Ninth Circuit Issues Two More Arbitration Rulings

The Ninth Circuit issued two arbitration decisions a day apart. Both opinions were written by Circuit Judge Richard Clifton.  But the court came down in favor of arbitration in one and against in the other.

Ferguson
Kevin Ferguson sued Corinthian Colleges, Inc. claiming he was deceived by the college's methods of recruiting students to apply.  He signed an arbitration agreement.  The district court refused to enforce it in part, because Ferguson's claims included "public injunctive" relief.  California law held that it was unconscionable to require arbitration of these claims.  Corinthian argued that California's rule precluding arbitration of "public" injunctive relief claims (such as under the Unfair Competition Law and Consumer Legal Remedies Act) was preempted by the Federal Arbitration Act.

The court of appeals held that the FAA indeed preempts California law on this point.  The court held that exempting UCL or CLRA injunction claims from arbitration was inconsistent with U.S. Supreme Court decisions.  Therefore, the Ninth Circuit held that two California Supreme Court decisions exempting from arbitration claims seeking public injunctions are preempted. (Broughton v. Cigna Healthplans of California, 988 P.2d 67 (Cal. 1999). Cruz v. PacifiCare Health Systems, Inc., 66 P.3d 1157, 1164–65 (Cal. 2003).

The significance of this decision to employment law is that this case will affect the analysis of claims brought under the Private Attorney Generals Act or PAGA.  For example in Brown v. Ralphs Grocery Co., 197 Cal. App. 4th 489 (Cal. App. 2d Dist. 2011), the Court of Appeal held that the FAA did not require employees to arbitrate PAGA claims. The Court in part relied on Broughton. This case calls into question the Brown court's analysis. The California Supreme Court is considering a host of arbitration law issues, likely including whether PAGA claims are preempted.

This case is Ferguson v. Corinthian Colleges, Inc. and the opinion is here.

Chavarria

Zenia Chavarria was a Ralphs Grocery deli clerk for a short time. She brought a wage-hour class action.

Chavarria had signed the employment application, in which she acknowledged she would be bound by Ralphs arbitration agreement.  The district court held the agreement was unenforceable. The Ninth Circuit agreed.

First, the court of appeals decided that the agreement was unconscionable under California law.  Second, the court held that federal law did not preempt California's unconscionability analysis.

Here are the main provisions:

The arbitration agreement

• - required the parties to use a retired judge 
• - expressly excluded JAMS and AAA from the administration of the arbitration
• - provided that if the parties did not agree on an arbitrator, each side would submit three arbitrators and alternate striking names.  The first "strike" would be by the party that did not demand arbitration (almost always the employer)

The last point factored into the court's decision that Ralphs agreement was unconscionable. The court remarked: "In practice, the arbitrator selected through this process will invariably be one of the three candidates nominated by the party that did not demand arbitration."  Although Ralphs did not make the argument, this statement would not be true if either party did not strike one of the other party's arbitrators.  (For example, the employer picks a retired judge that the employee prefers over the three retired judges she proposed).

The court merely assumed that each side would always pick three arbitrators unacceptable to the other side, and that each side would automatically strike the other side's judges. That is not always the case in my experience.  In any event, the court held this scheme was unconscionable.  Perhaps if Ralphs had provided for a coin-flip for deciding who makes the first strike, it would have passed muster.

Ralphs apparently excluded JAMS and AAA because of their employee-friendly arbitration rules, designed to comply with California law.  In particular, the agreement gave the arbitrator the power to apportion the arbitration costs up front, contrary to California's arbitration jurisprudence and the above rules. To remove the issue from a judge's review, the agreement provided the arbitrator must decide disputes over the arbitrator fees.  And the agreement provided that the arbitrator could consider only U.S. Supreme Court authority in deciding how to apportion the fees (thereby ignoring California law and lower federal court decisions).  The court of appeals held that provision was illegal too.

The agreement also expressly said that it could be modified by Ralphs and that no signature would be required to accept a change. Rather, the employee's continued employment would be acceptance.  The court did not reach this issue, as it found that the above terms, plus procedural unconscionability (because it was take-it-or-leave-it), invalidated the agreement under California law.

Ralphs was trying to avoid California arbitration case law, because California courts find arbitration agreements unconscionable for many reasons that seem unique to arbitration agreements.  That being the case, Ralphs argued that the Federal Arbitration Act preempts California's arbitration jurisprudence.

No sale, said the court of appeals.  The court held that the FAA did not preempt the court's holding that Ralphs' cost allocation provision was unconscionable.  The Supreme Court's recent Italian Colors decision was inapplicable, the court found, because that decision said that the high cost of proving the claim did not preclude a class-action waiver.  This case, on the other hand, involved the high cost of arbitration itself.

The court of appeals also rejected Ralphs argument that special unconscionability rules that could apply only to arbitration contracts -- such as the finding that the arbitrator selection procedures were unconscionable --  were preempted. The court held

The Supreme Court’s holding that the FAA preempts state laws having a “disproportionate impact” on arbitration cannot be read to immunize all arbitration agreements from invalidation no matter how unconscionable they may be, so long as they invoke the shield of arbitration. Our court has recently explained the nuance: “Concepcion outlaws discrimination in state policy that is unfavorable to
arbitration.” Mortensen v. Bresnan Commc’ns, LLC, 722 F.3d 1151, 1160 (9th Cir. 2013) (emphasis added). We think this is a sensible reading of Concepcion.

The panel did not believe that the arbitration selection issue was "unfavorable" to arbitration.  Therefore, it would not be preempted.

The Supreme Court one day will resolve the tension between Concepcion and Armendariz once and for all. Until then, it will be difficult to implement arbitration agreements in California that will pass judicial review for unconscionability.  Not impossible - just difficult.  

That said, it's still legal to include class action waivers in arbitration agreements. That could make arbitration worthwhile, assuming the employer is ready to bear the costs / arbitrator fees for individual claims.

This case is Chavarria v. Ralphs Grocery Company and the opinion is here.

9th Circuit: $1 in damages....$125,000 Punitive Award OK?

Punitive damages can be unconstitutional when the punishment does not fit the "crime" (or liability).  The Supreme Court noted in BMW v. Gore a long time ago that “[punitive] damages must bear a reasonable relationship to compensatory damages.”  There is case law in which courts held that punitive damages in many cases should not exceed a 1:1 ratio, usually should not exceed 3:1 and pretty much never should exceed 9:1. Further,the Supreme Court stated in another case, State Farm, that “few awards exceeding a single-digit ratio between punitive and compensatory damages . . . will satisfy due process.”

Here's a case that apparently is an exception to the rule. This case was about how a court reaches a proper award of punitive damages when there are no compensatory damages.  ($1.00 to be exact).  

Angela Aguilar sued ASARCO LLC, a mining company,  for sexual harassment.  The allegations included sexual solicitations and a vandalized portable toilet at the work site. Supervision and HR were generally unsympathetic and took practically no action in response to her complaints.  One HR person told her she had to "handle" the 350 lb would-be paramour herself.  

Management did not take action on the basis of another supervisor's rude and obnoxious behavior towards her, apparently contending he was an "equal opportunity a*****" (to use the official employment law legal jargon).  That argument rarely works.

After trial, a jury found in favor of Aguilar on the sexual harassment claim, but not on her constructive termination based claims.  But the jury awarded just $1.00 in damages, apparently believing that although the conduct towards Aguilar was harassment, she suffered no actual harm. The jury, though, decided to punish ASARCO, probably for its less than stellar handling of Aguilar's complaints, and awarded punitive damages of over $800,000.

