed requirements over and above what the statute actually provides for.  DLSE had the right to expand on the law's requirements becuase the statute says that the required disclosure must include "any other information the Labor Commissioner deems material and necessary."

That's all fine, but how about more than 2 work days' notice of what you think is necessary?  Not to mention that 90% of management is on vacation.  Employers likely planned the new notices would include only the items expressly identified in the law, given DLSE's failure to promptly issue its template.  Now they have to re-tool, which may be easier to do in a mom & pop store, but not so easy when there are multiple outlets and hundreds of new hires to process.

Perhaps the DLSE didn't care because the notice provision does not apply to...the DLSE (!) or other government employers.  Go figure.

Oh well, enough whining.  The DLSE model includes a couple of itsems not specified in the actual statute:  1) the name and address of a PEO or other third party that administers the hiring process (but not a payroll processor or recruiting agency) 2) whether the employment agreement is oral or written... there may be more. I just got the thing today and all...

DGV

California DLSE Issues Template AB 469 Notice... IMPORTANT

AB 469 requires employers to give new hires, at the time of hire, a notice containing certain information listed in the law. The statute also requires the California Division of Labor Standards Enforcement to issue a model notice.  The DLSE finally did so, and it is here.
Happy New Year!

U.S. Dept of Labor to Cut Overtime Exemption for Home Caregiver Agencies

The Fair Labor Standards Act exempts from minimum wage and overtime law:

domestic service employees employed ``to provide companionship services for individuals who (because of age or infirmity) are unable to care for themselves (as 
such terms are defined and delimited by regulations of the 
Secretary). 

Section 13(b)(21) exempts any employee employed "in domestic service in a household

and who resides in such household."

Under current regulations, an employer such as an agency can employ these caregivers and live-ins and treat them as exempt under the FLSA.  That is, qualifying employees would be paid a certain amount of money to perform the duties without tracking their time or receiving overtime premiums.  Presumably, the agencies markup this rate to add overhead and profit and then charge the patient a fixed amount of money for the service.

The U.S. DOL has issued a proposed regulation (here)  that would prohibit home care agencies from treating caregivers as exempt.  However, individual caregivers not employed by an agency or its individual employer (the patient or patient's family) still may assert the exemption.  (Note - After a humongous analysis and notice of proposed rule making, the proposed regulations are all the way at the very end of the link).  Here is the section that applies to third party agencies:

Sec.  552.109  Third Party Employment.

    (a) Third party employers of employees engaged in companionship services within the meaning of Sec.  552.6 may not avail themselves of the minimum wage and overtimeexemption provided by section 13(a)(15) of the Act, even if the employee is jointly employed by the individual or member of the family or household using the services. However, the individual or member of the family or household, even if considered a 
joint employer, is still entitled to assert the exemption, if the employee meets all of the requirements of Sec.  552.6.
    (b) * * *
    (c) Third party employers of household workers engaged in live-in domestic services within the meaning of Sec.  552.102 may not avail themselves of the overtime exemption provided by section 13(b)(21) of the Act, even if the employee is jointly employed by the individual or member of the family or household using the services. However, the individual or member of the family or household, even if considered a 
joint employer, is still entitled to assert the exemption.

This is one cryptic draft regulation. Even if the individual's family is a joint employer with whom?? The public can comment until Feb. 27, 2012.  Maybe they'll clear it up.

The proposed regulation also revises the definition of "companionship services" and "live-in domestic services.  To see those, click the link above and scroll way down to the draft regulation at 552.6.  Employees who do not pass the duties tests in these regulations also must be treated as non-exempt - by individual employers and agencies alike.

California employers will be affected by this, because the federal rule will apply even if California would extend the exemption to home agencies.  If federal law says no exemption, that controls.   Also, this change would not affect most employers. But it sure will affect people who count on home care agencies to deliver services.  Who is going to pay for the overtime and other obligations (like record keeping) that the lost exemption will cause?   

