Court of Appeal: Statute of Limitations Bars Claims Based on Stale Administrative Charges

When an employee files a series of discrimination charges with the Department of Fair Employment and Housing, may she wait to sue until years later, even if she received "right to sue" letters long before she filed her lawsuit? No.

Esperanza Acuna was employed with San Diego Gas and Electric.  Over a course of several years, she claimed harassment and discrimination by a supervisor, and failure to accommodate  a work-related stress disability.   The court of appeal set out this timeline:

On March 16, 2006, Acuna filed her first DFEH complaint, alleging racial discrimination and harassment, and retaliation for having filed a worker's compensation claim. On March 27, 2006, the DFEH issued a right to sue notice on this first DFEH complaint.

On February 23, 2007, Acuna filed her second DFEH complaint, alleging disability discrimination (failure to accommodate her claimed disability). On February 19, 2008, the DFEH filed a right-to-sue notice on this second DFEH complaint.

On July 11, 2008, SDG&E terminated Acuna's employment.

On October 23, 2008, Acuna filed her third DFEH administrative complaint, alleging various wrongful acts, including her alleged retaliatory termination. On November 7, 2008, the DFEH issued a right-to-sue letter based on this third DFEH complaint.

On November 5, 2009, Acuna filed her lawsuit.

The Court of Appeal decided the statute of limitations barred any claims based on the first two DFEH complaints.  She had until March 2007 to file a lawsuit based on the first charge; she did not.  She had until February 19, 2009 to file the lawsuit based on the second "right to sue" notice.  But she did not file until November 5, 2009.

The Court rejected Acuna's attempt to argue that the "continuing violation" doctrine saved her claims based on the first two "right to sue" letters:

As discussed above, in California the continuing violations doctrine applies to toll section 12960's one-year period for filing a DFEH claim during the time the employee and employer are engaged in informal efforts to resolve the employer's claimed wrongful conduct. (Richards, supra, 26 Cal.4th at pp. 822-823.) The California Supreme Court held this tolling period ends when the employer's determination achieves a level of permanence, i.e., when a reasonable employee would understand that "further efforts to end the unlawful conduct will be in vain." (Id. at p. 823.)

Acuna's allegations establish that a reasonable person would have understood that SDG&E had denied her requests for accommodation no later than February 2007. According to Acuna's allegations, beginning in late 2005, SDG&E repeatedly declined to permit Acuna to return to her job and refused to permit her to work for a supervisor other than Valentine. In response to this conduct, Acuna retained counsel and filed a DFEH complaint. After SDG&E continued to refuse to accommodate her claimed disability, Acuna filed her second DFEH complaint in February 2007. In this complaint, Acuna specifically alleged that SDG&E was refusing to accommodate her disability. By retaining counsel and filing a DFEH complaint, Acuna manifested an understanding that further attempts at informal, rather than formal, resolution of the disability accommodation process would not be successful and were futile. Under these circumstances, the continuing violations doctrine is inapplicable.

The Court also held that the doctrine of "equitable tolling" did not save her stale claims either. 

The equitable tolling doctrine generally requires a showing that the plaintiff is seeking an alternate remedy in an established procedural context. (See McDonald, supra, 45 Cal.4th at p. 102-104; Schifando v. City of Los Angeles, supra, 31 Cal.4th at p. 1082.) Informal negotiations or discussions between an employer and employee do not toll a statute of limitations under the equitable tolling doctrine. (See 65 Butterfield v. Chicago Title Ins. Co. (1999) 70 Cal.App.4th 1047, 1063.) Acuna does not allege any facts showing she was pursuing an alternate remedy that excused her from timely filing her administrative claim and/or from filing her lawsuit.

Moreover, the equitable tolling doctrine is inapplicable once the employee is on notice that his or her rights had been violated and that her alternate remedies will be unsuccessful. (Richards, supra, 26 Cal.4th at p. 814.) As discussed above, Acuna acknowledged that by February 2007 she understood that SDG&E was refusing to accommodate her disability and was not interested in informally resolving her claims.

So, the Court held that Ms. Acuna can proceed on her timely claims for wrongful termination and her FEHA-based retaliation claim concerning her discharge.

The case is Acuna v. San Diego Gas & Elec. and the opinion is here.

Court of Appeal: Nail Salon Independent Contractors

Happy Nails owns a number of nail salons.  Their workers were independent contractors.  The EDD sought to classify them as employees and lost before the Unemployment Insurance Appeals Board.

The Division of Labor Standards Enforcement was not convinced and instituted proceedings against Happy Nails for not providing itemized wage statements, predicated on the theory that the cosmetologists were really employees.   Happy Nails argued that it already had litigated this issue and that the DLSE should not proceed based on the legal principle known as collateral estoppel.
The DLSE hearing officer ignored Happy's arguments and the prior decisions and held that the workers were employees.

Happy Nails sued the DLSE, claiming violation of due process, and seeking a writ of administrative mandate overturning the DLSE's findings.  The superior court denied Happy's motion for summary judgment on this claim and denied the writ.

The Court of Appeal decided that the trial court should have issued the writ and precluded re-litigation of the independent contractor question, based on collateral estoppel:

For an issue to be precluded from relitigation, the following requirements must be satisfied: (1) the issue must be identical to an issue decided in a prior proceeding; (2) the issue must have been actually litigated in the prior proceeding; (3) the issue must have been necessarily decided in the prior proceeding; (4) the decision in the prior proceeding must be final and on the merits; and (5) the party against whom preclusion is sought must have been a party to or in privity with a party to the prior proceeding. (People v. Garcia (2006) 39 Cal.4th 1070, 1077; Castillo v. City of Los Angeles (2001) 92 Cal.App.4th 477, 481 (Castillo).) As we explain below, each requirement is satisfied in this case.

The court analyzed each factor and decided that Happy Nails established them.  Therefore, the DLSE should have respected the UIAB's decision.

Although this is a procedure-based decision, there is some interesting law discussed in the opinion.  For example, the DLSE argued that the Happy Nails cosmetologists were once classified as employees until the company restructured its relationship with them.  Therefore, the DLSE argued, they could not be re-classified as contractors.  Not so, said the court:

The law[] does not require private parties to share the Commissioner's "once an employee, always an employee" mindset. Rather, private parties are free to change the nature of their business relationship in accordance with the "long-standing established public policy in California which respects and promotes the freedom of private parties to contract" (Brisbane Lodging, L.P. v. Webcor Builders, Inc. (2013) 216 Cal.App.4th 1249, 1262) and which allows them "the widest latitude in this regard" (Stephens v. Southern Pacific Co. (1895) 109 Cal. 86, 89). Our adoption of the position advocated by the Commissioner's counsel at oral argument would effectively nullify the Board's determination and would impermissibly deny Happy Nails and the cosmetologists "their freedom to contract as they please" (Rosen v. State Farm General Ins. Co. (2003) 30 Cal.4th 1070, 1080), which they exercised by restructuring their business relationship.

It also bears noting that this decision holds that different government agencies are considered the same for collateral estoppel purposes when their interests are similar.  Here, the Employment Development Department and DLSE share the common purpose of protecting workers from mis-classification.

Finally, the court sent the case back to the trial court so that it could consider Happy's request for an injunction against the DLSE, prohibiting future claims unless it showed there was a material change, and for attorney's fees.

The case is Happy Nails and Spa of Fashion Valley L.P. v. Su and the opinion is here.

Court of Appeal: On-Call and Sleep Time

CPS guards construction sites.  Some of the security guard employees sleep in on-site trailers.  CPS compensated them for the time they were required to investigate potential problems at the sites, such as break ins.  Otherwise, the employees were considered "on call," but were uncompensated.

On weekday shifts, employees actively worked 8 hours and were "on-call" for eight hours.  On weekends, employees worked 16 hours and were "on call" for eight.  During weekday periods when the construction crews were working, the live-in employees were free to do as they pleased, leave the facility, etc.

The employees who lived in trailers could keep personal items and could have visitors as the client permitted. But families were not permitted to live within the trailers. The trailers were basically small, self-contained, mobile apartments with cleaning facilities, etc.

The live-in employees signed on-call agreements, which provided for circumstances under which the employees could leave the trailers during on-call time:

if a trailer guard wished to leave the jobsite during on-call hours, he or she was required to (1) notify a dispatcher, (2) provide information as to where the guard would be and for how long, and (3) wait for the reliever to arrive.6 After leaving the jobsite, the guard was required to remain within a 30-minute radius and carry a pager or radio telephone. If called during that time, the guard was required to respond immediately. The trailer guards were not allowed to leave a jobsite before a reliever arrived. If no reliever was available, CPS had the right to order a trailer guard to remain at the jobsite, even if the trailer guard had an emergency.

The company did not consider on-call time to be hours worked, but paid employees for time they waited for a reliever or were denied a reliever, as well as when they have to investigate alarms or noises.

Employees sued, claiming they should have been paid for all on-call time, not just the time actually working. The parties agreed that Wage Order 4-2001 applied.