Under federal law, the maximum punitive damages award on a Title VII claim is $300,000. So, on ASARCO's motion for new trial, the trial court reduced the punitive damages award accordingly.   

ASARCO appealed to the Ninth Circuit, arguing that an award of $300,000 was way too high when the jury awarded $1.00.  The Court of Appeals did not ignore the ratio. In fact, the Court held that courts must consider the Supreme Court's analysis of the ratio.  

Yet, the Court of Appeals found a way to uphold a substantial punitive damages award anyway:  At a ratio of 125,000:1.  Here's how they got there:

Given ASARCO’s highly reprehensible conduct and the presence of a comparable civil penalty in the form of the Title VII damages cap, we conclude that the Constitution does not bar the imposition of a substantial punitive award in this case. But this does not change the fact that a 300,000 to 1 ratio raises our “judicial eyebrow[s].” Gore, 517 U.S. at 583.
* * *
Although we think a ratio higher than 2,500 to one is called for by ASARCO’s conduct, the $300,000 awarded was nonetheless excessive. As we indicated above, no court in a discrimination case has ever upheld a ratio of punitive damages to compensatory damages greater than 125,000 to 1. Many discrimination cases have struck down awards as constitutionally excessive with substantially smaller ratios. See Thomas v. iStar Fin., Inc., 652 F.3d 141, 149–50 (2d Cir. 2011) (holding that a $1.6 million punitive damages award, in comparison to a $280,000 compensatory damages award, violates due process); Mendez-Matos v. Mun. of Guaynabo, 557 F.3d 36, 55 (1st Cir. 2009) (holding that a $350,000 punitive damages award, in comparison to a $35,000 compensatory damages award, violates due process); Bains, 405 F.3d at 776–77 (holding that a $5 million punitive damages award, in comparison to a $50,000 compensatory damages award, violates due process); Williams, 378 F.3d at 798 (holding that a $6,063,750 punitive damages award, in comparison to a $600,000 compensatory damages award, violates due process); Lincoln v. Case, 340 F.3d 283, 294 (5th Cir. 2003) (holding that a $100,000 punitive damages award, in comparison to a $500 compensatory damages award, violates due process); Ross v. Kan. City Power & Light Co., 293 F.3d 1041, 1049 (8th Cir. 2002) (holding that a $120,000 punitive damages award, in comparison to a $6,000 compensatory damages award, violates due process); Rubinstein v. Adm’rs of Tulane Educ. Fund, 218 F.3d 392, 408 (5th Cir. 2000) (holding that a $750,000 punitive damages award, in comparison to a $2,500 compensatory damages award, violates due process).

* * * *

Since nothing compels a particular dollar figure, we conclude that the highest punitive award supportable under due process is $125,000, in accord with the highest ratio we could locate among discrimination cases. Abner, 513 F.3d at 164. We think this is the highest award which maintains the required “reasonable relationship” between compensatory and punitive damages. Gore, 517 U.S. at 580. This award is nonetheless on the order of the damages cap in Title VII and proportional to the reprehensibility of ASARCO’s conduct.

So, here's why I am too dumb to be a judge.  The court cites to abundant case law showing that when a defendant inflicts actual harm - measured in money - it's unconstitutional to award punitive damages in a ratio well below 100:1, or 10:1.  In fact, $100,000 is unconstitutional when the award of actual damages is $500; and $120,000 is unconstitutional when the actual damages are $6,000.  But here, where the Defendant inflicted no actual harm, the punitive damages ratio can be 125,000:1. Does that make sense to you?  

I guess the court was more than a little unimpressed with ASARCO's supervisors' conduct and the corporation's poor handling of the situation.  And rightly so.  But I don't understand how one is able to divine a rule regarding what is "due process." 

We'll see if the Supreme Court takes up the issue of whether punitive damages implicate the Gore Due Process analysis when there is no actual damage. Until then, it looks like the Constitution says punitive damages of $125,000 are permitted when a jury awards $1.00.  

The case is Arizona v. ASARCO LLC and the opinion is here.

Court of Appeal: State Anti-Hacking Criminal Statute Applies to Employee

Childs was a senior engineer for the City and County of San Francisco.  Via a series of events, he assumed significant control over a major part of the city's IT infrastructure, against the wishes of management.  I'm oversimplifying here.  The opinion contains all the gory IT details, and there are many.

At different times, management attempted to retrieve network passwords, which Childs refused to provide.  He claimed certain network configurations were his intellectual property, and he claimed that there would be a risk of disclosure of the passwords.  He also stored the passwords in such a way that they would be erased if the network had a power outage, resulting in the need to entirely reconfigure the system.

By the time Childs was fired, he had assumed total control of the network.  He became threatening and combative when another employee came to his offices to conduct an inventory.  After many meetings, the city naturally fired  attempted to reassign Childs to another job.  Management and the police met with him to recover the passwords.  He refused to provide them, with policy "pleading" with him for cooperation.

The city was locked out of its own computer system for several weeks.  Childs ultimately returned the correct passwords via his attorney, directly to the Mayor at the time.

Childs eventually was convicted under California Penal Code Section 502.  As told by the Court,

Section 502, subdivision (c)(5) makes it a crime for any person who “[k]nowingly and without permission disrupts or causes the disruption of computer services or denies or causes the denial of computer services to an authorized user of a computer, computer system, or computer network.”

One of Childs's many arguments was that he was an authorized user because the City employed him. Therefore he was not acting "without permission."  The Court of Appeal affirmed the conviction:

It appears that subdivision (c)(5) may properly be applied to an employee who uses his or her authorized access to a computer system to disrupt or deny computer services to another lawful user.

The opinion contains details about how the employee was able to take over the city's computer system.  Employers: don't let this happen to you. Ensure you have outside help to create secure "back doors" and fail safe ways of accessing the system. The employment law upshot is:  employers should ensure there are policies for IT engineers defining what is authorized and unauthorized access / permission. Then, if an IT employee goes off the rails, it is easier to raise the issue of criminal prosecution.  

Criminal Background Check

Here's another interesting part of this case.   I say interesting because of all the negative attention the government is giving to employers conducting criminal background checks.  Perhaps this case will serve as a reminder that criminal background checks could be a good idea for positions such as Childs's.

Childs lied on his employment application, because he had been convicted of several crimes out of state but did not list the convictions.  

More than once during his employment, Childs was asked to undergo a background check:

In February 2005, a San Francisco County sheriff told Childs that he needed to undergo a criminal background check. Childs offered both his California and Kansas driver‟s licenses to the sheriff, prompting an out-of-state inquiry. The sheriff discussed his findings about Childs‟s criminal history with his supervisor, who agreed that Childs could work on the project. Months later, the sheriff acknowledged to Childs that he knew of this criminal history when he praised the network engineer for “turning his life around.”

Oops. Then, 

By the end of 2007, the city was planning how to connect the city‟s law enforcement functions on FiberWAN. The combined system would allow users access to state and federal databases. For security reasons, all DTIS employees had to pass a criminal background check in order to have access to the law enforcement system. Childs had adult felony convictions that he had not revealed when he applied to work for the city.8 When asked to submit to a voluntary background check, Childs balked. Instead, he made a temporary arrangement with Tong and law enforcement officials to have Ybanez—who had passed his background check—escort him when Childs was required to work on the law enforcement network. This procedure continued to be used through July 9, 2008.

So, he said "no background check" for me - and they went for it.  

Long after Childs refused to provide the passwords to his supervisor, and after there were discussions about how to rein in Childs, a manager pondered...

