California Chamber's Job Killer List - Employment Law

Contrary to what you may think, the California Legislature has not finished perfecting the laws governing the California workplace.  But, they persevere.

Our friends at the California Chamber of Commerce track the bills  they affectionately call "job killers."   Sure, more employment laws might drive up costs, reduce competition, increase unemployment, and increase prices.  Never you mind that. These bills give me more to complain advise employers about in the months to come.  And more lawsuits are sure to follow.  So, these bills really are  job creators.  For lawyers.

The Chamber's list of pending California employment law job killers are summarized here.  The description is the Chamber's. You can read the bill and check its status by clicking the links.

Please note:  1.  This is not a complete list of pending employment bills; only the California Chamber's job-killer list.  2. These bills are still wending their way through the Legislature. So, they could fail to pass or the Governor might not sign them even if they do pass.  

• AB 1522 (Gonzalez; D-San Diego) Paid Sick Leave — Increases employer mandates by requiring all employers, large and small, to provide all employees in California with paid sick leave, and threatens employers with statutory penalties as well as litigation for alleged violations.

• AB 2604 (Brown; D-San Bernardino) Exposes Employers to Disproportionate Workers’ Compensation Penalties — Dramatically increases penalties and costs for delayed payments and will result in disproportionate penalty awards that are significantly greater than the amount of the delayed payment.

• SB 935 (Leno; D-San Francisco) Minimum Wage — Unfairly increases employer costs by increasing the minimum wage to $13 by 2017 and then increased thereafter according to the Consumer Price Index.

• AB 2416 (Stone; D-Scotts Valley) Unproven Wage Liens — Creates a dangerous and unfair precedent in the wage and hour arena by allowing employees to file liens on an employer’s real or personal property, or property where work was performed, based upon alleged yet unproven wage claims.

• AB 2617 (Weber; D-San Diego) Interference with Arbitration Agreements and Settlement Agreements— Unfairly prohibits the enforcement of arbitration agreements or pre-litigation settlement agreements that require the individual to waive their right to pursue a civil action for the alleged violation of civil rights.

• SB 404 (Jackson; D-Santa Barbara) Expansion of Discrimination Litigation — Makes it virtually impossible for employers to manage their employees and exposes them to a higher risk of litigation by expanding the Fair Employment and Housing Act to include a protected classification for any person who is, perceived to be, or associated with an individual who provides medical or supervisory care to a listed family member.

There are several other job-killers not directly related to employment law. The entire list of job killer bills is here.

U.S. Supreme Court: Severance is Wages; California Employers Take Note

Quality Stores laid off many employees as part of a bankruptcy. The Company paid severance, duly withheld taxes, and duly reported the severance on employees' W-2 forms.  Then the Company sought a refund of the "FICA" taxes paid on behalf of employees (and presumably the employer's portion of the FICA paid as well).

Everyone with a paycheck knows that FICA is a mandatory withholding from employees' paychecks, which goes towards funding social security.  "FICA" is the Federal Insurance Contributions Act.  As explained by the Court:

FICA taxes “wages” paid by an employer or received by an employee “with respect to employment.” 26 U. S. C. §§3101(a), (b), 3111(a), (b) . . . . FICA defines “wages” as “all remuneration for employment, including the cash value of all remuneration (including benefits) paid in any medium other than cash.” §3121(a). The term “employment” encompasses “any service, of whatever nature, performed . . . by an employee for the person employing him.” §3121(b).

So, that's a broad definition.  Does it include severance payments to laid off employees?  Yes, said the Court.  (Unanimous opinion, except Justice Kagan was recused):

Under this definition, and as a matter of plain meaning, severance payments made to terminated employees are“remuneration for employment.” Severance payments are,of course, “remuneration,” and common sense dictates that employees receive the payments “for employment.” Severance payments are made to employees only. It would be contrary to common usage to describe as a severancepayment remuneration provided to someone who has not worked for the employer. Severance payments are made in consideration for employment—for a “service . . . performed” by “an employee for the person employing him,”per FICA’s definition of the term “employment.” Ibid.