The trial court issued a preliminary injunction, ordering CPS to pay for on-call time pending the resolution of the lawsuit. CPS appealed.  Interestingly, one of the class reps lost a DLSE hearing on the same issue.  Additionally, CPS had sought guidance from the DLSE and U.S. DOL, and conformed its practices based on the opinions received.  Nevertheless, the lawsuits continued and the trial court granted summary adjudication in favor of the plaintiff, holding that the employees should be paid for all on-call time.

So, the issue on review was whether the time employees spent in their trailers should count as "hours worked" under Wage Order 4.  "Hours worked" are “the time during which an employee is subject to the control of an employer, and includes all the time the employee is suffered or permitted to work, whether or not required to do so.” 

The court thoroughly reviewed what it means to be subject to the employer's control, and cited this seven-factor test for on-call situations:

In resolving the degree to which employees are able to engage in private pursuits during on-call time, courts generally apply seven factors: “„(1) whether there was an on-premises living requirement; (2) whether there were excessive geographical restrictions on [the] employee‟s movements; (3) whether the frequency of calls was unduly restrictive; (4) whether a fixed time limit for response was unduly restrictive; (5) whether the on-call employee could easily trade on-call responsibilities; (6) whether use of a pager could ease restrictions; and (7) whether the employee had actually engaged in personal activities during call-in time.‟”

Applying this and other legal principles discussed in the opinion, the court concluded that the weekday on call time should have been paid as hours worked:

By their presence on site during the on-call hours, the guards perform an important function for their employer and its clients: they deter theft and vandalism. CPS promises its clients security services throughout the night and for 24 hours on Saturday and Sunday, and would be in breach if no security guards were present between 9:00 p.m. and 5:00 a.m. The parties‟ On-Call Agreements designate that period as “free time,” but it is clear from the Agreements and the stipulated facts that trailer guards are not free to leave at will. A guard may leave only when and if a reliever is available. From this, it can reasonably be said that the restrictions on the on-call time are “primarily directed toward the fulfillment of the employer‟s requirements,” and the guards are “substantially restricted” in their ability to engage in private pursuits.



* * *


They are required to live on the jobsite. They are expected to respond immediately, in uniform, when an alarm sounds or they hear suspicious noise or activity. During the relevant hours, they are geographically limited to the trailer and/or the jobsite unless a reliever arrives; even then, they are required to take a pager or radio telephone so they may be called back; and they are required to remain within 30 minutes of the site unless other arrangements have been made. They may not easily trade their responsibilities, but can only call for a reliever and hope one will be found.24

Most important, the trailer guards do not enjoy the normal freedoms of a typical off-duty worker, as they are forbidden to have children, pets or alcohol in the trailers and cannot entertain or visit with adult friends or family without special permission. On this record, we conclude the degree of control exercised by the employer compels the conclusion that the trailer guards‟ on-call time falls under the definition of “hours worked” under California law.

However, the court then decided that the on-call time during the weekend, 24-hour shifts was not hours worked. The court relied on decisions holding that employers may deduct 8 hours of sleep time from employees' work time when they are engaged in 24-hour shifts.  The ruled the following standard would apply to 24-hour shifts:

There are sound reasons for permitting an employer who engages an employee to work a 24-hour shift and compensates him or her for 16 of those hours to exclude the remaining eight hours for sleep time, as long as the time is uninterrupted, a comfortable place is provided, and the parties enter into an agreement covering the period. Most employees would be sleeping for a similar period every day, whether on duty or not, and the compensation provided for the other 16 hours, which should generally include considerable overtime, ensures that the employees receive an adequate wage

So, employers seeking to avoid payment for 24-hour "live in" shifts under Wage Order 4 should ensure: there is an agreement to exclude sleep time, there is a comfortable place to sleep, and the sleep time generally is interrupted.  If the sleep period is interrupted, the agreement should provide for compensation for time worked, and for the entire period if there are frequent or considerable interruptions.


The case is Mendiola v. CPS Security Solutions, Inc. and the opinion is here.

U.S. Supreme Court: Retaliation Causation

University of Tex. Southwestern Med. Ctr. v. Nassar (opinion here) is the Supreme Court opinion setting forth the "causation" standards that apply to retaliation cases under Title VII of the Civil Rights Act of 1964.

Nassar was a doctor and professor at Univ. of Texas. He also worked at the University's medical center.  He  complained of harassment and discrimination by Dr. Levine. He tried to work only at the hospital to avoid Dr. Levine's harassment at the University. But the University blocked his effort, claiming that University policy required attending doctors also to be professors at the medical school.

So, Nassar sued for retaliation, claiming discrimination / constructive discharge, and retaliation in that the University blocked his hiring at the hospital.  After Nassar won a verdict, the Supreme Court accepted review to determine whether the retaliation claim was decided under the correct "causation" framework.

The Court decided that in Title VII cases, the causation standard is "but for," which means that the employer would not have taken negative action against the employee "but for" the employee's engaging in protected activity. Put another way, the harm would not have occurred if the employee had not complained.

Along the way, the Supreme Court majority explained the causation standard that applies to Title VII discrimination cases.  This is known as the "motivating factor" standard:

An employee who alleges status-based discrimination under Title VII need not show that the causal link between injury and wrong is so close that the injury would not have occurred but for the act. So-called but-for causation is not the test. It suffices instead to show that the motive to discriminate was one of the employer’s motives, even if the employer also had other, lawful motives that were causative in the employer’s decision. This principle is the result of an earlier case from this Court, Price Water­house v. Hopkins, 490 U. S. 228 (1989), and an ensuing statutory amendment by Congress that codified in part and abrogated in part the holding in Price Waterhouse, see §§2000e–2(m), 2000e–5(g)(2)(B). 

Why the separate standards, you ask?  Because in Title VII, the discrimination provisions are covered by a specific statute, and that statute was amended to include the motivating reason standard.    The anti-retaliation section is in another part of Title VII.  So, what the Court really decided was that the 1991 amendment to Title VII's causation provision did not apply to the retaliation piece. 

It remains to be seen whether this decision will influence California courts' interpretation of the causation standard. Earlier this year, the California Supreme Court examined causation standards in "mixed motive" cases (discussed here). We will see what the lower courts do with Nassar in the coming months. 

DGV

 

US Supreme Court: Who Is a Supervisor for Determining Title VII Liability Standards?

Under Title VII of the Civil Rights Act of 1964, the law regards harassment by a supervisor as different from harassment by a co-worker.  The employer is liable for harassment by a co-worker if the employer is negligent: the employer knew or should have known of the harassment and failed to take appropriate corrective action.  That is true as well in California under the Fair Employment and Housing Act.

For supervisor harassment, though, the employer is "strictly liable" - regardless of what it knew or should have known, and regardless of what action it takes - if the harassment includes a "tangible employment action" such as firing, demotion, loss of pay.  But if there is no tangible employment action, the employer may escape liability by proving that the employer exercised reasonable care to prevent harassment and the harassment victim did not take advantage of the employer's preventive or corrective opportunities.  That is known as the "Faragher-Ellerth" defense.  

Under California law, there is no escape from liability.  Employers are strictly liable for supervisor harassment, regardless of whether there is a tangible employment action. The employer may assert as a defense, though, that the employee's damages should be reduced because of the employee's failure to avail herself of opportunities to avoid the harassment (avoidable consequences defense.)

So, the issue of who is a supervisor matters under both schemes.  California law defines supervisor in its statute (Govt. Code Section 12926(s): "'Supervisor' means any individual having the authority, in the interest of the employer, to hire, transfer, suspend, layoff, recall, promote, discharge, assign, reward, or discipline other employees, or the responsibility to direct them, or to adjust their grievances, or effectively to recommend that action, if, in connection with the foregoing, the exercise of that authority is not of a merely routine or clerical nature, but requires the use of independent judgment."

Title VII does not define supervisor.  Some lower courts said that supervisors had to have the power to take tangible actions like firing, reassignment, etc.  The EEOC said supervisors merely have to have the power to direct the victim's work. Enter the Supreme Court.

Maetta Vance worked for Ball State University as a server in the catering department.  She complained that a co-worker, Saundra Davis, was her supervisor and harassed her over a period of time on the basis of her race.  Davis was a catering specialist, but she had no power to hire, fire, promote, demote, etc. Vance.  The lower courts threw out Vance's harassment claim because they found that Davis was not a supervisor and that Ball State was not negligent.

After reviewing precedent and the different supervisor formulations, the Court 5-4 decided

We hold that an employer may be vicariously liable for an employee’s unlawful harassment only when the employer has empowered that employee to take tangible employment actions against the victim, i.e., to effect a “significant change in employment status, such as hiring,firing, failing to promote, reassignment with significantly different responsibilities, or a decision causing a significant change in benefits.” Ellerth, supra, at 761. We reject the nebulous definition of a “supervisor” advocated in the EEOC Guidance and substantially adopted by several courts of appeals.

It is unclear whether this decision will affect California law.  As stated above, California has a statutory definition of "supervisor."  In fact, that definition is taken from the National Labor Relations Act, Section 2(11).  And the majority in the Vance case said the NLRA definition was too broad and did not apply to Title VII harassment cases.  So, it appears that California's supervisor definition is broader than  the Court's definition in Vance.