Robinson knew that Childs had not passed his background check. He sought out more information about the engineer‟s criminal history. Reviewing the reports that Childs gave during the hiring process, Robinson saw the discrepancy between his initial job application reflecting no prior convictions and his time-of-hiring forms in which he admitted that he had once been convicted as an adult. Tong believed that Childs had suffered a juvenile conviction, but Robinson learned that Childs had been convicted of a criminal offense as an adult. The adult conviction and the perjured filing of personnel records were both grounds for dismissal.

And they still did not fire him for lying or because the convictions rendered him unfit.  Anyway, that's a slice of personnel management in San Francisco.

The case is People v.  Childs and the opinion is here.

 

California Supreme Court: Arbitration Agreement Can Waive Labor Commissioner Hearings. I think.

We posted about the California Supreme Court's decision in Sonic-Calabassas A, Inc. v. Moreno (2011) 51 Cal.4th 659  here.  In that case, the California Supreme Court decided that an employer cannot make an employee skip a labor commissioner hearing in favor of arbitration.

The U.S. Supreme Court then issued its opinion in AT&T Mobility v. Concepcion (discussed here).  The California Supreme Court agreed to reconsider Moreno in light of Concepcion.  In the meantime, Moreno's author, Justice Moreno (no relation) and Chief Justice Ronald George retired.  Justice Goodwin Liu and Chief Justice Tani Cantil-Sakauye joined the Court.

Many thought the Court would re-examine its arbitration / unconscionability case law and come up with some clear standard for what is "unconscionable."  Because the California Supreme Court's jurisprudence on arbitration agreements plainly is inconsistent with the U.S. Supreme Court's interpretation of the Federal Arbitration Act. (Don't take it just from me.  Justices Chin and Baxter in their dissent in this case say the same thing.)

Well, if you were one of those people, you were half right.  The Court indeed re-examined its jurisprudence in a long, scholarly opinion.  And the Court decided (5-2) that Concepcion indeed overruled Moreno I.  Therefore, we know after this opinion that employers are not absolutely required to allow employees to go to the Labor Commissioner before arbitrating wage claims if they so choose.

But the Court also held that state courts can continue to invalidate arbitration agreements as "unconscionable" under the case law that has developed in California over several years.  "Scholarly" does not mean "clear."  After this case,  we know precious little about how to draft an enforceable arbitration agreement.  In fact, I am more confused than ever after reading this opinion.  I will read it again to see if I can come up with some rules.

I remain confused because the Court does not explain well what is "unconscionable" in an arbitration agreement. The Court does not draw a clear rule for how a court decides if it must defer to the agreement to arbitrate under the Federal Arbitration Act, or apply the California courts' maze of rules that the courts have developed following the Armendariz case.

The California Supreme Court is considering arbitration in several pending cases that have been briefed but not yet heard.  We will have to wait a bit longer for some clearer guidance, or wait for the U.S. Supreme Court to review Armendariz or one of its progeny. In the meantime, if you have an hour or so,  there are about 95 pages of majority and dissent opinion to read here.

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San Francisco Flexible Schedule Ordinance - Update

We posted about San Francisco's newest ordinance here.  Here's an update.

If the Mayor approves, and he says he will, the new law will take effect on January 1, 2014. Here is a link to a draft of the ordinance, which is going to be codified as Administrative Code Chapter 12Z.  I can't confirm that this is the final text, so caveat employer.

Here is a quick and dirty summary. We'll have an article once this is finalized.

Employers of > 20 employees must consider requests by employees with at least six months service who work more than 8 hours per week.

The requests can range from fixed schedules, to telecommuting, to regular work hours / days.  The employee must make a written request; the employer must respond in writing and must give a legitimate reason (specified in the ordinance) for any denial.  The employee can ask for reconsideration.  It bears emphasis: An employer need not agree to any request.

The employee can make a request twice a year, unless there is a major life change, in which case the employee can make a request based on that.

The ordinance protects employees from retaliation for making such requests. The San Francisco Office of Labor Standards Enforcement will enforce the provision. There will be a poster, natch.

Again, there are more details in the text. Stay tuned for more analysis.

Greg

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Correction re California Minimum Wage Post

We posted about California's minimum wage increase here.  We mis-stated that the first increase occurs January 1, 2014.  It actually increases to $9.00 on July 1, 2014.  It's fixed now.  We regret the error.

San Francisco Enacts Ordinance Requiring Employers to Consider Employees' Requests for Flexible Schedules

The San Francisco Board of Supervisors  passed an ordinance requiring an employer to consider employees' requests for "flexible or predictable" working arrangements to assist with care giving responsibilities.  The employer can deny the request for legitimate reasons.  But there will be another poster, and the city's Office of Labor Standards Enforcement will enforce its anti-retaliation provisions.

Here is the Supervisors' summary of the ordinance, passed on October 1, 2013.  Stay tuned for a copy of the entire bill and more details as they emerge (including the effective date).

130785 [Administrative Code - Family Friendly Workplace Ordinance]

Sponsors: Chiu; Cohen, Mar, Campos, Yee, Breed, Avalos and Kim

Ordinance amending the Administrative Code to allow San Francisco-based employees to request flexible or predictable working arrangements to assist with care giving responsibilities, subject to the employer’s right to deny a request based on business reasons; prohibit adverse employment actions based on caregiver status; prohibit interference with rights or retaliation against employees for exercising rights under the Ordinance; require employers to post a notice informing employees of their rights under the Ordinance; require employers to maintain records regarding compliance with the Ordinance; authorize enforcement by the Office of Labor Standards Enforcement, including the imposition of remedies and penalties for a violation and an appeal process for an employer to an independent hearing officer; authorize waiver of the provisions of the Ordinance in a collective bargaining agreement; and making environmental findings.

PASSED, ON FIRST READING by the following vote:

Ayes: 11 - Avalos, Breed, Campos, Chiu, Cohen, Farrell, Kim, Mar, Tang, Wiener, Yee

Court of Appeal: No Employer Liability for Employee's Car Accident in Company Truck

We posted about the Court of Appeal's previous opinion in Moradi v. Marsh here.  That case caused quite a stir, when it held that an employer could be vicariously liable for an employee's car accident when she took a detour for yoga and frozen yogurt during her commute home.  The premise was that the employer required the employee to use her personal vehicle for work. Therefore, the  "going and coming" rule exonerating employers did not apply.  The employer was held vicariously liable for accidents occurring during foreseeable detours from the commute as well as the commute itself.

Now, just a few days later, a different court decided that an employer was NOT liable for an employee's accident when he was using a company-owned vehicle.   Why? Because he took a long detour away from work, over 100 miles.  Here is the Court's analysis.

The undisputed facts presented by Halliburton’s motion for summary judgment demonstrated that Martinez’s purpose in traveling to and from Bakersfield on September 13, 2009, was entirely personal. He finished his shift and drove the company truck 140 miles to Bakersfield; he intended to meet his wife at a car dealership and sign the papers to purchase a vehicle for her. Martinez was not performing any services or running any errands for Halliburton. His supervisor was unaware of the trip until after the accident. The trip was not made in the furtherance of any business activity of the employer. The
risk of a traffic accident during this personal trip was not a risk inherent in, or “‘“typical of or broadly incidental to,”’” Halliburton’s enterprise. (Bailey, supra, 48 Cal.App.4th at pp. 1558-1559.)

The Court here read Moradi before issuing the opinion, but held that the plaintiff's trip for yogurt and yoga was way more closely related to her commute than the plaintiff in the Haliburton case.