DGV

Court of Appeal Makes Christmas Come Early for Employers re Reporting Time and Split Shifts

The Court of Appeal issued a ruling that may change the way us employment lawyers advise clients. But WARNING, this decision is not yet final and cannot be relied upon just yet.
Anyway the first issue deals with "reporting time" pay.  California's IWC Wage Orders require "reporting time pay," viz:

Each workday an employee is required to report for work and does report, but is not put to work or is furnished less than half said employee‘s usual or scheduled day‘s work, the employee shall be paid for half the usual or scheduled day‘s work, but in no event for less than two (2) hours nor more than four (4) hours, at the employee‘s regular rate of pay, which shall not be less than the minimum wage.‖ (Cal. Code Regs., tit. 8, § 11040, subd. 5(A).)

It has been long understood (not just by me) that if an employee has to come in for a scheduled meeting on a day off, the employer must pay at least 1/2 the employee's regular scheduled shift (up to 4 hours).Don't take my word for it, here's what the Division of Labor Standards Enforcement has written about it:

Required "Training" Or "Staff" Meeting Attendance. DLSE has been asked on a number of occasions how the Reporting Time provisions of the Orders affect a situation where the employer requires employees to attend a short training meeting, staff meeting or similar gathering under a variety of circumstances. Most common are:

Required meeting is scheduled for a day when the worker is not usually scheduled to work. The employer tells all of the workers that attendance at the meeting is mandatory and a one- or two-hour shift is "scheduled" for this meeting. For those workers not "regularly scheduled" to work, the employee must be paid at least one-half of that employee’s usual or scheduled day’s work. * * *

Well, the Court of Appeal disagreed with the DLSE's analysis.  AirTouch Cellular scheduled meetings lasting two hours or less. Some employees came in specially for the meeting and claimed they were owed up to 4 hours' pay (1/2 the regular shift). The court said:

To simplify, the issue may be framed by the following question: If an employee‘s only scheduled work for the day is a mandatory meeting of one and a half hours, and the employee works a total of one hour because the meeting ends a half hour early, is the employer required to pay reporting time pay pursuant to subdivision 5(A) of Wage Order 4 in addition to the one hour of wages?

The answer to this question is no, because the employee was furnished work for more than half the scheduled time. The employee would be entitled to receive one hour of wages for the actual time worked, but would not be entitled to receive additional compensation as reporting time pay.

If that wasn't enough, the Court then resolved another mystery that has vexed employers and their lawyers for years:  When, if ever, is a "split shift" premium due to an employee who earns more than minimum wage for the day?   See, the wage order requires split shift premiums, but the provision is expressed in terms of "minimum" wage.  The court of appeal agreed with a district court when it held that "The plain language of the split shift regulation reflects an intent to ensure that an employee who works a split shift must be compensated highly enough so that he or she receives more than the minimum wage for the time actually worked plus one hour."

Therefore, an employee who earns more than $72 for an 8 hour day (assuming an $8 minimum wage) does not receive a  split shift premium, even if he works a split shift.  The court unfortunately did not say what happens when the day is shorter than 8 hours. ... must the employee still earn $72 for the day even if he only works 6 hours? 

Anyway, this wage and hour obscurity is probably dry as dirt for some of you. For others, though, this case could result in significant payroll savings. 

And DLSE, remember when I asked you the split shift question in a request for opinion letter like 3 years ago?  Remember?   Never mind. 

The opinion is Aleman v. Airtouch Cellular and the opinion is here.


DGV

NLRB Giving and Taking Away

Two items from your friends at the National Labor Relations Board.

As predicted, the new NLRB rights poster (discussed here) is postponed again - this time until April 2012.  Announcement here.  H/T Ross Runkel.