(emphasis mine).

Caveat for California employers: 

Some severance plans are covered by ERISA.  If so, then federal law governs the payment  of severance, the timing, and the conditions.  However, the Division of Labor Standards Enforcement may decide that a severance claim is not subject to ERISA. The DLSE will consider whether there is a plan in place, the discretion involved in calculating the eligibility and formula for payment, and other factors. 

If ERISA does not apply, California law may consider severance to be in the form of a deferred payment of wages.  Wages must be paid timely under California law. 

Employers should therefore ensure that they pay severance when it is earned in accordance with the contract (severance agreement or plan).  For example, if ERISA does not apply, a promise to pay a lump sum severance, without any conditions such as the signing of a release, may require payment on the date of termination.  

On the other hand, if the employer requires the employee to sign a release to "earn" the severance, then the severance is not due until earned.  (That is another good reason to require signing a release before severance is earned.)

This case is U.S. v. Quality Stores, Inc. and the opinion is here.

Court of Appeal: Employers Cannot Shorten Statutes of Limitations in FEHA Discrimination Cases

The employment relationship is contractual (e.g., I'll work for you and you will pay me).  Statutes of limitations generally can be shortened by contract, even in California.  Now forget all of these general rules. An agreement shortening the California Fair Employment and Housing Act's statute of limitations is void, said the Court of Appeal in Ellis v. U.S. Security Associates.

Ashley Ellis sued her employer and manager for sexual harassment, retaliation and failure to prevent discrimination / harassment / retaliation under the Fair Employment and Housing Act.  She agreed in her employment application to bring any claim against the employer within six months, notwithstanding any law to the contrary.

The trial court enforced the provision. The Court of Appeal reversed.  The Court was particularly concerned that the six-month statute would impede the Fair Employment and Housing Act's administrative charge process.  (By statute, the employee has a year from the discriminatory event to file a charge with the Department of Fair Employment and Housing, and then a year from the end of the administrative process to file a lawsuit.  The DFEH itself has a year to investigate.)  The six-month limitation would limit the DFEH's ability to investigate, which the court found troubling.

So, the Court went about distinguishing and casting aside contrary authority in other jurisdictions and other legal contexts to hold that limiting the statute of limitations in FEHA cases to six months is unenforceable as "unreasonable and contrary to public policy."

We do not know what the Court would have done if the employer had limited to six months the time to file the administrative charge with the DFEH (instead of the year employees normally are allowed), or if the employer had limited to six months the time to file a lawsuit from the receipt of the "right-to-sue letter."  Perhaps a court will address a more generous statute of limitations in a later case.  For now, though, employers who shorten limitations periods should carve out FEHA-based claims.

The case is Ellis v. U.S. Security Associates and the opinion is here.

9th Circuit: Employer's Credit for Paid Overtime Calculated Week by Week

So, the Ninth Circuit decided that Los Angeles mis-classified certain employees as "engaged in fire protection."  Under the FLSA, those "fire protection" employees are due overtime only after 212 hours worked in a 28-day work period (or 204 hours worked in a 27-day period).  Employees who are not "engaged in fire protection" are due the normal overtime pay for work > 40 hours in a workweek (unless another exemption applied).

These county fire dispatchers and air paramedic employees worked standard hours of 9 X 24 hour shifts in a 27 day work period, or 216 hours.  So, because they were mis-classified, overtime is due each workweek for each hour worked > 40.

Anyway, I know most of you are not running a city or fire protection operations and are not concerned with the above. But wait.  There's more.

After the district court found in favor of the employees, the parties disagreed on how to calculate the overtime due. LA argued that it was entitled to offset overtime already paid, as it was paying employees for the hours worked > 204 in a 27-day work period.

For example, under the normal rule, if an employee worked  60 hours per week for 4 weeks, that would be 20 hours per week of overtime, times 4 weeks = 80 hours of overtime premium pay due.   Under the exemption for fire protection, the overtime due for 240 hours worked in 28 days would be approximately 36 hours.  (Assuming 28 instead of 27 days).  So, big liability.