The plaintiffs in this opinion were the injured persons who sued Martinez, Halliburton's employee. Halliburton argued that it was not liable for Martinez's accident because he was acting outside the course and scope of his employment by driving the company owned truck on a personal errand taking him miles away from his home and work. 

The Court rejected the plaintiff's argument that the 100 mile detour was part of his commute or that it was foreseeable:

The Plaintiffs argue Martinez was returning to work at the time of the accident, so the trip, or at least the return from Bakersfield, was part of Martinez’s commute back to work. We do not believe the purpose or destination of the return leg of the journey can be separated from the purpose of the trip as a whole in this manner. Under plaintiffs’ theory, the return leg of any personal trip in the company vehicle, regardless of the length of time spent, the distance traveled, and the complete lack of connection between the trip and the enterprise of the employer or the work of the employee, would give rise to respondeat superior liability, as long as the employee’s ultimate destination on return was the workplace. We reject such an expansion of the incidental benefit exception to the going and coming rule.

The purpose of Martinez’s trip as a whole was entirely personal. The trip to Bakersfield was such a complete and material departure from his employment duties that it could not reasonably be considered to be an activity in pursuit of the employer’s business or a minor deviation from the strict course of the employee’s duties. It was such a marked turning aside from the employer’s business as to be inconsistent with its pursuit: driving to a location 140 miles from his assigned worksite, a trip that would take more than six hours to complete, without asking his employer’s permission or informing his supervisor that he would be gone, when, according to plaintiffs, Martinez was on call 24 hours, seven days a week, and might be called at any time to proceed to a new location. This activity would be entirely inconsistent with serving the employer’s purposes. Consequently, the trip to Bakersfield was, as a matter of law, outside the scope of Martinez’s employment.

Plaintiffs attempt to characterize the trip to Bakersfield as part of Martinez’s commute between the oil rig in Seal Beach and his home in Caliente. But the evidence presented indicated Martinez did not go home, because it was too far out of the way. Martinez met his wife and daughter at a car dealership in Bakersfield, 45 to 50 miles from his home, in order to sign the documents necessary to purchase a vehicle for his wife. The undisputed evidence does not support a contention that Martinez was
commuting between his home in Caliente and the oil rig at the time of the accident.

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So, Moradi is not going to expand liability as far as some imagine, apparently.  

This case is Halliburton Energy Services, Inc. v. Department of Transportation and the opinion is here.

Ninth Circuit Upholds Certification of On-Duty Meal Period Class

The Ninth Circuit Court of Appeals decided that an employer's "on duty" meal period program for security guards was susceptible to class action treatment.

The big issue here is the Court's analysis of when on-duty meal periods are authorized under California law.  The general rule is that unpaid meal periods are compliant with California law only if the employee is relieved of all duty. There is an exception:

An “on duty” meal period shall be permitted only when the nature of the work prevents an employee from being relieved of all duty and when by written agreement between the parties an on-the-job paid meal period is agreed to. The written agreement shall state that the employee may, in writing, revoke the agreement at any time.

Although on duty meal periods are paid as hours worked, the missed meal period penalty / premium does not apply.

When does the "nature of the work" prevent an employee from being relieved of all duty?  The Court of Appeals noted that the California courts have not explored this issue in any detail. A federal court is supposed to predict how the California Supreme Court would decide the issue.  This Court did not mention that requirement.  Nor did the Court certify the question to the California Supreme Court, as it has the power to do. Instead, the Court primarily reviewed the DLSE opinion letters on the subject of the "nature of the work" exception.

we can characterize the instances in which DLSE has found that the “nature of the work” exception applies into  two categories: (1) where the work has some particular, external force that requires the employee to be on duty at all times, and (2) where the employee is the sole employee of a particular employer.

The Court also relied on a post-Brinker Court of Appeal opinion involving security guards, where the state court upheld class certification.  That case, Faulkinbury v. Boyd & Assocs.,  216 Cal. App. 4th 220 (2013), involved security guards too.  But the Court of Appeal in Faulkinbury was simply concerned with whether the employees' claims should proceed as a class based on Boyd's policy, not a definitive evaluation of the on-duty meal period law.

This Abdullah case also involved security guards assigned to work at schools, hospitals, etc.  In many instances, only one guard was assigned to do the work at the particular site.  The Court of Appeals rejected the employer's argument that a lone security guard automatically is entitled to an on-duty meal period - because s/he is ALONE at the job site (at least the only U.S. Security Associates employee):

First, as the district court explained, the DLSE letters make clear that “the showing necessary to establish the ‘nature of the work’exception is a high one.” In order to make such a showing, USSA had to demonstrate not just that its employees’ duties
varied, but that they varied to an extent that some posts would qualify for the “nature of the work” exception, while others would not. It failed to do so. Indeed, USSA’s sole explanation for why it requires on-duty meal periods is that its guards are staffed at single-guard locations. It does not argue that any particular posts would qualify for the “nature of the work” exception absent the single-guard staffing model.

Then the Court appeared to say that the employer must prove that the tasks themselves prevent the employee from taking a meal period even when the employee works alone:

Consider, for example, the illustrative list of duties that USSA has provided to demonstrate the variety of its employees duties:  [T]he duties performed by security guards include patrolling parking lots; checking receipts; signing in and out trucks; setting up  school parking lots and assisting with student drop-offs and pick-ups; inspecting vehicles; restraining unruly patients; escorting dead bodies; checking the inventory, mileage, and temperature of trucks; working undercover to catch shoplifters; monitoring psychiatric patients; checking in employees and answering phones at a front desk; performing surveillance; and enforcing hotel quiet hours.

These duties are undoubtedly distinct from one another, but the only reason any of them “prevent” the employee from taking a meal period is because USSA has chosen to adopt a single-guard staffing model. See Cal. Code Regs., tit. 8, § 11040, subd. 11(A) (stating that an “on-duty” meal periodis permitted “only when the nature of the work prevents an employee from being relieved of all duty” (emphasis added)).

The Court  seems to be saying that the job's tasks themselves must preclude an off-duty meal, even if the employee works alone.  If that is the Court's position, then in many cases employers will have to hire people for the sole purpose of relieving employees who work alone, or pay the meal period premiums associated with on-duty meal periods.

That said, the Court and DLSE have noted there are jobs involving solo employees that could qualify for on-duty meal periods, such as a late-night gas station where there were no other workers, or a truck driver carrying dangerous materials.

So, if California courts decide to adopt the reasoning of this case, it could further narrow the on-duty meal period exception. Additionally, employers attempting to secure on-duty meal period waivers must carefully consider the employee's job duties.  If the duties "always" prevent an off duty lunch because the job is inherently too dangerous or isolated, fine.  But if the employee's duties vary such that the employee could take an off-duty meal on some days but not others, that on duty agreement could be held invalid if it precludes employees from taking off duty meal periods when they can do so.

The case is Abdullah v. U.S. Security Associates, Inc. and the opinion is here.

Court of Appeal: Arbitration Agreement Valid Even Without AAA Rules Attached

The Court of Appeal held that First Republic Bank's arbitration agreement was not "unconscionable" because the bank did not attach the AAA dispute resolution rules that govern the arbitration proceedings.  The court distinguished prior cases that had held agreements invalid and mentioned the absence of attached rules.  