In dissent, Justice Ginsburg, writing for four, argued that the majority's definition is too narrow and that Congress should define supervisor.

This case is Vance v. Ball St. University and the opinion is here.

Supreme Court Upholds Express Class Action Waivers Regardless of Individual Claim's Value

Italian Colors restaurant challenged American Express's fees as violating anti-trust laws by filing a class action. But Colors signed an arbitration clause excluding class claims.   Colors argued that the cost of proving its case would be multiples of whatever it might recover.  Therefore, Colors contended, the class waiver impermissibly interfered with its ability to sue under federal law.  The Second Circuit court of appeals agreed with this premise, citing what is known as the "effective vindication" rule.  Under that rule, courts have held that arbitration agreements are invalid under the Federal Arbitration Act unless they permit "effective vindication" of federal statutory rights.

The Supreme Court, 5-3 with Justice Sotomayor recused, held that Colors is bound by its agreement to arbitrate, regardless of whether it is economically feasible to arbitrate its individual claim.  The majority's point is that Congress did not say in the anti-trust laws that a litigant must be able to bring a class action, or that litigation must be economically feasible.  Nothing in the arbitration agreement precluded or limited Colors' rights under the anti-trust law.  Further, anti-trust lawsuits and the Sherman Act predated the class action device.

The Court wrote:

Respondents argue that requiring them to litigate their claims individually—as they contracted to do—would contravene the policies of the antitrust laws. But the antitrust laws do not guarantee an affordable procedural path to the vindication of every claim.

The dissent (penned by Justice Kagan, with Ginsburg and Breyer concurring) essentially wrote that when the cost of bringing a claim under a federal statute significantly outweighs the potential recovery, then a class action right must be preserved as well.  The dissent stated that the majority opinion all but doomed Colors' case by rendering it prohibitively expensive to arbitrate.  Justice Kagan characterized the majority's response to that contention as, "Too darn bad."

This decision addresses class action waivers under federal law, not state law.  However, the majority does not appear to consider it a big difference whether the issue is if the FAA preempts state law or conflicts with federal law:

In dismissing AT&T Mobility [v. Concepcion] as a case involving pre-emption and not the effective-vindication exception, the dissent ignores what that case established—that the FAA’s command to enforce arbitration agreements trumps any interest in ensuring the prosecution of low value claims. The latter interest, we said, is “unrelated” to the FAA. 563 U. S., at ___ (slip op., at 17). Accordingly, the FAA does, contrary to the dissent’s assertion, see post, at 5, favor the absence of litigation when that is the consequence of a class-action waiver, since its “ ‘principal purpose’ ” is the enforcement of arbitration agreements according to their terms.

This last point undermines the California Supreme Court's focus on "low value" claims (like wage-hour matters) as a factor in determining if a class action waiver is valid.   We are waiting to see what the California high court plans to do with its decision in Gentry v. Superior Court, which the court is reconsidering.

This decision is American Express Co. v. Italian Colors Rest.  and the opinion is here.

American Medical Association Creates Millions of New "Individuals With Disabilities"

At its June 18, 2013 annual meeting, the American Medical Association decided a new "policy":

Obesity as a Disease 

Today, the AMA adopted policy that recognizes obesity as a disease requiring a range of medical interventions to advance obesity treatment and prevention.
“Recognizing obesity as a disease will help change the way the medical community tackles this complex issue that affects approximately one in three Americans,” said AMA board member Patrice Harris, M.D. “The AMA is committed to improving health outcomes and is working to reduce the incidence of cardiovascular disease and type 2 diabetes, which are often linked to obesity.

The link is here.

Although the effect of this "policy" will have on employment law is unclear, the move could significantly increase ADA / disability discrimination and impose huge new reasonable accommodation obligations on employers. Why? Courts in the past generally have found that obesity in and of itself is not a covered "disability," but its effects (like high blood pressure, type 2 diabetes, heart disease) could be.  (We wrote about this some time ago here.)  If obesity itself is not a disability, the employer would not have a duty to accommodate an obese worker merely because the employee desired adjustments to the work area, for example. It should be noted, though, that some courts more recently have begun to recognize that significantly overweight people might have disabilities or at least be "regarded" as disabled.  The ADA Amendments Act's looser definition of "disability" is making it easier for courts to hold that an employee with nearly any impairment has a disability.

Anyway, if the AMA's recent policy results in more protection for the overweight as "disabled," without a showing of medical complications, then there could be a significant expansion of the duty to accommodate. Employers may have to take into account the obese in office space planning, ergonomics, etc.  What about physical job requirements?  And what of employers who do not hire the obese, or who require / encourage "wellness" plans for the heavyset?  Obese applicants, too, may be able to claim they were not selected due to their disability without any showing that the employer was aware of a latent disability.  

Of course "obesity" is a medical term and does not apply to all overweight people.  And it's too early to know what the AMA's policy statement will mean. But it's worth keeping an eye on this issue and planning for the future.

EEOC Again Goes After Criminal Background Checks

The EEOC is still filing lawsuits against employers who conduct criminal background checks as shown in this June 11 press release.  States are limiting criminal background checks too.  Based on the government's current hostility, it is important to review your background check policies and procedures frequently in all states in which you do business.

Happy 7th Anniversary to Shaw Valenza LLP

It seems like only yesterday that Jennifer Shaw and your humble correspondent started our firm.  (Of course, some days it feels like our 80th anniversary.)   Thank you to everyone who made it possible for us to be here for seven years!

The blog's about 7 years old too.  574 posts and at least that many page views.  We hope the information has been helpful, Dad. I kid, I know there are at least four non-relatives who read the blog too.  And thank you as well.

Greg

U.S. Supreme Court: Arbitrator Had Power to Interpret Whether Arbitration Agreement Allowed Class Actions

The Supreme Court infrequently issues unanimous decisions in matters that concern employers and employees. So, it was a bit of a surprise to see Oxford Health Plans v. Sutter, the Court's 9-0 decision today.  Then I noticed that the substantive claims are not employment law-related.  Still, this opinion  will affect class action arbitration, employment law and otherwise.

Sutter was a doctor. He and a class of doctors sued Oxford for failing to reimburse adequately under the insurance reimbursement contract. Oxford required Sutter to arbitrated his claim under this arbitration clause:

No civil action concerning any dispute arising under this Agreement shall be instituted before any court, and all such disputes shall be submitted to final and binding arbitration in New Jersey, pursuant to the rules of the American Arbitration Association with one arbitrator.

Once in arbitration, the parties agreed to let the arbitrator  decide whether the above language authorized classwide arbitration. The arbitrator held that it did.  When the Supreme Court issued Stolt Nielsen v. AnimalFeeds (when arbitration agreement is silent regarding class action arbitration, the default is to hold individual arbitrations), Oxford asked the arbitrator again to exclude class claims. The arbitrator again refused.

So, for a second time Oxford moved to vacate that finding under the Federal Arbitration Act.  The trial court, the court of appeals and the Supreme Court unanimously said, no can do:

Here, the arbitrator did construe the contract (focusing, per usual, on its language), and did find an agreement to permit class arbitration. So to overturn his decision, we would have to rely on a finding that he misapprehended the parties’ intent. But [Federal Arbitration Act] §10(a)(4) bars that course: It permits courts to vacate an arbitral decision only when the arbitrator strayed from his delegated task of interpreting a contract, not when he performed that task poorly.

As in other cases, the Court's decision in part turned on the litigation strategy of one of the parties. Possibly to garner more votes, Justice Kagan was pretty negative about the arbitrator's decision.  She suggested that a court might well have ruled a different way if Oxford had chosen to ask the district court to interpret the agreement instead of the arbitrator:

We would face a different issue if Oxford had argued below that the availability of class arbitration is a so-called “question of arbitrability.” Those questions—which “include certain gateway matters, such as whether parties have a valid arbitration agreement at all or whether a concededly binding arbitration clause applies to a certain type of controversy”—are presumptively for courts to decide. Green Tree Financial Corp. v. Bazzle, 539 U. S. 444, 452 (2003) (plurality opinion). A court may therefore review an arbitrator’s determination of such a matter de novo absent “clear[] and unmistakabl[e]” evidence that the parties wanted an arbitrator to resolve the dispute. AT&T Technologies, Inc. v. Communications Workers, 475 U. S. 643, 649 (1986). StoltNielsen made clear that this Court has not yet decided whether the
availability of class arbitration is a question of arbitrability. See 559 U. S., at 680. But this case gives us no opportunity to do so because Oxford agreed that the arbitrator should determine whether its contract with Sutter authorized class procedures. See Brief for Petitioner 38, n. 9 (conceding this point). Indeed, Oxford submitted that issue to the arbitrator not once, but twice—and the second time after StoltNielsen flagged that it might be a question of arbitrability.

So, lesson learned.  If you think a court will follow Stolt-Nielsen more faithfully than an arbitrator, seek construction of your arbitration clause in court.

Bonus - the Court said this right up front:  "Class arbitration is a matter of consent: An arbitrator
may employ class procedures only if the parties have authorized them."  That does not bode well for those who would like the California Supreme Court to hold that class action waivers are illegal.

This case Oxford Health Plans LLC v. Sutter and the opinion is here.