For the bad news, the Board just finalized revisions to election rules.  (Announcement is here).  Here is a redline of the changes to the election procedures.  The new rules severely curtail pre-election hearings on such matters as whether the voting unit is appropriate and who is eligible to vote.  Little things like that.  As a result, elections will occur much more quickly after a petition is filed, and there will be shorter "campaign" periods.

Look for the Union label!  There probably will be a few more of them starting next year!

San Francisco Update

Employers operating in SF - couple of things to note.

First, a new poster!  This one must be posted by employers with more than 20 employees who are covered by San Francisco's health care program.   Under that program, employers must spend a certain amount per hour on health care coverage for San Francisco based employees. That amount starts at $1.46 per hour for employers of 20-100 employees.  Read the poster and download it here.

Second, the San Francisco minimum wage, is going up!  San Francisco employers must start paying $10.24 minimum starting 1/1/12. That's a big jump from this year's minimum of $9.92, because the minimum wage is indexed to inflation.  Prices have been going up too, except for home prices of course!  And employers have to post the updated poster, which is here.

San Francisco employers- here's wishing you an enjoyable winter celebration of pointy sustainably grown trees, except for those of you who are enjoyment-challenged or hypofuniacs.

DGV

Brinker delayed

The Supreme Court is considering even more briefing in the Brinker case re meal and rest periods. So, they are going to delay the opinion past the normal 90 days from argument. Here is the order:

Pursuant to California Rules of Court, rule 8.520(f)(7) and this court's December 2, 2011, order, the parties' answers to the amicus curiae brief of the California Employment Law Council, addressing the grounds for prospectively applying portions of this court's eventual decision on the merits, are due Tuesday, January 3, 2012. Each party may file a simultaneous reply to the other party's answer within 10 days thereafter. Submission of the cause is vacated. (See Cal. Rules of Court, rule 8.524(h)(1) [submission runs from expiration of the time in which to file briefs, including supplemental briefs].) The cause will be resubmitted on January 13, 2012.

IRS Standard Mileage Rates for 2012 - Business Rate Unchanged

The IRS announced its 2012 Standard Mileage Rates here.  Employers rely on this rate when reimbursing the use of personal vehicles.  However, the business rate is unchanged from the mid-2011 adjustment.  From the IRS announcement:

Beginning on Jan. 1, 2012, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

• 55.5 cents per mile for business miles driven
• 23 cents per mile driven for medical or moving purposes
• 14 cents per mile driven in service of charitable organizations

Happy holidays!

Greg

Ninth Circuit: No Duty to Accommodate Unqualified Applicant With Disability

Trish Johnson was a special education teacher. She was required to maintain a teacher certification. To do so, she had to satisfy certain continuing education requirements, including having 3 hours of college credit over a five year period.  Johnson failed to complete the college credit on time and told her bosses she would lose her certification. Her school district could have petitioned the state for an exemption, but declined to do so. Johnson lost her certification and was fired.
She sued under the ADA, claiming the school district had to apply for and obtain the exemption as a form of accommodation of her depression and other mental impairments.
Agreeing with the district court, the Ninth Circuit upheld summary judgment. The court held that a plaintiff under the ADA must establish she is a "qualified individual with a disability" or no accommodation is due.
The court noted EEOC regulations provide "that a 'qualified individual with a disability' is one 'who satisfies the requisite skills, experience, education and other job related requirements of the employment position such individual holds or desires, and who, with or without reasonable accommodation, can perform the essential functions of such position.” 29 C.F.R. § 1630.2(m) (emphasis added).
So, the court reasoned, Johnson was required to hold the "requisite" job related requirements of the job without accommodation. She did not maintain the requisite continuing education requirements and, therefore, lost her certification.
So, by way of example given in the opinion, an employer hiring a CPA can require the CPA to be licensed and need not provide "accommodation" that helps the applicant obtain the license (like tutoring).  A law firm does not have to help a law clerk pass the bar, etc.
The case is Johnson v. Bd. of Trustees and the opinion is here.