The court's analysis suggests the following:
- It's important to attach special arbitration rules if the arbitration agreement is in conflict with those rules - so the employee can see the effect of the agreement on the rules.
- It is not necessary to attach third party rules such as AAA and JAMS that contain employee-friendly provisions in them and do not violate California courts' requirements for arbitration proceedings.
- It's important so specifically identify what rules will apply, and at least provide Internet links so the employee can find them.
- If the employee is not given time to review the arbitration agreement before signing, it's more important to attach the rules.

That said,  after this case, I don't think courts will invalidate otherwise good arbitration agreements based on failing to attach the third party rules.

The case is Peng v. First Republic Bank and the decision is here.

Two More Changes to California Employment Law

California Governor Jerry Brown signed into law two more employment law-related bills.

SB 770 expands California's "paid family leave" program. This law provides up to six weeks of paid disability benefits for employees who are off work to care for covered family members or to bond with a child. Existing law applied only to leave taken to care for spouses, domestic partners, parents or children. (California' state disability insurance benefits apply to the employee's own illness.) 

Effective July 1, 2014, the new law will expand the benefit for when the employee takes leave to care for grandchildren, grandparents, siblings, or in-laws. 

AB 241 is a new wage-hour law that provides for overtime pay to certain employees who qualify as "domestic service employees." California Wage Order 15-2001 usually governs the overtime rules for domestic workers, such as housekeepers and personal attendants for households. The new law will modify the wage order.

Basically, those employees who qualify under this law as "a domestic worker who is a personal attendant" will earn time and one half overtime pay for all hours worked over 9 in a day or 45 in a week.  But the trick is: this law is full of exceptions and definitions regarding who counts as a "domestic worker who is a personal attendant." For example certain family members performing care, and "casual" baby sitters do not count, but full-time baby sitters do. Another example - nursing home employees do not count under this law.  The definitions go on for days:

(a) (1) “Domestic work” means services related to the care of persons in private households or maintenance of private households or their premises. Domestic work occupations include childcare providers, caregivers of people with disabilities, sick, convalescing, or elderly persons, house cleaners, housekeepers, maids, and other household occupations.

(2) “Domestic work” does not include care of persons in facilities providing board or lodging in addition to medical, nursing, convalescent, aged, or child care, including, but not limited to, residential care facilities for the elderly.

(b) (1) “Domestic work employee” means an individual who performs domestic work and includes live-in domestic work employees and personal attendants.

(2) “Domestic work employee” does not include any of the following:

(A) Any person who performs services through the In-Home Supportive Services program under Article 7 (commencing with Section 12300) of Chapter 3 of Part 3 of Division 9 of, or Sections 14132.95, 14132.952, and 14132.956 of, the Welfare and Institutions Code.

(B) Any person who is the parent, grandparent, spouse, sibling, child, or legally adopted child of the domestic work employer.

(C) Any person under 18 years of age who is employed as a babysitter for a minor child of the domestic work employer in the employer’s home.

(D) Any person employed as a casual babysitter for a minor child in the domestic employer’s home. A casual babysitter is a person whose employment is irregular or intermittent and is not performed by an individual whose vocation is babysitting. If a person who performs babysitting services on an irregular and intermittent basis does a significant amount of work other than supervising, feeding, and dressing a child, this exemption shall not apply and the person shall be considered a domestic work employee. A person who is a casual babysitter who is over 18 years of age retains the right to payment of minimum wage for all hours worked, pursuant to Wage Order No. 15-2001 of the Industrial Welfare Commission.

(E) Any person employed by a licensed health facility, as defined in Section 1250 of the Health and Safety Code.

(F) Any person who is employed pursuant to a voucher issued through a regional center or who is employed by, or contracts with, an organization vendored or contracted through a regional center or the State Department of Developmental Services pursuant to the Lanterman Developmental Disabilities Services Act (Division 4.5 (commencing with Section 4500) of the Welfare and Institutions Code) or the California Early Intervention Services Act (Title 14 (commencing with Section 95000) of the Government Code) to provide services and support for persons with developmental disabilities, as defined in Section 4512 of the Welfare and Institutions Code, when any funding for those services is provided through the State Department of Developmental Services.

(G) Any person who provides child care and who, pursuant to subdivision (d) or (f) of Section 1596.792 of the Health and Safety Code, is exempt from the licensing requirements of Chapters 3.4 (commencing with Section 1596.70), 3.5 (commencing with Section 1596.90), and 3.6 (commencing with Section 1597.30) of Division 2 of the Health and Safety Code, if the parent or guardian of the child to whom child care is provided receives child care and development services pursuant to any program authorized under the Child Care and Development Services Act (Chapter 2 (commencing with Section 8200) of Part 6 of Division 1 of Title 1 of the Education Code) or the California Work Opportunity and Responsibility to Kids Act (Chapter 2 (commencing with Section 11200) of Part 3 of Division 9 of the Welfare and Institutions Code).

(c) (1) “Domestic work employer” means a person, including corporate officers or executives, who directly or indirectly, or
through an agent or any other person, including through the services of a third-party employer, temporary service, or staffing agency or similar entity, employs or exercises control over the wages, hours, or working conditions of a domestic work employee.

(2) “Domestic work employer” does not include any of the following: (A) Any person or entity that employs or exercises control over the wages, hours, or working conditions of an individual who performs domestic work services through the In-Home Supportive Services program under Article 7 (commencing with Section 12300) of Chapter 3 of Part 3 of Division 9 of, or Sections 14132.95, 14132.952, and 14132.956 of, the Welfare and Institutions Code or who is eligible for that program.

(B) An employment agency that complies with Section 1812.5095 of the Civil Code and that operates solely to procure, offer, refer, provide, or attempt to provide work to domestic workers if the relationship between the employment agency and the domestic workers for whom the agency procures, offers, refers, provides, or attempts to provide domestic work is characterized by all of the factors listed in subdivision (b) of Section 1812.5095 of the Civil Code and Section 687.2 of the Unemployment Insurance Code.

(C) A licensed health facility, as defined in Section 1250 of the Health and Safety Code.

(d) “Personal attendant” means any person employed by a private householder or by any third-party employer recognized in the health care industry to work in a private household, to supervise, feed, or dress a child, or a person who by reason of advanced age, physical disability, or mental deficiency needs supervision. The status of personal attendant shall apply when no significant amount of work other than the foregoing is required. For purposes of this subdivision, “no significant amount of work” means work other than the foregoing did not exceed 20 percent of the total weekly hours worked.

Understand?  Right. 

The law is set to "sunset" (or expire) on 1/1/17, which coincides with the date you will be able to figure out who is covered.  Presumably, the sunset provision exists in case this new law results in a problem because, for example, people who need in-home care reduce caregivers' hours to avoid paying overtime, or maybe because those who are attempting to work as domestic employees lose work they otherwise would have received if they did not earn overtime...  But the bill mandates a "Governor's Council" to evaluate its effects on such issues and others.

This new law will have to be read with the U.S. Department of Labor's new rules on personal attendants (discussed here). Employers must comply with the more employee-friendly law. We will have a more detailed analysis in an article soon. SV plug: We also will cover these laws in more detail in our annual employment law update (information here).

California State Minimum Wage Going Up...and Then Up Some More

The Governor will sign AB 10 on 9/25.  The new bill will raise the California minimum wage from its current $8.00 per hour to $9.00 on July 1, 2014.  Then it will go up to $10.00 on January 1, 2016.
This change will affect overtime calculations, the retail inside sales exemption (measured based on whether employees earn more than 1.5 X minimum wage), and the salaried exemptions (based on salary of at least 2 X minimum wage).  It will also affect the "split shift" threshold which imposes a split shift premium for those workers who earn less than minimum wage + 1 hour at minimum.
There will be a new poster!
Read the new law here.