9th Circuit: California Wage Hour Class Action Should Be Certified

Employees of Medline Industries brought a wage and hour class actions, which Medline removed to federal court.  The claims included "rounding," improper calculation of the "regular rate" for overtime purposes, waiting time penalties, and inadequate wage statements. 

The district court refused to certify the class because, although there were common questions, the individualized assessments of which employees were entitled to damages, and how much, outweighed the common issues.

The Ninth Circuit held the district court abused its discretion.  The court explained that individual damage assessments do not defeat class certification if liability can be determined via common proof.

Of note, the court distinguished the U.S. Supreme Court's recent decision in Comcast Corp. v.Behrend, 133 S. Ct. 1426, 1435 (2013):

In Comcast, the Supreme Court reversed an order granting class certification because the plaintiffs relied on a regression model that “did not isolate damages resulting from any one theory of antitrust impact.” Id. at 1431. The Court concluded that “a model purporting to serve as evidence of damages in this class action must measure only those damages attributable to that theory.” Id. at 1433.

Here, unlike in Comcast, if putative class members prove Medline’s liability, damages will be calculated based on the wages each employee lost due to Medline’s unlawful testimony of Medline’s director of payroll operations, andMedline’s Notice of Removal. Those documents show that

Medline’s computerized payroll and time-keeping database would enable the court to accurately calculate damages and related penalties for each claim.

So, this case will proceed as a class action, and the Comcast decision does not preclude class certification when there are individual damages issues, when there is a reliable way of establishing each class member's damages.

This case is Leyva v. Medline Industries, Inc. and the opinion is here.

CA Supreme Court: LA County Union Entitled to Home Addresses and Phone Numbers of Non-Union Employees

The California Supreme Court in a unanimous opinion addressed employees' privacy rights in the public sector union context. The decision has implications for non-union, private sector employers as well, so read on.

The Service Employees International Union, Local 721, represents Los Angeles County's employees.  However, employees within the union's collective bargaining unit may choose not to join the SEIU as a member. Here's how it works per the CA Supreme Court.

Each of the County‟s bargaining units has a memorandum of understanding (MOU), with SEIU. Most of these MOUs have an agency shop provision that gives County employees four options: (1) join SEIU and pay dues; (2) decline to join and pay a fair share fee; (3) decline to join, object to the fair share fee, and instead pay an agency shop fee; or (4) decline to join, claim a religious exemption, and pay the agency shop fee to a nonreligious, nonlabor charitable fund. A recognized bargaining agent acts on behalf of
all employees in a bargaining unit, whether the employees are union members or not.

Every year, the union sends out a packet of information.  Those who do not respond are deemed "fair share" fee payers.  The vast majority of non-members are "fair share" fee payers.  The "fair share" fee covers activities related to collective bargaining, but does not include contributions for the union's non-bargaining related activities, such as political activity.

The County historically did not disclose non-members' addresses and phone numbers. Instead, the union would send the packets to a third party, the LA County Employee Relations Commission, for distribution to the non-members.

In 2006, the union sought to amend the collective bargaining agreements to require the County to turn over the addresses and phone numbers of non-members. After the County refused, the union filed an administrative charge with the County ERC. The ERC held the County's refusal was an unfair labor practice.  The County filed a writ proceeding in Superior Court, which held that the non-members' privacy interests would have to yield to the union's need to discharge its duties as bargaining representatives of the non-members.

The Court of Appeal also held the union was entitled to the information, but for different reasons than the superior court.  The appellate court decided that the non-members had a right to notice and the opportunity to opt-out of disclosure, similar to the rights courts have fashioned in the context of class action litigation.

The California Supreme Court accepted the County's request for review.  First, the Court noted that the National Labor Relations Act does not apply to the County's union relationship.  The County's relationship is governed by state law, the MMBA.  LA County's ERCOM (rather than the NLRB in the private sector or the PERB that covers state workers and counties other than LA) enforces the MMBA.  I know, lots of acronyms.  Bottom line, though, is that PERB interpretations of the MMBA and the NLRB's decisions under the NLRA are persuasive authority.

The Court analyzed the PERB and NLRA decisions as well as the statute and other authorities. The Court concluded that the union is entitled to the names and addresses of the employees it represents, even when the employees do not sign up as "members" of the union and pay only the agency fee.

The Court then considered whether California's right to privacy outweighed the union's right to the information. The Court first decided that applicants and employees had a reasonable expectation that employers would keep personal contact information private.  The Court noted:

A job applicant who provides personal information to a prospective employer can reasonably expect that the employer will not divulge the information outside the entity except in very limited circumstances. For example, various laws require employers to disclose information to governmental agencies, such as the Internal Revenue Service and Social Security Administration, and disclosure may also be necessary for banks or insurance companies to provide employee benefits. (See Belaire-West Landscape, Inc. v. Superior Court (2007) 149 Cal.App.4th 554, 561 (Belaire-West).) But beyond these required disclosures, it is reasonable for employees to expect that their home contact information will remain private "in light of employers‟ usual confidentiality customs and practices."

This conclusion is important to private sector, non-union employers, because it means that employees should be notified and should consent to disclosure to third parties, such as customers or vendors.  These notices and consents usually occur when employees sign up for benefits and the like.  Employee handbooks can contain a policy notifying employees that sometimes names and addresses will be disclosed to customers, vendors, etc. if that is a concern.

The Court next decided that disclosure of names and addresses amounted to a serious intrusion, another essential element of an invasion of privacy claim.

So, the County having established a reasonable expectation of privacy and a serious intrusion, the union had to show its legitimate interest in the information outweighed the employees' privacy interest.  The Court agreed that the union's interest was sufficiently important to justify the intrusion. 

The Court noted that employees and the County could put into place procedural safeguards themselves that would limit or preclude disclosure of non-members' information such as via collective bargaining: 
 

Employers like the County remain free to bargain for a notice and opt-out procedure in negotiating collective bargaining agreements with employee unions. Public employers can also draft employment contracts that will notify employees their home contact information is subject to disclosure to the union and permit employees to request nondisclosure. Finally, nothing in the relevant statutes or case law appears to prohibit agencies such as PERB or ERCOM from developing notice and opt-out procedures that would allow employees to preserve the confidentiality of their home addresses and telephone numbers

The decision is LA County v. Los Angeles County Employee Relations Commission and the opinion is here.

DGV






 

Court of Appeal Affirms Summary Judgment on Sexual Harassment Claim and More

The Court of Appeal's decision in McCoy v. Pacific Maritime Association covers a lot of ground.  The opinion contains analysis of a variety of issues important for pre-trial and trial lawyers alike.

Here are the main issues -

1. The plaintiff's allegations of hostile work environment harassment and intentional infliction of emotional distress were not severe / pervasive / extreme / outrageous enough to reach the jury.  The plaintiff's claim is summarized here:

Appellant testified that she was harassed and shunned throughout her training period. Her complaints centered around one vessel planner in particular, Anthony Spanjol. Appellant testified that Spanjol would disrespect her by talking down to her and by putting his feet up on her work space. On one occasion, he yelled at her in front of other employees and called her stupid. One of appellant‟s supervisors, Marc Izzo, witnessed this incident, but left the room rather than address it. Appellant testified that when she complained about the incident she was told that she should go home and that Spanjol‟s behavior was just a part of his personality. She also stated that Spanjol often made racially derogatory remarks and engaged in sexually offensive behavior. He would comment on the buttocks of other female employees once they left the room, using terms like "„nigger ass‟" and "„J-Lo ass.‟" On at least one occasion, Spanjol also made crude gestures toward a woman when the woman‟s back was turned. He also mocked these women in appellant‟s presence. During another incident, appellant asked Spanjol a question regarding the unloading of a ship, but he ignored her and "never spoke to [her] again." Appellant testified that shortly after this incident she decided she could no longer handle the work environment and quit her job entirely.

The court held that the harassment was not severe or pervasive enough to require a jury's consideration. The court also held that the allegations of co-worker harassment were not actionable because the plaintiff did not prove that her employer knew or should have known of the conduct directed toward her.

2.  The court held that the trial court properly excluded evidence of harassment of other women because the only claim tried was retaliation.

3.   "Me-too" evidence of retaliation against other women should have been admitted.

4.   The plaintiff claimed denial of promotion based on retaliation. The court held she was entitled to damages if she prevailed even if she did not prove constructive discharge. The amount of those damages would have to be limited to what she actually lost (the difference between her pay and the pay if she had been promoted).  I don't understand how she would be entitled to that differential after she quit if it's not a constructive discharge.  If you voluntarily quit, you no longer receive pay...  I know, there I go thinking again.

5.   The court held that PMA, an association that negotiated collective bargaining agreements, was not the plaintiff's employer, and therefore could not be held liable for retaliation or other FEHA based actions.

So, lots of reasons to cite this case.  It's long, but worth reading.  The opinion in McCoy v. Pacific Maritime Association is here.