The city argued that it dutifully had been paying overtime for > 204 hours in the 27 day period Therefore, the city argued, it should be liable only for overtime hours not already paid for during that same 27-day period.  Meaning, the overtime paid during the entire work period would be offset against what was still owing.  The city  argued in the alternative it should be given  an offset for all overtime paid in the three year period of the lawsuit, with the amount paid credited against the total overtime owed.

No, said the Ninth Circuit.  The employer would be allowed to credit / offset overtime only for the workweek in which the overtime was paid.

Under the FLSA, 29 U.S.C. § 207(h)(2), an employer may credit overtime payments already made to employees against overtime payments owed to them under the FLSA. The statute, however, does not specify the method to be used to calculate these overtime payments. The statute simply states that “[e]xtra compensation . . . shall be creditable toward overtime compensation payable pursuant to this section.” 29 U.S.C. § 207(h)(2).

* * *

The district court correctly applied a week-by-week approach. Section 207(a) sets forth the basic overtime standard, set at forty hours in a seven-day workweek and time and one-half for overtime. To determine the overtime owed for each workweek, the total hours worked over forty is multiplied by one and one-half the regular rate. Then, under § 207(h), the overtime already paid by the employer is determined and credited against the overtime owed. While § 207(h) does not state whether credits must be determined on a workweek basis, it must still be read within the context of the overtime due under § 207(a), which is calculated on a workweek basis. Under this reading, compensation already paid for work done within one workweek should not be transferrable and offset against overtime due in another workweek. This makes sense because Plaintiffs are owed what they should have been paid had the City obeyed the law.

This decision adds to a split in the circuit courts.  The Supreme Court eventually may decide this issue. Until then, in the Ninth Circuit, employers will not be able to offset overtime already paid, except on a work week by workweek basis.

Although this is an FLSA case, California wage-hour laws track the FLSA unless there's a reason in the California law to depart from federal law.  In this instance, California courts are likely to follow the FLSA on this point, because it is the calculation method that is most generous to employees.

This case is Haro v.  City of Los Angeles and the opinion is here. 

CA Supreme Court Will Answer Ninth Circuit's Suitable Seating Questions

We wrote an article about the California wage orders' "suitable seating" requirement here.

We blogged about the Ninth Circuit's certified questions to the California Supreme Court here. 

Turns out the California Supreme Court just agreed to answer the 9th Circuit's questions.  You can sign up to follow the case here.

The questions presented are: For purposes of IWC Wage Order 4-2001 § 14(A) and IWC Wage Order 7-2001 § 14(A), "(1) Does the phrase 'nature of the work' refer to an individual task or duty that an employee performs during the course of his or her workday, or should courts construe 'nature of the work' holistically and evaluate the entire range of an employee's duties? (a) If the courts should construe 'nature of the work' holistically, should the courts consider the entire range of an employee's duties if more than half of an employee's time is spent performing tasks that reasonably allow the use of a seat?

(2) When determining whether the nature of the work 'reasonably permits' the use of a seat, should courts consider any or all of the following: the employer's business judgment as to whether the employee should stand, the physical layout of the workplace, or the physical characteristics of the employee? 

(3) If an employer has not provided any seat, does a plaintiff need to prove what would constitute 'suitable seats' to show the employer has violated Section 14(A)?

We'll keep you posted....

U.S. Supreme Court: The Sarbanes-Oxley Act's Retaliation Protection

Extends to private companies' employees.

Remember Enron?  Me neither.  That was one stock I somehow failed to buy.  And it was before the iPad .Anyway, those of you who do remember know that Enron resulted in a big financial mess.  There were Enron employees who attempted to uncover the fraud the management was perpetrated. They suffered retaliation by Enron's management.  Allegedly. Employees of Enron's auditors and lawyers who tried to blow the whistle on corrupt Enron managers. But these employees experienced retaliation by their employers as well. (Allegedly).

So, after the Enron debacle, Congress passed the Sarbanes-Oxley Act which, in part, protects whistleblowers from retaliation for reporting fraud by public companies.