Court of Appeal: Employer Liable for Employee's "Off Duty" Car Accident

Here are the facts as told by the Court of Appeal:

An employee of an insurance broker was required each workday to drive to and from the office in her personal vehicle. During the workday, the employee had to use her vehicle to visit prospective clients, make presentations, provide educational seminars, follow leads, and transport company materials and coemployees to work-related destinations.

On April 15, 2010, the employee left the office at the end of the workday and began driving in the direction of her home. She had decided that, on the way, she would stop for some frozen yogurt and take a yoga class. As the employee made a left turn at the yogurt shop, she collided with a motorcyclist.

Motorcyclist sues driver of course. But motorcyclist also sues the employer.  Employer moves the trial court for summary judgment and wins.  After all, she's commuting and then she did not go home, but rather for a snack and some exercise. So, her accident is her responsibility.  End of post, right?

Nope.  Here's how the court summarized its lengthy decision:

Because the employer required the employee to use her personal vehicle to travel to and from the office and make other work-related trips during the day, the employee was acting within the scope of her employment when she was commuting to and from work. The planned stops for frozen yogurt and a yoga class on the way home did not change the incidental benefit to the employer of having the employee use her personal vehicle to travel to and from the office and other destinations. On the day of the accident, the employee had used her vehicle to transport herself and some coemployees to an employer-sponsored program, and the employee had planned to use her vehicle the next day to drive to a prospective client‘s place of business. Nor did the planned stops constitute an unforeseeable, substantial departure from the employee‘s commute. Rather, they were a foreseeable, minor deviation. Finally, the planned stops were not so unusual or startling that it would be unfair to include the resulting loss among the other costs of the employer‘s business. Thus, under the required vehicle exception to the going and coming rule, the employee was acting within the scope of her employment at the time of the accident, and the doctrine of respondeat superior applies. Accordingly, the trial court erred in granting the employer‘s summary judgment motion

Here's how it breaks down:

1. The doctrine of "respondeat superior" requires an employer to answer for the torts of the employee, if those torts are committed within the "scope of employment."  This is also called "vicarious" liability.  Good so far?

2.  Under the "going and coming" rule, employers are not liable for the torts of employees committed during the regular commute to and from work / home.  Right, so that's why the employer should have  won! Not so fast, grasshopper.

3.  The "required vehicle exception" to the going and coming rule means that when an employer requires an employee to use a personal vehicle as part of her duties, the "going and coming rule" does not apply, and accidents that occur on the way to or from work may be the employer's responsibility.  In this case, the court held that the "required vehicle" exception applied because the employer required the employee to use her personal car for work-related trips, including on the day she had the accident.

4.  Even under the required vehicle exception, the employer is not liable for everything that an employee does in her personal vehicle.  The employer may not be liable if the employee's side trip is not "foreseeable."  But not "foreseeable" is way more than just a short side-trip for yogurt and yoga.   It is "foreseeable," the court noted, that employees using their own cars would do personal errands for their own comfort and convenience.  Had she visited a friend in another town, committed an intentional act or a crime, I believe this would have come down a different way.

5.  If driving is not part of the job, or if the employer does not require employees to use their cars as part of their jobs, then the going and coming rule still applies and there is no liability for accidents that occur during the commute.  In this case, the employee used her personal car two to five times a week for work-related business. How much work-related driving is enough to trigger the required vehicle exception?  There will be litigation. 

The court went over several different prior decisions and provided detailed analysis.  So, if you would like to know how courts draw the line, you can read the full opinion at the link below.

This decision is an important reminder that employers who require employees to use their personal cars for business will take on additional liabilities.  Therefore, employers imposing such requirements should ensure employees are properly licensed and ensure business insurance is sufficient to cover these types of accidents.  

Employers thinking of imposing restrictions on employees' activities during the "going and coming" to minimize liability for traffic accidents could cause a wage-hour problem.  So, as WW says, "tread lightly" or get some advice first.

The opinion in Moradi v. Marsh USA is here.

Greg 

9th Circuit Taketh Away in an Amended Opinion

We posted about the Ninth Circuit's post-Wal-Mart v. Dukes decision in Wang v. Chinese Daily News here.   This was an overtime class action involving newspaper employees. The Court of Appeals in the earlier opinion remanded the case to the district court for reconsideration of its class certification decision after Wal-Mart v. Dukes.

The plaintiffs apparently sought a rehearing. The Court issued an amended opinion instead.  The Court softened some of its language in the first opinion.  For example, it removed this line, quoted from its own precedent, addressing the plaintiffs' burden of proof on a motion for class certification:

Plaintiffs must show “significant proof that [CDN] operated under a general policy of [violating California labor laws].” Ellis, 657 F.3d at 983 (quoting Wal-Mart, 131 S. Ct. at 2553 (alteration omitted)).

The Court in the first opinion foreclosed class certification for injunctive relief Fed. R. Civ. Pro. 23(b)(2)

Further, it appears that none of the named plaintiffs has standing to pursue injunctive relief on behalf of the class, as none of them is a current CDN employee. See Wang, 623 F.3d at 756. We therefore reverse the district court’s class certification under Rule 23(b)(2).

In the new opinion, the Court opened the door to injunctive relief:

It appears that none of the named  plaintiffs has standing to pursue injunctive relief on behalf of the class, as none of them is a current CDN employee. See Wang, 623 F.3d at 756. However, because the Rule 23(b)(2) class was certified by the district court while they were current employees, the class certification with respect to injunctive relief may survive if there are identifiable class members who are still employed by CDN.

The Court's new opinion also deletes the section of the prior opinion called "Damages."  In the first opinion the Court wrote this, which could have been helpful to defense lawyers in class action cases:

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. 

Poof. That language is gone from the amended opinion. The Court mentions in the new opinion that it expresses no opinion regarding damages.
The case is Wang v. Chinese Daily News and the amended opinion is here. 

Court of Appeal: No Duty to Pay for Defendant Employee's Choice of Lawyer

Several years ago, a radio station conducted a contest that involved consuming water. The one who "held it in" the longest would win a prize.  Unfortunately, one contestant died from drinking too much.

Anyway, the contestant's representative sued the radio station as well as Matt Carter, an individual who helped with the contest.  Carter hired a lawyer and tendered his defense to his  employer's insurance company. The insurance company appointed its own defense counsel to represent Carter.  ]
Carter refused to change lawyers and sued his employer for indemnification under Labor Code Section 2802. Carter sought over $800,000 in attorney's fees for his attorneys' representation.

The insurance company settled with the plaintiff on behalf of all individuals.  The plaintiff recovered millions against the radio station.

Carter's indemnity claim went to trial to the court. The court decided that Carter's attorney's fees were not covered under Labor Code Section 2802, except for about $1980 he spent before the insurance company offered counsel.

The Court of Appeal clarified what Labor Code Section 2802 requires employers to do when individual employees are sued for actions undertaken within the course and scope of employment:

Subdivision (a) of section 2802 provides that “[a]n 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.”
***
As the court explained in Grissom v. Vons Companies,  Inc. (1991) 1 Cal.App.4th 52, “Section 2802 does not say that an employer must ‘defend’ an employee. The word ‘defend’ does not appear in section 2802. The statute merely requires the employer to indemnify the employee for all that the employee necessarily expends in direct consequence of the discharge of the employee’s duties. The focus of the actual words of the statute is on the employee’s expenditure. If that expenditure is necessarily in direct consequence of the discharge of the employee’s duties, then the employer must ‘indemnify’ (i.e., reimburse) the employee.” (Grissom, at pp. 57-58, fn. omitted; see also Cassady v. Morgan, Lewis & Bockius LLP (2006) 145 Cal.App.4th 220, 236 [“Section 2802 does not impose a duty to defend upon an employer”].)