Court of Appeal: Church-owned School Exempt from Marital Status Discrimination Claims

Sara Henry divorced and began living with a boyfriend, with whom she had a child.  She worked for the Red Hill Evangelical Lutheran Church of Tustin as a teacher and administrator for a church-owned and operated preschool.  After the church discovered Henry's living situation, it discharged her. She sued for marital status discrimination.
Henry argued the church fired her because of her "marital status" in that she was unmarried and living with her boyfriend. The church contended it was concerned with her living with her boyfriend while unmarried.  Regardless, the church won the case because it is not considered an "employer" under the Fair Employment and Housing Act.  As the court of appeal found, the definition of "employer" in FEHA ‟does not include a religious association or corporation not organized for private profit." Govt Code § 12926, subd (d).  The court also found that Henry was not covered by Title VII of the Civil Rights Act of 1964.  Therefore, without a statutory basis, her claim for wrongful termination in violation of public policy failed as well.
The case is Henry v. Red Hill Evangelical Lutheran Church of Tustin and the opinion is here.

California - New Wage Rates Announced for Computer Exemption

Under Labor Code Section 515.5, some computer software employees are considered exempt if they meet certain duties and compensation criteria.  The compensation rate is supposed to vary with the rate of inflation.

The California Division of Labor Statistics and Research has just adjusted the minimum pay rates for the exemption for 2012:

Old hourly rate:  $37.94
New rate:  $38.89

Old monthly salary: $6,587.50
New monthly salary: $6,752.19

Old annual salary: $79,050.00
New annual salary  $81,026.25

The DLSR's memorandum announcing the change is here.

Thanks to the Cal Chamber for pointing this out.

Greg

No Individual Liability for Supervisors Under Military Service Anti-Discrimination Law

Mario Pantuso is a member of the U.S. Navy. He served six months in Iraq and then sought return to his job at Safway Services. Denied reinstatement, he sued Safway and two former supervisors under the Military and Veterans Code for discrimination.  If you are unfamiliar with that law, here it is, as quoted by the court:

Section 394, subdivision (a) reads: “No person shall discriminate against any officer, warrant officer or enlisted member of the military or naval forces of the state or of the United States because of that membership. No member of the military forces shall be prejudiced or injured by any person, employer, or officer or agent of any corporation, company, or firm with respect to that member‟s employment, position or status or be denied or disqualified for employment by virtue of membership or service in the military forces of this state or of the United States.” (Italics added.)


Section 394, subdivision (d) reads in part: “No employer or officer or agent of any corporation, company, or firm, or other person, shall discharge any person from employment because of the performance of any ordered military duty or training or by reason of being an officer, warrant officer, or enlisted member of the military or naval forces of this state . . . .” (Italics added.)

 So, the individual managers sought to have the claims against them dismissed. The trial court refused, and they took a writ to the court of appeal. The court of appeal agreed that there is no individual liability for supervisors under the Military and Veterans Code. The court reasoned that the law is written similarly to the Fair Employment and Housing Act and has a similar purpose. Because individuals cannot be held liable for discrimination and retaliation under FEHA, the same result should obtain.  The court pointed out that some federal decisions impose liability for individuals under the federal USERRA.  But the plaintiff was proceeding under state law, and the language of USERRA is different.

Because the narrow issue was whether individuals could be held liable, there was no discussion of the merits of the lawsuit itself.

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

DGV
 

Brinker (Meal Period Case) Oral Argument

I am told there are lawyers who waited hours to get a seat at the California Supreme Court's hearing on Brinker v. Superior Court.  It's called "Youtube."  Look into it.  

For those of you who would not wait in line for a courtroom hearing, the oral argument is here.

As you will see, it looks like some justices are concerned that employers should not have to force employees to take meal periods.  The court will issue its decision within 90 days.

AB 469 - Read Our Article

We've summarized AB 469 - California's Wage Theft Prevention Act in an article here. This one will require employers' attention soon.