As it turns out, mutual funds are public companies and, therefore, covered by SOX. But they typically have no employees.  Mutual funds hire private companies to act as "investment advisers." The advisers have the employees. The funds just hold the stocks, bonds, etc.

So, Lawson worked for an "adviser" to a mutual fund, which was a privately held company.  She allegedly complained about certain mutual fund accounting practices she believed were illegal.
The question for the Supreme Court in Lawson v. FMR LLC was whether the SOX anti-retaliation provision applies only to the employees of the publicly traded company (the mutual fund itself).  Or, did the anti-retaliation protections also apply to employees of non-publcly traded companies who blow the whistle on public corporation fraud (Lawson's employer, the investment advisor).

The Supreme Court decided to extend protections to non-public companies.

The prohibited retaliatory measures enumerated in §1514A(a)—discharge, demotion, suspension, threats, harassment, or discrimination in the terms and conditions of employment—are commonly actions an employer takes against its own employees. Contractors are not ordinarily positioned to take adverse actions against employees of the public company with whom they contract. FMR’s interpretation of §1514A, therefore, would shrink to insignificance the provision’s ban on retaliation by contractors.The dissent embraces FMR’s “narrower” construction. See post, at 2, 3, 4, 7.

The dissent (Sotomayor, Kennedy, and Alito) opined that the whistleblower protections apply only to the employees of the public employer, not to employees of the private companies who may "contract" with the public company.

This is Lawson v. FMR LLC and the opinion is here.

President Calls on DOL to Revise Exemption Regulations

He doesn't expressly say how:

I hereby direct you to propose revisions to modernize and streamline the existing overtime regulations. In doing so, you shall consider how the regulations could be revised to update existing protections consistent with the intent of the Act; address the changing nature of the workplace; and simplify the regulations to make them easier for both workers and businesses to understand and apply.

The memorandum is here.

So, what will this mean to employers?  The White House's  "Fact Sheet" about the memorandum, which is longer and more detailed than the memo itself, provides some clues:

Workers who are paid hourly wages or who earn below a certain salary are generally protected by overtime regulations, while those above the threshold who perform executive, professional or administrative duties are not. That threshold has failed to keep up with inflation, only being updated twice in the last 40 years and leaving millions of low-paid, salaried workers without these basic protections. Specifically: 

In 1975 the Department of Labor set the threshold below which white collar workers were entitled to overtime pay at $250 per week.
In 2004 that threshold was set at $455 per week (the equivalent of $561 in today's dollars). 

This is below today’s poverty line for a worker supporting a family of four, and well below 1975 levels in inflation adjusted terms. 

Today, only 12 percent of salaried workers fall below the threshold that would guarantee them overtime and minimum wage protections (compared with 18 percent in 2004 and 65 percent in 1975). Many of the remaining 88 percent of salaried workers are ineligible for these protections because they fall within the white collar exemptions. Many recognize that these regulations are outdated, which is why states like New York and California have set higher salary thresholds.

If you haven't heard, the administration is pushing hard to raise the minimum wage to $10.10 per hour, which is equivalent to a full time salary of $21,008 or so.  (They have not invented a pajama boy for the minimum wage - yet- but they're still pretty committed.)  Under the current regulations, the salary basis minimum is just over $23,000.  So, raising the salary basis threshold is another way of raising the "minimum wage," at least for those workers who qualify as "exempt" under federal law.

As for the duties tests, the DOL revised them in 2004, which addressed some outdated regulations and terms.  The DOL also simplified certain exempt tests, particularly when workers earned more tha $100,000 per year.  So "simplification" must mean "tougher exemptions." For example, the executive exemption might be changed to require supervision of more than the current two employees.  The administrative exemption could be reserved to senior administrative employees with greater discretion.  The professional exemption might be revised to include the salary test (hi, contract lawyers).  The duties test could be turned into a quantitative measure of time spent on exempt work (a la California) rather than a qualitative test.  Etc.