The Court emphasized that an employer that does not offer to pay for counsel up front will be responsible for necessary expenses the employee incurs.  In this case, though, the employer did make that offer.

The Court rejected Carter's claim that he had a "right" to choose his own counsel.  True enough, said the court. In fact, Carter did so. The issue here, though, was whether the employer had to pay for that right.  The Court of Appeal also rejected Carter's argument that the insurance company's lawyer was insufficient because of the potential for punitive damages liability or criminal charges against Carter.

So, employers (and their carriers) may appoint a lawyer to defend an employee involved in employment litigation.  It may be that conflicts of interest or competence issues will cause disputes between employees and employers over whether the appointment is adequate to conduct the defense.  If representation is not adequate, employees likely can request different counsel or seek their own and argue that the related expense is "necessary."

This case is Carter v. Entercom Sacramento LLC and the opinion is here.

Half a SLAPP Still Hurts

Jessica Chang sued her former employer and an individual named Howard Cho for sexual harassment.  Cho counter-sued Chang for IIED and defamation.

Chang believed Cho filed his cross-claim in retaliation for her own.  She filed a motion to strike Cho's cross-claim as a "SLAPP" or Strategic Lawsuit Against Public Participation.

Cho in part claimed that Chang's discrimination charges filed at the EEOC/DFEH were defamatory.  But Cho also based his cross-claim for defamation in part on statements Chang made to co-workers and a written report she submitted accusing Cho of harassment.  So, the court had different types of conduct to sort through.

Each of the two causes of action in Cho's cross-complaint, defamation and intentional infliction of emotional distress, is based on three separate and discrete alleged activities by Chang: (1) Chang‟s discrimination claim filed with the EEOC and DFEH; (2) her written report to Midway management; and (3) her verbal comments to co-workers regarding the November and December incidents.

Cho argued that Chang's statements to other employees about his alleged harassment were not "protected" by either the litigation privilege or the anti-SLAPP provisions.  Therefore, Chang could be sued for slander.   The trial court agreed with Cho, as did the Court of Appeal.

Chang submitted no evidence that her comments to Lee or to other co-workers were made to seek the assistance of any other person as a witness or as a person with an interest in the action. While Chang argues such a rationale, and presumably could have offered evidence to support it, she offered none. Absent such a showing, we agree with the trial court's finding that Chang‟s comments to co-workers were not “in connection with” the issues in her subsequent lawsuit against Cho and, therefore, are not protected activity pursuant to section 425.16.

So, this means that if Chang had demonstrated a closer connection between her formal complaints and her discussions with co-workers, the communications might have been protected.  Because she did not do so, Cho's cross-claim against her could proceed.   Therefore, if this case stands, individual defendants in some cases may get away with cross-claims against plaintiffs who accuse them of sexual harassment.  This does not mean individuals should do so. There is a risk that they will be viewed as vengeful or motivated to deny bad conduct to win the cross-claim.

The trial court and the Court of Appeal had little trouble finding that the administrative charges themselves were covered by the anti-SLAPP statute, as was the letter that Chang wrote to management to complain about sexual harassment.  

The internal complaint was covered because as the court put it: "Where the protected activity is a complaint to management or a government agency, or a lawsuit concerning workplace sexual harassment, it must have a demonstrated nexus with that activity, such as an effort to find witnesses to the same or similar conduct."

So the Court of Appeal decided the anti-SLAPP law barred part of Cho's claims for defamation and IIED. Did that mean the entire cause of action should be struck?  No.  The Court decided that the trial court may stike portions of a claim, and is not required to let the whole case continue.  

Then the Court turned to Chang's request for attorneys' fees, since she prevailed on her motion.  Although the winner of an anti-SLAPP motion is entitled to fees, the trial court denied Chang's claim for them, because she had not "accomplished" enough by striking part of Cho's cross-complaint.  The Court of Appeal allowed this ruling to stand.

This ruling encourages anti-SLAPP motions directed to portions of a cause of action, but then creates a disincentive by denying attorney's fees.  We will see if the parties attempt California Supreme Court review.

This decision is Cho v. Chang and the opinion is here. 

California Court of Appeal: Applying New Post-Harris v. L.A. Standard in FEHA Discrimination Cases

Alamo worked for a small company called PMIC as a collections clerk. She took pregnancy leave.  PMIC hired a pregnant temp to replace her during the leave.  The temp, named Moran, intended to stop working once Alamo returned.

Stop me if you've heard this before. While Alamo was on leave, her manager discovered performance problems with Alamo's work, including problems that cost the Company money.  And - again stop me - the manager had noticed performance problems before the leave, but had not disciplined Alamo previously.

So, Alamo is getting ready to come back to work. She comes into the office one day to have lunch with a co-worker.  She runs into Moran and gets into a heated argument about Moran's alleged treatment of Alamo's co-worker (with whom she had just had lunch).  Moran tells Alamo she's about to be fired.  Sure enough, when Alamo returned, she was fired for poor performance and insubordination.

Alamo sued for pregnancy discrimination. After trial, a jury awarded her $10,000.00 in compensatory damages, and 0 for punitive damages.  The court awarded about $50K in attorney's fees.

PMIC appealed.  It argued that the court should have instructed the jury that the plaintiff has to prove discrimination was a "substantial motivating reason" for the termination, rather than just "a motivating reason."  PMIC also argued that it was entitled to put on evidence of a "mixed motive" defense,
following Harris v. City of Santa Monica (2013) 56 Cal.4th 203 (discussed here).

The Court of Appeal ageed that PMIC was entitled to an instruction that says discrimination must be a "substantial" motivating reason. The form civil jury instructions ("CACI") have been amended to incorporate Harris.  Practitioners should ensure they have the most current version of the instructions.

But PMIC was not so lucky on the mixed motive defense. PMIC offered a defective mixed motive instruction that was not a proper statement of the law. And the Court also found that "mixed motive" is an affirmative defense that must be pleaded in the defendant's answer.  Therefore, employers seeking to limit damages with the mixed motive defense must plead it or amend their answers.

Frankly, I don't know why the employer lost, or why it wanted a "mixed motive" defense.  There was scant evidence of discrimination described in the court of appeal's opinion.   Alamo argued that this was not a mixed motive case at all, and I think I agree with her.  We shall see if the employer can assert the mixed motive defense without admitting there is evidence of a discriminatory and non-discriminatory motive for taking action.

This case is Alamo v. Practice Management Information Corp. and the opinion is here.

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Court of Appeal: Exhaust Administrative Remedies Before Filing Whistleblower Claims under Labor Code Section 1102.5

Everyone's suing for retaliation lately.  Labor Code Section 1102.5 provides an expansive vehicle for doing so.  You don't have to complain to the government; internal complaints are covered. And you don't have to be correct in your assessment that there's a legal violation; you merely have to have a reasonable / good faith belief in what you're saying.   Here's a new wrinkle that will affect these claims (if this decision remains on the books and is not depublished or taken up for review by the California Supreme Court.)

So, Aaron MacDonald worked for the California State Assembly.  He complained to supervisors that co-workers were smoking in violation of statutes regulating smoking in the workplace (or within 20 feet of the entrance to a public building).  Not sure where the employee was smoking.