DGV

Employer Who Sues Ex-Employee Does Not Have to "Indemnify" Ex-Employee for His Attorney Fees

Nicholas Laboratories, LLC sued its former employee, Chen.  Ultimately, the parties resolved the case. Chen sought reimbursement of his fees under Labor Code Section 2802.

Section 2802, subdivision (a), states: "An employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties, or of his or her obedience to the directions of the employer, even though unlawful, unless the employee, at the time of obeying the directions, believed them to be unlawful."
Chen's claim was that the fees he incurred defending himsel was a business expense that arose because of my work for my former employer.

No sale.

Thus, we conclude the attorney fees incurred by Chen do not fall within the domain of section 2802. We are not persuaded that the Legislature, in drafting section 2802, intended to depart from the usual meaning of the word "indemnify" to address "first party" disputes between employers and employees. The Legislature could have specifically provided in section 2802 that attorney fees incurred defending an action by the employer were recoverable by a prevailing employee. The fact that the Legislature did not do so suggests disputes between employers and employees are subject to the ordinary rules applying to the recovery of attorney fees in California litigation.

The court also decided Corporations Code Section 317, containing another indeminification provision, does not apply to LLCs.

The case is Nichols Laboratories, LLC v. Chen and the opinion is here.

DGV

AB 469 -California Adopts NY "Wage Theft" Law

When I covered some of Governor Jerry Brown's last minute bill signings, I left out perhaps the most obnoxious new law.  That's what I get for hurrying. 

Effective 1/1/12, employers are going to have to begin complying with Labor Code Section 2810.5.  This law requires employers to provide new hires with a written notice of various items of information:

(A) The rate or rates of pay and basis thereof, whether paid by the hour, shift, day, week, salary, piece, commission, or otherwise,including any rates for overtime, as applicable.
(B) Allowances, if any, claimed as part of the minimum wage, including meal or lodging allowances.
(C) The regular payday designated by the employer in accordance with the requirements of this code.
(D) The name of the employer, including any "doing business as" names used by the employer.
(E) The physical address of the employer's main office or principal place of business, and a mailing address, if different.
(F) The telephone number of the employer.
(G) The name, address, and telephone number of the employer's workers' compensation insurance carrier.
(H) Any other information the Labor Commissioner deems material and necessary.

The good news is that the law requires the Labor Commissioner to prepare a template and make it available.
More good news - this provision does not apply to exempt employees (although if someone claims to be "misclassified" then there will be a dispute over whether this notice was due.) So, employers may want to provide the notice to exempt employees anyway.

Mostly bad news though - If an employer makes changes to the above listed information, the employer must provide notice of the change within seven days either by providing a written amendment, a whole new notice, or via paycheck stub if that information is contained in the paycheck stub.

Naturally, even though items C and G are already covered by required posters, the law does not repeal the poster requirement.

Public employers need not worry about this because they are exempt from the requirement!
Most employees covered by a valid collective bargaining agreement also are not entitled to the notice (if they make more than 30% more than minimum wage).

This provision is contained in AB 469. This new law contains other provisions, such as increasing a variety of penalties.  It also imposes more disclosure requirements on Farm Labor Contractors.

Of significance, it increases the statute of limitations for the DLSE to collect penalties from 1-3 years. That new statute of limitations does not appear to apply to private enforcement actions, though.

Again, this applies only to new hires, but it takes effect on 1/1/12. Employers will have to put in place procedures very quickly.  However, employers already operating in New York will recognize that this new law is quite similar to a NY law enacted a year or two ago.

Yep, I can smell the number of jobs this one is going to create. At the DLSE and law firms!  OK, I kid, I kid. ::cough:::

We will have more information about this as it becomes available...

AB 469 is here.

Governor Jerry Brown's Actions on Pending Workers' Compensation Legislation

Our friends at the California Chamber of Commerce prepared a nice summary of what became of the proposed workers' compensation bills this year:  Your can find the roundup here.