So, by now, some of you may be concerned that these regulations are going to happen and soon. The press and seminar sellers write articles etc. as though this is just around the corner.   I don't think any changes are nigh, or imminent, even.

First, it will take years to draft, vet, re-draft, re-vet, and finally promulgate these regulations.  Because that's how the DOL issues regulations.  Second, although it is true that this administration has issued gobs of regulations, it also has failed to issue others (Hi, NLRB poster, NLRB quickie election rules, etc.).   Third, I hear there's an election in 2016.  The outcome could affect whether and to what extent any proposed changes are implemented.  Even the 2014 election could shift the winds.  Who knows?

Finally, as the White House memo points out, California employers already must apply exemptions that are much stricter than federal law.  So, don't expect much impact on California employers' practices unless the DOL regulations are incredibly onerous.

Feel better?  Go look at pajama boy again.

9th Circuit - Employee Can Opt out of FMLA, Even at Her Peril

Maria Escriba found out her dad was ill in Guatemala.  She told her bosses at Foster Poultry Farms that her father was sick.  But she asked to use two weeks'  vacation time to visit. She did not request FMLA leave.  She said "no" when the company asked her if she needed more than two weeks' vacation time.  She took more than two weeks off anyway. She was discharged under the no-call / no-show policy.

Her argument was that she did not have to request FMLA leave.  The employer should have designated all her time off as FMLA time, protecting her from discharge.   She exhausted the vacation time, did not request FMLA leave, did not ask for an extension, did not have her husband ask for an extension (although he worked for the same employer), and so, was no-call no show.  Even the union figured she'd be fired.  The union was right.

Escriba then sued under FMLA and analogous California law, the California Family Rights Act.
The district court let her claims go to the jury. After a "short" deliberation, the jury found for the employer.  The key issue at trial and on appeal was whether Escriba's time off qualified as FMLA, even though she declined FMLA.   The Court analyzed the issue:

Holding that simply referencing an FMLA-qualifying reason triggers FMLA protections would place employers like Foster Farms in an untenable situation if the employee’s stated desire is not to take FMLA leave. The employer could find itself open to liability for forcing FMLA leave on the unwilling employee. See, e.g., Wysong v. Dow Chem. Co., 503 F.3d 441, 449 (6th Cir. 2007) (noting that “[a]n involuntary-leave claim,” alleging that an “employer forces an employee to take FMLA leave,” is “really a type of
interference claim”). We thus conclude that an employee can affirmatively decline to use FMLA leave, even if the underlying reason for seeking the leave would have invoked FMLA protection. See, e.g., Ridings v. Riverside Med. Ctr.537 F.3d 755, 769 n.3 (7th Cir. 2008) (“If an employee does not wish to take FMLA leave but continues to be absent from work, then the employee must have a reason for the absence that is acceptable under the employer’s policies, otherwise termination is justified.” (emphasis added)).

The Court also upheld the jury's conclusion that Escriba indeed declined to use FMLA. There was evidence at trial that she wanted to preserve her FMLA entitlement. And she knew the ropes, apparently, because she had sought FMLA leave on 15 previous occasions

there is substantial evidence that Escriba elected not to take FMLA leave. After Linda Mendoza’s initial meeting with Escriba on November 19, 2007, Mendoza met with Escriba and an interpreter, twice asking if Escriba needed more time in Guatemala. Escriba twice answered “no.” Mendoza testified that she then told Escriba to visit the Human Resources Department if she later decided to request more than two weeks of leave.

This decision is good for employees, too.  For example, if a pregnant employee wishes to use vacation to care for a parent so she can preserve 12 weeks of FMLA for baby bonding, should she be able to do so?  See?

This case is Escriba v. Foster Poultry Farms, Inc. and the opinion is here. 

California Court of Appeal SLAPPs Claim for Breach of Settlement Agreement

Perhaps you have read about the EEOC's recent lawsuits attacking severance agreements as allegedly containing illegal provisions, because they impede the EEOC's work. The EEOC is challenging everything from "cooperation clauses," to general releases that broadly preclude the releasing employee from bringing future claims.  You know, in exchange for money.   Here's an example of what the EEOC is doing.  If the EEOC wins,  and they don't win all of these efforts to radically change the law via agency internal policy and litigation rather than legislation (Hi, credit check lawsuits), many standard releases will have to be modified.