DGV
 

Court of Appeal: Meal/Rest/Wage Statement Class Action Should Be Certified

Safeway compensated truck drivers based on a compensation formula rather than a straight hourly rate: 

The collective bargaining agreements also obligated Safeway to utilize what it calls an activity based compensation system to determine the drivers‟ wages. Pay was calculated based on (1) mileage rates applied according to the number of miles driven, the time of day the trips were taken, and the locations where the trips began and ended; (2) fixed rates for certain tasks (e.g., rates for number of pallets delivered and picked up); (3) an hourly rate for a predetermined amount of minutes for certain tasks (e.g., paid for 10 minutes at hourly rate for set-up time at each store); and (4) an hourly rate for delays (e.g., breakdowns, impassable highways, time spent at scales, or other causes beyond the driver‟s control).

Drivers logged their mileage and activities for each trip manually on trip sheets. They also logged their activities into an onboard computer system known as the XATA system. Through XATA, Safeway tracked the drivers' moves, including their stops. The drivers input codes into XATA to record specific reasons for delays. Neither the trip sheets nor the XATA system, however, provided a place or means to record meal or rest periods.

 
So, the compensation system did not include separate payment for contractually and legally required rest periods.  Safeway argued that the paid rest periods were included in its compensation formula, presumably because the payment for miles and tasks assumed the rest periods would be taken during these activities.  Safeway also had drivers sign time cards to acknolwedge they were authorized and permitted to take rest periods. 
The trial court refused to certify a sub-class of rest period claims.  But the court of appeal reversed.  The court held Safeway's system of compensation was akin to a piece rate method of compensation.  And, the court decided, California law does not allow paid rest periods to be included in piece rates because it was an improper averaging of compensation: 

under the rule of Armenta v. Osmose, Inc. (2005) 135 Cal.App.4th 314, 323 (Armenta), rest periods must be separately compensated in a piece-rate system. Rest periods are considered hours worked and must be compensated. (Cal. Code Regs., tit. 8, §§ 11070, subd. 12; 11090, subd. 12.) Under the California minimum wage law, employees must be compensated for each hour worked at either the legal minimum wage or the contractual hourly rate, and compliance cannot be determined by averaging hourly compensation.

The court expressly held that there was a common issue for determining liability - that the compensation system did not compensate employees for paid rest periods separately. The court did so by holding that piece rates may not include payment for rest periods. That is another way of saying that there was no payment for rest periods as a matter of law.

With all respect to the court of appeal, this decision seems to over-analyze the merits of the case.  The court seems to be saying the common proof is that all rest periods were paid incorrectly as a matter of law.  Without saying so, therefore, the court essentially granted summary judgment for the plaintiff rather than just class certification. 

While we're talking about the merits, I am not sure I understand why the piece rate payment cannot include implied payment for rest periods, as Safeway testified it did. An hourly pay rate does not expressly include payment for rest periods either.  During the hour that an employee takes a rest period, he is paid the same hourly rate, but simply works less.  During the hour that an employee does not take a rest period, she receives the same rate as if she did take one. Employers likely set their hourly rates under the assumption that the employee will take a rest period during one of every four hours worked.  The hourly rate therefore "averages" compensation, which the cout said could not be done.   Anyway, I don't get a vote.  So, I descend from my soap box, dejected.

The court also certified a meal period sub-class class on the basis that there was a common issue regarding whether Safeway adequately provided second meal periods before 2006, which is when the case was filed.  The court did not reach the plaintiff's argument that Safeway did not do enough to ensure drivers were relieved of duty, because the one common issue was enough for class certification.  This part of the decision may not be all that significant to employers who adequately provide for both meal periods per Brinker.  Safeway changed practices in 2006.

Finally, the court of appeal decided the wage statement sub-class should be certified.  The court agreed that the wage statement did not adequately spell out wage rates applicable to miles driven, such that the employees would have to refer to their own trip sheets to verify whether they received adequate compensation and engage in mathematical calculations:

Plaintiff‟s argument goes to the structure of the wage statements. As a result, his and the other drivers‟ claims of injury on account of the wage statements will be resolved by means of common proof. The structural omissions in the wage statements, and their alleged violation of Labor Code section 226, are, like employer policies, the types of matters best resolved by class adjudication.

There have been other decisions regarding  piece rates lately. See, e.g., here.  Employers should review their compensation plans to ensure compliance with minimum wage, overtime, meal and rest period laws.

This case is Bluford v. Safeway Stores, Inc. and the opinion is here.

Court of Appeal - Managers Supervising While Performing Non-Exempt Tasks Are Non-Exempt

Safeway stores employ assistant managers who supervise many employees and have responsibility for hiring, supervising, budget compliance, etc.  But the stores' "operating budgets" and other policies allegedly require assistant managers to work the cash register and perform bookkeeping duties at times.  The assistant managers can supervise associates while "multi-tasking" / working the checkout line.

The plaintiff, Linda Heyen, was an assistant manager. The trial court found she worked about 54 hours a week, and spent a great deal of time at the check stand and performing bookkeeping tasks, even though she was able to supervise the store simultaneously.  An advisory jury concluded that Safeway did not prove Heyen was exempt.  The trial court instructed the jury that it should consider the primary purpose for "mixed" activities - those that involved both non-exempt work and supervision.

Safeway argued this:

So long as the manager is still actively functioning in his/her managerial capacity, and addressing his/her attention to managerial tasks such as observing how the store is running and considering how to make the store perform more efficiently and profitably, how to best model and train the store's employees in proper service activities, how to resolve any employee or operational problems that have arisen or are arising, and instructing employees in that regard, etc., all that time should be considered to fall on the 'exempt' side of the ledger—even if the manager is helping customers or handling product at the same time.

The court engaged in a detailed analysis of federal regulations, the wage order, and California case law, which you can read in the opinion. The punch line is this:

the federal regulations cited in Wage Order 7 expressly recognize that managers sometimes engage in tasks that do not involve the "actual management of the department [or] the supervision of the employees therein." (§ 541.108(a).) In those circumstances, the regulations do not say, as Safeway would have us hold, that those tasks should be considered "exempt" so long as the manager continues to supervise while performing them. Instead, the regulations look to the supervisor‟s reason or purpose for undertaking the task. If a task is performed because it is "helpful in supervising the employees or contribute[s] to the smooth functioning of the department for which [the supervisors] are responsible" (§ 541.108(a), (c)), the work is exempt; if not, it is nonexempt.

The court also found that when the company's expectations regarding the budgeted non-exempt hours, production standards, etc. virtually or expressly require the exempt manager to take on non-exempt tasks, the employer cannot argue that the employee did not live up to its expectations by performing non-exempt work.

So, employers, "working" / floor management, leads, etc. are more likely to be classified as "non-exempt" after this opinion, particularly when these managers are performing duties that non-exempt workers are simultaneously performing.   I predict the price of cheesy-poofs will be increasing or the checkout lines are going to be a little longer.

The case is Heyen v. Safeway and the opinion is here.

Court of Appeal - Hourly Pay X Busy Employee = Non-Exempt Compensation

The plaintiff was an insurance adjuster.  He was paid $29 / hour for every hour worked, including overtime.  He always worked more than 40 hours per week.  In a wage-hour lawsuit, he claimed he was not properly classified as exempt because he was not paid on a salary basis.  (He challenged the duties test as well it appears).  The employer argued that he was never paid less than 40 X $29 because he always worked overtime. Therefore, he earned the equivalent of a salary.  The trial court bought that argument.

But the Court of Appeal reversed.

The question presented in this case is whether a compensation scheme based solely upon the number of hours worked, with no guaranteed minimum, can be considered a “salary” within the meaning of the pertinent wage and hour laws. We conclude that such a payment schedule is not a salary and, therefore, does not qualify the employee as exempt.

The employer argued "no harm, no foul," in that the employee always received more than 40 hours x $29 per hour, in that he was always working more than 40 hours.  But, said the court,

The problem here is that defendant stipulated to the fact that it “never paid [plaintiff] a guaranteed salary”; if he worked fewer claims “he made less money than if he worked more claims.” That is the same thing as saying that plaintiff was not paid “a predetermined amount” that “was not subject to reduction based upon the quantity of work performed.” He was not paid a salary. For that reason, defendant did not prove that the administrative exemption of Wage Order 4 applies in this case.

The court did not address whether the employee was properly classified as exempt based on his duties, because the salary issue destroyed his claim.

So, a salary is a predetermined sum, that is not reduced because of the quantity or quality of work performed.  To qualify for exempt status, the fixed salary must be at least 2 X minimum wage (currently $8.00 in California) X 40 hours.  Certain deductions from salary are authorized, as detailed in the federal FLSA regulations, 29 CFR 541.602 (here).

This case is Negri v. Koning & Associates and the opinion is here.

Court of Appeal: Union Contracts Must Clearly and Unmistakably Waive Rights Under California Vacation Law

It's California employment law 101 that employers must pay out all "vested" vacation time when an employee's employment ends.  No "use it or lose it" and no limits on "carry over" are allowed under Labor Code Section 227.3.  There's an exception in the statute though, which says the statute applies "[u]nless otherwise provided by a collective-bargaining agreement."