Anyway, two weeks after complaining, MacDonald was fired. He sued, claiming retaliation under Section 1102.5 and Section 6310 of the Labor Code, both of which prohibit retaliation against employees who make complaints about workplace safety.

The Assembly demurred and won, claiming MacDonald did not exhaust administrative remedies by filing with the Labor Commissioner.  The employee appealed, arguing he did not have to exhaust.

So, per the Court of Appeal, Labor Code Section 98.7 says:

“Any person who believes that he or she has been discharged or otherwise discriminated against in violation of any law under the jurisdiction of the Labor Commissioner may file a complaint with the division within six months after the occurrence of the violation.”3 Section 98.7 outlines a process of investigation and decision by the Labor Commissioner. (Id., subds. (b)-(e).) Subdivision (f) of that section states: “The rights and remedies provided by this section do not preclude an employee from pursuing any other rights and remedies under any other law.” (Id., subd. (f).) Moreover, section 6312 provides: “Any employee who believes that he or she has been discharged or otherwise discriminated against by any person in violation of Section 6310 or 6311 may file a complaint with the Labor Commissioner pursuant to Section 98.7.”

Because Sections 1102.5 and 6310 are "laws under the jurisdiction of the Labor Commissioner," the Court of Appeal held that Section 98.7 was applicable.  The Court then held:

Although sections 1102.5 and 6310 are silent regarding administrative remedies, section 98.7, subdivision (a), provides in pertinent part: “Any person who believes that he or she has been discharged or otherwise discriminated against in violation of any law under the jurisdiction of the Labor Commissioner may file a complaint with the division within six months after the occurrence of the violation.”3 Section 98.7 outlines a process of investigation and decision by the Labor Commissioner. (Id., subds. (b)-(e).) Subdivision (f) of that section states: “The rights and remedies provided by this section do not preclude an employee from pursuing any other rights and remedies under any other law.” (Id., subd. (f).) Moreover, section 6312 provides: “Any employee who believes that he or she has been discharged or otherwise discriminated against by any person in violation of Section 6310 or 6311 may file a complaint with the Labor Commissioner pursuant to Section 98.7.”

The Court relied on Campbell v. Regents of University of California (2005) 35 Cal.4th 311, in which the California Supreme Court reaffirmed (albeit in another context) that when the Legislature provides an administrative remedy, an employee must exhaust it.

A few notes of caution:

1. This decision creates a split with Lloyd v. County of Los Angeles (2009) 172 Cal.App.4th 320.  There, the Court held a plaintiff was not required to exhaust.  The Court here disagreed with Lloyd. So, the California Supreme Court may get involved and nullify this decision pending review.
2. The statute of limitations for filing a charge with the Labor Commissioner is 6 months.  So, if this case stays on the books, it could kill a bunch of statutory causes of action.  
3. The Legislature may overrule this case, although that would be supremely ironic, given the Assembly (acting as an employer) won this case.    
4. This case does not affect common law claims for "wrongful termination in violation of public policy."  This was a public-sector case and no such claim was available to the plaintiff here. 

This decision is MacDonald v.  California and the opinion is here.

Court of Appeal: Some Wage Claims Tolled; Some Time Barred and More

This case is the poster child for needless litigation over a pretty simple issue, which was a loser for the employer from the jump. (And I say that in the most respectful way).

Harold Bain worked for Tax Reducers, Inc. (TRI) and its predecessor as a tax preparation consultant. He also performed other duties.  It's pretty clear from the facts that he was an employee, not an independent contractor. So, that part of the case is not breaking new ground.  However, the court of appeal allowed the trial court to consider a "presumption" of employee status, because the trial court also underwent the normal analysis of independent contractor. The evidence was overwhelmingly in favor of employee status, presumption or no.

After TRI bought the predecessor, Bain got into a dispute with the new owner of TRI about his compensation.  He worked for TRI for just seven weeks or so, but with the predecessor for several years.  However, because of the dispute, TRI didn't pay Bain at all for his seven weeks of work.

Bain filed a claim with the Labor Commissioner at the DLSE.  TRI argued that Bain was an independent contractor, but even if he wasn't, there was no agreed upon rate. As a result, TRI argued, Bain should recover only minimum wage.  Bain sought the $1100 per week he was earning before the take-over.  And that's what the DLSE awarded him, plus waiting time and interest, for about $15K.

When in a hole, stop digging?  Nah. TRI appealed the DLSE's ruling.  The parties then reached a settlement for the wages and interest, plus some attorney's fees, but no waiting time penalties.  The deal fell through when the parties could not agree on the scope of the release.

The court then re-set the case for trial.  The parties then settled again for $17,700, higher than the DLSE's award.  The settlement was supposed to include releases, but the parties again could not agree on the language, or even who was to prepare them.

Massive amounts of litigation ensued over the breached settlement agreement, including discovery motions, demurrers, summary judgment motions, anti-SLAPP motions, an appeal, too.  Bain even named TRI's president, Griffin, as an individual defendant, which typically is a no-go in a wage claim.
Guess who ended up getting rich here?  (Not Bain's lawyer; stay tuned).

The trial court conducted a four-day bench trial, after which it awarded Bain just over $25,000 plus attorney's fees on the wage claims.  (Bain had a choice of electing recovery on the breach of settlement agreement or recovery on the wage claims. He chose wisely, because the latter includes an award of attorney's fees).  How much attorney's fees did Bain seek?  Bain sought over $400,000 in fees, including a 1.5 multiplier.

Unfortunately for Bain's lawyer, he filed the motion for attorney's fees late and received nothing from the trial court, and nothing from the court of appeal, either.  I believe this clip from Willie Wonka captures the court's holding well.

TRI President Griffin, though, successfully obtained an award of fees for his individual claim, but only for $4225 (the fees for his summary judgment motion).  Continuing his losing streak, the court of appeal reversed Griffin's award, because he sought fees under the wrong statute (Lab. Code Section 218.5).  Because Bain won under the unpaid minimum wage law, the right statute is a one-way law that awards fees to employees only.  See, supra, Willie Wonka clip.  218.5 is becoming a one-way statute next year, so no one will make that mistake again.  Sigh.

Annnywayyyyyy, now that the discussion of litigation excess is over, here's the wage-hour issue that the court decided.

First, the Court set out the relevant statutes of limitations in wage claims:

1. Final pay - 3 years per Labor Code Section 201 and Code of Civil Procedure 338(a).
2. Waiting time - runs with the limitations period of the underlying wages sought - here 3 years, per Labor Code Section 203.
3. Liquidated damages for failing to pay minimum wage per Labor Code 1194.2 - one year per  Code of Civil Procedure 340(a).

Second, the Court had to decide whether Bain's claims were untimely.  He left on February 18, 2005, but did not sue until May of 2008.  That's more than three years and could have time-barred all his claims.

But the Court held that Bain's filing his DLSE claim "tolled" or suspended the statute of limitations. during the period is pursued his DLSE claim until the first DLSE proceeding was final. Once that time was added to the Bain's claims were timely, except for the 1194.2 liquidated damages penalty.  The court held the "equitable tolling" doctrine applied even though Bain was not required to go to the DLSE in the first place.  This decision, therefore, could extend limitations period in wage cases that involve administrative proceedings followed by litigation.

Even the tolled claims did not save the liquidated damages penalty, which was subject to the one-year statute. The court held that claim was barred and deduced those penalties.

So, Bain won about $18,000 bucks plus more interest... his lawyer lost out on at least $200K in fees.  And who knows how much TRI spent to obtain its lousy result.  Just sayin'.

This case is Bain v. Tax Reducers, Inc. and the decision is here.