What does "otherwise provided" mean?  Well employer Celite had a collective bargaining relationship, and their agreement provided as follows, according to the Court of Appeal:

Celite granted its employees between one and five weeks of vacation annually. Each January, Celite calculated a yearly "vacation allotment" based on each employee's length of employment and the number of hours they worked the year before. [The] employees terminated from Celite were entitled to "receive whatever vacation allotment is due them upon separation."[fn] For 25 years, both Celite and the Union understood this provision to refer to the "vacation allotment" as defined above. Accordingly, Celite paid terminated employees for the vacation time already allotted to them for the year of their termination, but did not pay them the vacation time they had accrued toward the next year's allotment.

The description above suggests that the contract required payment of whatever vacation balance the employee had, but did not take into account "accrual" of vacation during the current year.  Pretty clear to me.

 

Not clear enough for the Court of Appeal, though, and I don't get a vote.  The Court decided that because vacation pay is a significant state-law right, any waiver of 227.3's requirements had to be "clear and unmistakable." Here's what the Court said:

To be clear and unmistakable, a waiver must do more than speak in "'[b]road, general language." (Vasquez, supra, 80 Cal.App.4th at p. 435.) It must be specific, and mention either the statutory protection being waived or, at a minimum, the statute itself. (Accord, Hoover v. American Income Life Ins. Co. (2012) 206 Cal.App.4th 1193, 1208.) The Agreements here neither mention pro rata vacation pay nor cite section 227.3. Celite points out that the Agreements "affirmatively address" vacation payments upon termination. But discussing a topic while at the same time saying nothing about the statutory right at issue does not affect a clear and unmistakable waiver of that right.

So, please check your union contracts and either negotiate a clear provision that waives Section 227.3 expressly and, preferably, quotes the statute.  This is why California release agreements quote Civil Code Section 1542, in case you've ever wondered about that.

On the bright side, the Court of Appeal decided the employer did not act "willfully" by following the collective bargaining agreement and, therefore, was not on the hook for "waiting time" penalties.  The court said that this was the first opinion deciding the standard for waivers under Section 227.3, and so the employer's mistake of law was not "willful."

Some times I wonder what all those class action plaintiff lawyers are doing after Brinker and Dukes v. Walmart put a damper on things.  (Ok, not really).  Well, here is the Court of Appeal riding to the rescue. 

It may be that the California or even U.S. Supreme Court may review this case, but the odds are long. If this case stays on the books, all union contracts prescribing a vacation payout provision that is less generous than Section 227.3 are subject to attack.  Make with the bargaining, employers.

The case is Choate v. Celite Corporation, and the opinion is here.

The Colorado Appeals Court Harshed My Mellow.

In California, we know that there is no right to work if you test positive for marijuana, not even medical marijuana.  See Ross v. RagingWire Telecommunications, Inc., 174 P.3d 200 (2008).

But Colorado not only has "medical" marijuana, but also a new law making all marijuana use legal, medical or not.  Well, the Colorado Court of Appeals did not get the memo prohibiting employers from discharging those who test positive for marijuana.

Applying the state's previous "medical marijuana" law, the Court decided that even medicinal use is not a "lawful activity" under the Colorado lawful activity statute.  (If marijuana use was protected as a lawful activity, employers could not discharge an employee for engaging in it).

Why?  Here's what the court said:

because activities conducted in Colorado, including medical marijuana use, are subject to both state and federal law, . . . for an activity to be “lawful” in Colorado, it must be permitted by, and not contrary to, both state and federal law. Conversely, an activity that violates federal law but complies with state law cannot be “lawful” under the ordinary meaning of that term. Therefore, applying the plain and ordinary meaning, the term “lawful activity” in section 24-34-402.5, means that the activity – here, plaintiff’s medical marijuana use – must comply with both state and federal law.

One of the three judges dissented, arguing that a "lawful activity" should be defined only under state law.

It may be that the Colorado Supreme Court takes this up, or that the Colorado legislature or voters have something to say about this issue. For now, though, Colorado employees cannot "wake and bake" before work under the protection of the lawful activities law.

The case is Coats v. Dish Network and the opinion is here.

Attorney Demand Letter: Sting but No SLAPP

Ever get one of these attorney demand letters?

“As you are aware, I have been retained to represent Media Print & Copy (‘Media’). We are in the process of uncovering the substantial fraud, conversion and breaches of contract that your client has committed on my client. . . . To date we have uncovered damages exceeding $75,000, not including interest applied thereto, punitive damages and attorneys’ fees. If your client does not agree to cooperate with our investigation and provide us with a repayment of such damages caused, we will be forced to proceed with filing a legal action against him, as well as reporting him to the California Attorney General, the Los Angeles District Attorney, the Internal Revenue Service regarding tax fraud, the Better Business Bureau, as well as to customers and vendors with whom he may be perpetrating the same fraud upon [sic].” The letter goes on to list Mendoza’s alleged transgressions, including failure to pay Media’s employees, sales taxes and bills.

Ouch. The threats. The insinuations.  The money.  Wait, criminal prosecution?

Well, Mendoza, the recipient of the above attorney demand letter, did not take this lying down. He sued the attorney, Hamzeh, for extortion, intentional infliction of emotional distress and unfair business practices.

But aren't demand letters protected speech?  And can't a lawyer sued for sending a demand letter use the "Anti-SLAPP" statute so they are not sued for representing their clients aggressively?

Yes.  Most of the time.  In this case, though, the attorney's letter exceeded the protections of the anti-SLAPP statute. Why?  Because there is no anti-SLAPP protection for threatening criminal prosecution unless the target pays money (i.e., extortion):

The threat to report a crime may constitute extortion even if the victim did in fact commit a crime. The threat to report a crime may in and of itself be legal. But when the threat to report a crime is coupled with a demand for money, the threat becomes illegal, regardless of whether the victim in fact owed the money demanded. (Flatley, supra, 39 Cal.4th at pp. 326-327.) “‘The law does not contemplate the use of criminal process as a means of collecting a debt.’ [Citations.]” (Ibid.) “Attorneys are not exempt from these principles in their professional conduct. Indeed, the Rules of Professional Conduct specifically prohibit attorneys from ‘threaten[ing] to present criminal, administration, or disciplinary charges to obtain an advantage in a civil dispute.’ (Cal. Rules of Prof. Conduct, rule 5-100(A).)” (Id. at p. 327.)

Again, most attorneys know better.  And most attorney demand letters are protected from retaliatory lawsuits. But, in my experience, some attorneys go too far with their letters.  Perhaps it's enough to simply lay out the facts and explain why there is the potential for legal liability without calling the defendant a criminal, and without demanding money to refrain from reporting a crime.

If the demand goes too far, as in this case, the lawsuit alleging extortion against the would be plaintiff's counsel is not a SLAPP, but it could be painful.  ::rimshot:::

The case is Mendoza v. Hamzeh, and the opinion is here.

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9th Circuit Allows Wage Claim Based on End of Day Security Screen

Integrity Staffing Solutions employed temp warehouse workers in Nevada.  At the end of the workers' day, they had to pass through security screenings to minimize theft. They had to remove metal from pockets and pass through a metal detector.  Sometimes, they had to wait up to 25 minutes for the security check.

The plaintiffs brought a claim for off-the-clock work, claiming the screenings were part of the compensable work day in violation of the Fair Labor Standards Act. They also brought state law claims under Nevada law.  They claimed that they had to walk to the lunch room to punch out for meals, and had to undergo security screenings after lunch before returning to work. These took only 5 minutes.

The court of appeals held that (based on the plaintiffs' allegations in the complaint) waiting for security could be compensable time under the Fair Labor Standards Act:

Here, Busk and Castro have alleged that Integrity requires the security screenings, which must be conducted at work. They also allege that the screenings are intended to prevent employee theft – a plausible allegation since the employees apparently pass through the clearances only on their way out of work, not when they enter. As alleged, the security clearances are necessary to employees’ primary work as warehouse employees and done for Integrity’s benefit. Assuming, as we must, that these allegations are true, the plaintiffs have stated a plausible claim for relief.
***
Integrity allegedly requires the screening to prevent employee theft, a concern that stems from the nature of the employees’ work (specifically, their access to merchandise).

As for the claims that the plaintiffs were delayed from enjoying their unpaid meal period, the court of appeals was not convinced:

Busk and Castro alleged they were not “completely relieved from duty” because by placing the time clocks far from the lunchroom, Integrity forced upon them the “duty to walk to the lunch room in order to eat lunch.” But the district court correctly held that walking to the lunchroom is not a work duty. Walking to the lunchroom is not necessary to the plaintiffs’ principal work as warehouse employees. Moreover, though the Portal-to-Portal Act does not clearly preclude compensation for walking to the lunchroom, as it only expressly applies to walking before the workday starts

* * *

Finally, the first amended complaint alleges that employees had to pass through a security clearance on their way to the lunchroom. Assuming that the time passing through the security clearance on the way to lunch constitutes compensable work, the time alleged in this case is de minimis. See Lindow v. United States, 738 F.2d 1057, 1062–64 (9th Cir. 1984) (discussing de minimis exception). As alleged in the first amended complaint, the walk to and from the cafeteria takes “approximately five minutes” each way, though employees pass through security only on their way to the cafeteria, not on the return trip. The relatively minimal time expended on the clearance in this context differs from the 25-minute delay alleged for employees passing through security at day’s end. Therefore, the district court correctlydismissed this claim under Rule 12(b)(6).

Based on this case, employers should consider whether "bag checks" and other security screening at the end of the shift should paid time (at least in the Ninth Circuit), unless it happens quickly enough to be "de minimis."

Of interest to litigators, the Court of Appeals decided that a federal "opt in" class action under the Fair Labor Standards Act could proceed simultaneously with a state-law based "opt out" class action.

This case is Busk v. Integrity Staffing Solutions and the opinion is here.

U.S. Supreme Court Holds Settlement Offer Thwarted FLSA Collective Action

Laura Symczyk, a nurse, challenged her employer's policy of "auto-deducting" a half hour for meal breaks, claiming that she and others "similarly situated" worked "off the clock."  She brought a "collective action" under the federal Fair Labor Standards Act, which is essentially an "opt-in" class action. That is, the other employees are given a chance to "opt in" to the action. In a class action, once certified, the unnamed class members are given a chance to "opt out" or they are bound by the judgment or settlement.

The courts never reached the auto-deduct issue.  The employer answered the complaint and simultaneously made an "offer of judgment" under Federal Rule of Civil Procedure 68. The offer was for $7500 plus attorneys fees and costs as determined by the court.  (Because it was the very beginning of the case, the employer must have figured the attorney's fees would be low).

The plaintiff ignored the Rule 68 offer.  The employer then brought a motion to dismiss the case, arguing that the Rule 68 offer completely compensated the plaintiff for her claims, and rendered it "moot" because she no longer had a stake in the case.  Therefore, she had no basis for leading the collective action against the employer.

The lower courts agreed that the settlement offer would have given the plaintiff complete relief. The district court dismissed the claim, but the Third Circuit Court of Appeals held the class action could proceed because the employer was trying to "pick off" the name plaintiff.

The Supreme Court assumed without deciding that an unaccepted Rule 68 offer would "moot" a claim if it offered complete relief. The Court did so because the plaintiff conceded that point in the courts below.

Based on that assumption and the plaintiff's concession, the Court decided that the claim could not proceed:  Justice Thomas, writing for 5 justices, wrote:

In the absence of any claimant’s opting in, respondent’s suit became moot when her individual claim became moot, because she lacked any personal interest in representing others in this action. While the FLSA authorizes an aggrieved employee to bring an action on behalf ofhimself and “other employees similarly situated,” 29 U. S. C. §216(b), the mere presence of collective-action allegations in the complaint cannot save the suit frommootness once the individual claim is satisfied
***
[W]e conclude that respondent has no personal interest inrepresenting putative, unnamed claimants, nor any other continuing interest that would preserve her suit from mootness. Respondent’s suit was, therefore, appropriatelydismissed for lack of subject-matter jurisdiction.

Justice Kagan wrote for 4 dissenters.  She in essence argues that an unaccepted offer does not moot the case, which the majority did not decide because the plaintiff conceded the point and the lower courts so held.  Justice Kagan in essence "yelled" at the lower courts that this approach was "wrong, wrong, and wrong again."  (We'll see if those who criticize Justice Scalia when he gets sassy objects to her rather caustic opinion, which I enjoyed reading a lot by the way).

To me, the plaintiff should be able to reject an offer and continue litigating, hoping to do better than the offer of judgment.  The issue here is that the plaintiff agreed she could not have obtained a more favorable result on her individual claim.  Plaintiffs in future cases may not make that concession which, as Justice Kagan predicts, will render this case inapplicable to most future claims.

Anyway, it remains to be seen how this case will affect future FLSA collective actions.  California law regarding offers to compromise is governed by Code of Civil Procedure Section 998, so state-law cases are not directly affected.  But we will have to stay tuned to see whether California courts follow the federal approach.

The opinion is Genesis Healthcare Corp. v. Symczyk and you can read it (and the dissent) here.

Catching Up - Friday Pot Pourri

Here are a few of the cases I should have mentioned, but missed:

In Lui v. City and County of San Francisco (opinion here), a police officer suffered a serious heart attack. He had a number of physical ailments and sought a job that did not involve the physical requirements of a police officer.  Under  a new directive, San Francisco police officers, even those assigned to administrative duties, had to perform certain functions. Upholding the trial court, the court of appeal decided that the officer could not succeed on claims for disability discrimination, failure to accommodate, or failure to engage in the interactive process.  The officer could not perform several essential job functions. Although this case arises in the special context of police officers, the court's analysis of what is essential is important.

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The Ninth Circuit held that Jennifer Westendorf did not make out a case of sexual harassment sufficient to get by summary judgment (!)  The comments and incidents she described, even though sexual in nature, and  though some were pretty darn risque I tell ya, were not severe or pervasive enough.  However, the court did allow the retaliation to go forward. The case is Westendorf v. West Coast Contractors (opinion here).

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The Court of Appeal decided that Bingham McCutchen's arbitration agreement was unenforceable.  Interestingly, the arbitration agreement had a Massachusetts choice of law clause.  Unlike in most employment law-related cases, the court enforced the choice of law clause, over Bingham's objection. Why?   Glad you asked: Mass. law precluded agreements to arbitrate discrimination claims unless they were specifically addressed in detail in the arbitration agreement.  Too bad a non-compete was not involved. The court probably would not have recited how much California law loves choice of law clauses.  Anyway, the Court decided that the Massachusetts court rulings were not preempted by the Federal Arbitration Act and, therefore, the arbitration agreement was unenforceable. Be careful of choice of law clauses, they may well be enforced!  This case is Harris v. Bingham McCutchen et al. and the opinion is here.

Court of Appeal: CA Employer Violates Minimum Wage By Averaging Total Compensation Over Hours Worked

An auto dealership compensated its mechanics based on a "piece rate" system. For repairs, the company would pay the employees based on a standard period of time allowed for a repair (flag hours).  The pay rate was significantly higher than minimum wage.  So, if the job took longer than standard hours, there was enough wages to ensure the mechanic earned more than minimum wage.

But the mechanics spent significant time at work NOT performing repairs, such as in training, cleaning, etc.  The dealership would calculate the total hours worked vs. the compensation it would pay for flag hours.  If the pay rate fell below minimum wage, the dealership would make up the difference.  The dealership did not pay a separate hourly rate for non-repair time that would not have been covered under the piece rate.

Illegal, said the court of appeal. The main issue is whether the applicable Wage Order (Wage Order 4-2001), requires payment of at least minimum wage for each hour worked, or an average of minimum wage for all hours worked in the work week.  The trial court and Court of Appeal, relying on an earlier case, Armenta v. Osmose, Inc. (2005) 135 Cal.App.4th 314 agreed with the plaintiffs that the former interpretation was correct.

The bottom line is that piece-rate employees must be paid separately for work that does not fall within the scope of the work that is the subject of the piece rate.  The non-related hours must be paid at least at minimum wage.  Employers concerned about increased payroll costs may choose to reduce piece rates prospectively, and upon reasonable notice.  They should check with their lawyers first regarding how to do this.

While you have your lawyer on the phone, another wrinkle may be determining where the piece rate work ends and the non-related work begins.  What, exactly, goes into the calculation of the piece rate repair time?  If the employer over-includes non-related work into the piece rate, it risks liability if the work should have been classified as non-related.

This case is Gonzalez v. Downtown LA Motors and the opinion is here.

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Me Too? Too Far

"Me too" evidence is when the plaintiff attempts to prove discrimination against him or her by offering evidence that others suffered similar discrimination.  The courts admit this evidence as proof of intent or motive, where it otherwise would be excluded as "character" evidence.

The Court of Appeal rejected the attempted use of "me too" evidence in a case where an employee claimed his boss discriminated against him because of his Asian national origin.  But this employee did not seek to admit "me too" evidence to show that the boss discriminated against other Asians.  Rather, the employee tried to admit evidence showing the boss discriminated against anyone who was not "Arab."

The trial court excluded the evidence as more prejudicial than probative under Evidence Code Section 352. The Court of Appeal affirmed:

Here, Hatai alleged he is a person of “Asian or Japanese race or national origin or ancestry,” and that he suffered discrimination, harassment and retaliation on the basis of his national origin and/or race. Thus, the “me-too” doctrine entitled Hatai to present evidence that other employees at Caltrans of east Asian or Japanese descent had been subjected to similar discrimination. However, given the nature of Hatai‟s lawsuit, the “me-too” doctrine did not entitle Hatai to present evidence of discrimination against employees outside of Hatai’s protected class to show discrimination or harassment against Hatai.

 The case is Hatai v. Department of Transportation and the opinion is here.

Court of Appeal Explains Invasion of Privacy Claim in California

Ignat worked for a Yum! Brands restaurant. She had bi-polar disorder.  While on a leave, her supervisor allegedly disclosed her condition to other employees, verbally.  Ignat sued for invasion of privacy, based on the common law claim "public disclosure of private facts."

The court of appeal reversed summary judgment.  The court explained that, contrary to the trial court's ruling, a claim for invasion of privacy based on disclosure of private facts is viable even if the disclosure is verbal as opposed to written:

We conclude that limiting liability for public disclosure of private facts to those recorded in a writing is contrary to the tort‟s purpose, which has been since its inception to allow a person to control the kind of information about himself made available to the public – in essence, to define his public persona. (See Briscoe, supra, 4 Cal.3d at p. 534; The Right to Privacy, supra, 4 Harv. L.Rev. at pp. 198-199.) While this restriction may have made sense in the 1890‟s – when no one dreamed of talk radio or confessional television – it certainly makes no sense now. Private facts can be just as widely disclosed – if not more so – through oral media as through written ones.

Because the trial court found no written dissemination of the plaintiff's condition, it ruled she could not prevail. The appellate court sent the case back to the trial court for re-evaluation.

However, the court also explained that the common law tort is not established based on mere disclosure to a few individuals. The court also distinguished between a claim for invasion of privacy based on the California constitution, and a common law claim.

Our Supreme Court regards the two legal theories as providing separate, albeit related, ways to insure privacy. The constitutional variety focuses on institutional record-keeping and does not require a wide dissemination of private information. (See Hill, supra, 7 Cal.4th at pp. 35-37 [elements of constitutional privacy violation].) Liability for the common-law tort requires publicity; disclosure to a few people in limited circumstances does not violate the right. (Porten v. University of San Francisco (1976) 64 Cal.App.3d 825, 840; Timperley v. Chase Collection Service (1969) 272 Cal.App.2d 697, 700; Schwartz v. Thiele (1966) 242 Cal.App.2d 799, 805.) Moreover, the facts disclosed must be offensive or objectionable to a reasonable person. (See, e.g., Shulman, supra, 18 Cal.4th at p. 214.) If they are not, there is no liability. (See, e.g., Johnson v. Harcourt, Brace, Jovanovich, Inc., supra, 43 Cal.App.3d at p. 892 [facts disclosed not "„so offensive as to shock the community‟s notions of decency.‟ [Citation.]"]; Carlisle v. Fawcett Publications, Inc. (1962) 201 Cal.App.2d 733, 748.) The constitutional right, however, may be violated if any private record that was supposed to be kept confidential is disclosed, for example, a college transcript. (Porten v. University of San Francisco, supra, 64 Cal.App.3d at p. 827.)

Based on the papers filed in the case, Ignat was limited to the common law claim, and therefore will have to prove widespread dissemination.

This case underscores the need to limit communications about the nature of an employee's disability or other sensitive private facts that would be "so offensive as to shock the community" if disclosed.

The case is Ignat v. Yum Brands, Inc. and the opinion is here.

Court of Appeal Affirms Denial of Class Certification

The court of appeal decided in a retail exemption case that the trial court ruled within its discretion to de-certify or preclude class action status.  The  case involved Sears automotive center managers and a dispute over whether they were correctly classified as exempt. The trial court issued a brief order denying certification, which the plaintiff appealed.

The appellate court's analysis focused on a few issues of interest. First, the trial court has discretion to credit one party's evidence over the other party's conflicting evidence. Second, the appellate court defers to the trial court's discretion by inquiring only whether there is substantial evidence supporting the trial court's ruling.  It does not matter if the other side also offered enough evidence to support a contrary ruling. 

Third, the court emphasized that an employer's uniform policy or classification of a group of employees as exempt is not going to suffice as a "predominating" common issue to warrant class action treatment. Rather, the trial court is supposed to determine whether the actual work performed by the potential class members is susceptible to common questions and answers.

And that brings us to the important part of the opinion. The court rejected the plaintiff's attempt to offer a statistician's opinion that one could "sample" a small group of managers to predict whether all class members were exempt or non-exempt.

To obtain class certification, Dailey was required to demonstrate the predominance of common questions of law or fact. . . . We have found no case, and Dailey has cited none, where a court has deemed a mere proposal for statistical sampling to be an adequate evidentiary substitute or demonstrating the requisite commonality, or suggested that statistical sampling may be used to manufacture predominate common issues where the factual record indicates none exist. If the commonality requirement could be satisfied merely on the basis of a sampling methodology proposal such as the one before us, it is hard to imagine that any proposed class action would not be certified.
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[C]ourts have held that when the class action proponent fails to satisfy the threshold requirement of commonality, as occurred here, the trial court does not err in rejecting the use of statistical sampling or other methodologies to establish liability as to the whole proposed class. (See, e.g., Mora, supra, 194 Cal.App.4th at pp. 501, 509-510 [rejecting argument that trial court erred in failing to consider survey methodology proposed by plaintiffs' expert to measure the amount of time employees spent on exempt versus nonexempt tasks, in light of that court's reasonable conclusion that common questions of fact or law did not predominate over individual ones]; Dunbar v. Albertson's Inc. (2006) 141 Cal.App.4th 1422, 1432 (Dunbar) [no error in court's conclusion — and in its implicit rejection of the use of surveys and exemplar evidence — that the "findings as to one grocery manager could not reasonably be extrapolated to others given the variation in their work"].)

 The court of appeal also rejected the notion that the absence of a formal policy regarding meals and breaks for exempt employees supports class certification:

Dailey also is not helped by evidence that Sears does not have formal written policies regarding rest breaks and meal periods for salaried managers, does not ensure that breaks are taken, and does not keep records of breaks these employees take. First, such evidence is consistent with Sears's contention that Managers and Assistant Managers are exempt employees. Second, to the extent this evidence relates to whether Managers and Assistant Managers actually take uninterrupted breaks, or to whether Sears enforces meal and rest periods, that evidence is not directly relevant after Brinker. (Brinker, supra, 53 Cal.4th at pp. 1034, 1040-1041.) Finally, the absence of a formal written policy explaining salaried managers' rights to meal and rest periods does not necessarily imply the existence of a uniform policy or widespread practice of either depriving these employees of meal and rest periods or requiring them to work during those periods. Sears presented substantial evidence that no one prevents Managers and Assistant Managers from taking meal and rest breaks, and they are free to do so as they deem appropriate. As explained previously, the trial court was entitled to credit this testimony over contrary inferences suggested by Dailey's evidence. (See, e.g., Sav-On, supra, 34 Cal.4th at p. 331.)

The case is Dailey v. Sears, Roebuck & Co. and the opinion is here.

Ninth Circuit: Class Action Erroneously Certified Given Wal-Mart v. Dukes

Back in 2004, employees of the Chinese Daily News started a class action, claiming mis-classification, unpaid overtime and denied meals and breaks.  The trial court eventually certified a class, and the employees won summary judgment on whether reporters for the newspaper qualified under the professional exemption.  The employees won millions of dollars after trial, which the Ninth Circuit affirmed.

Not so fast, said the Supreme Court.  Following the Supreme Court's Wal-Mart Stores v. Dukes decision (discussed here), the Supreme Court vacated the Ninth Circuit's decision in this case.  The Ninth Circuit decided that Wal-Mart requires reconsideration of the decision and sent it back to the district court.

Why? The trial court did not apply the proper analysis (after Wal-Mart) to determine whether there is sufficient commonality to certify the class.  As explained by the Court:

On remand, the district court must determine whether the  claims of the proposed class “depend upon a common contention . . . of such a nature that it is capable of classwide resolution — 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.” Wal-Mart, 131 S. Ct. at 2551.

So, it's not enough that there are "common questions" in the abstract, because, as the Ninth Circuit stated (quoting Wal-Mart and its own later decision in Ellis v. Costco):

"any competently crafted class complaint literally raises common questions.” Wang [sic], 131 S. Ct. at 2551 (alteration and internal quotation marks omitted). “What matters to class certification is not the raising of common questions — even in droves — but, rather the capacity of a classwide proceeding to generate common answers apt to drive the resolution of the litigation.” Id. (alteration and internal quotation marks omitted). Dissimilarities within the proposed class may “impede the generation of common answers.” Id. “If there is no evidence that the entire class was subject to the same allegedly
discriminatory practice, there is no question common to the class.” Ellis v. Costco Wholesale Corp., 657 F.3d 970, 983 (9th Cir. 2011).

The Ninth Circuit also decided that the district court would have to reconsider whether certification is appropriate under Federal Rule of Civil Procedure 23(b)(3).  That rule permits monetary recovery in class action cases when

the court finds that the questions of law or fact  common to class members predominate over any questions affecting only individual  members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.

First, the district court over-relied on the employer's policies applicable to all employees, but without considering whether issues pertaining to individual claims and defenses would "predominate" over the common policy.  Second, the district court did not have the California Supreme Court's Brinker decision (you've heard of it, right?) to assess whether certification of a meal / rest claim was appropriate. 

Of note, the Ninth Circuit also wrote this, which will likely be of interest to class action litigators:

In Wal-Mart, the Supreme Court disapproved what it called “Trial by Formula,” wherein damages are determined for a sample set of class members and then applied by extrapolation to the rest of the class “without further individualized proceedings.” Wal-Mart, 131 S. Ct. at 2561. Employers are “entitled to individualized determinations of each employee’s eligibility” for monetary relief. Id. at 2560.
Employers are also entitled to litigate any individual affirmative defenses they may have to class members’ claims. Id. at 2561. 

The case is Wang v. Chinese Daily News and the opinion is here.