Yes, the above discussion is related to why I asked you here today.  Somewhat. The California Court of Appeal just found that an employer's lawsuit against a union for breach of settlement agreement should be stricken because the lawsuit was a Strategic Lawsuit Against Public Participation.   The court's ruling in part is based on a conclusion that the parties' non-cooperation agreement was not enforceable.

The United Farmworkers Union settled one of two pending unfair labor practice charges with a company called D'Arrigo Bros. of California.

On February 18, 2011, UFW's attorney sent D'Arrigo's counsel a letter purporting to "memorialize the UFW's agreement." In the letter UFW acknowledged that it had obtained dismissal of the second ULP, and it promised not to refile this charge "and/or the substantive allegations at a later date." . . . UFW therefore agrees that said Objection Five will in fact be dismissed in its entirety or that, in the event the Executive Secretary for any reason declines to dismiss all or any of it prior to a hearing, UFW will timely act to withdraw its declarations and argument regarding Objection Five and will not present any evidence thereon in the objection process; and will continue to advise (in writing, on the record) the Executive Secretary, General Counsel, and/or assigned administrative law judge that UFW wants Objection Five entirely dismissed; and that UFW will not pursue, nor assist [in] pursuing, Objection Five in any fashion whatsoever."

Then, during proceedings on the remaining unfair labor practice charge, D'Arrigo believed the UFW breached the above agreement and cooperated with the Agrigultural Labor Relations Board's general counsel.

D'Arrigo sued the UFW for breaching the settlement agreement.  The UFW filed a motion to strike the D'Arrigo lawsuit under California's anti-SLAPP law.  The UFW's basis for the motion was that D'Arrigo's claim was really a lawsuit designed to retaliate against UFW for cooperating with the ALRB's proceedings in the matter that was not settled.

The Court of Appeal held that UFW should win the anti-SLAPP motion, resulting in dismissal of D'Arrigo's lawsuit.    Of note, the Court held that D'Arrigo's basis for asserting breach of contract - that the UFW violated an agreement not to cooperate with the ALRB - was unenforceable:

we agree with UFW—and with the General Counsel as amicus curiae-- that any interpretation of the stipulated language to prohibit UFW from cooperating with [the general counsel] in his investigation and prosecution of the first ULP charge must be rejected as contrary to the public policy inherent in the ALRA.

*  *  * 

Moreover, the [employer's] ability to guarantee the silence of witnesses by means of a legally enforceable private agreement does not comport with either the spirit or the stated purpose of the ALRA." 

That purpose is clearly stated in Labor Code section 1140.2: "[T]o encourage and protect the right of agricultural employees to full freedom of association, self-organization, and designation of representatives of their own choosing, to negotiate the terms and conditions of their employment, and to be free from the interference, restraint, or coercion of employers . . . ." This public interest is not advanced if private agreements between employer and employee are allowed to obstruct the General Counsel's prosecution of complaints. (Cf. E.E.O.C. v. Astra U.S.A., Inc. (1st Cir. 1996) 94 F.3d 738, 744-745 [settlement provision prohibiting employee from assisting EEOC in its investigation of sexual harassment charges against employer is void as against public policy].)

So, another trend in employment law appears to be increased scrutiny of releases.  Employers should ensure they know what they are bargaining for when they settle claims.  Absolute confidentiality is not realistic. Neither is a promise never to participate or cooperate in a future proceeding.  Employers should not pay settlements or separation pay expecting to fully achieve these goals.   That said, there are ways to draft agreements to comply with the limitations.   At least there used to be. We'll have to see what happens in the EEOC's litigation.

This case is D'Arrigo Bros. of California v. United Farmworkers of Am.  and the opinion is here.

To Compel Arbitration Under Federal Arbitration Act, Employer Must Prove It Applies

Lab. Code section 229 is a California law that expressly precludes arbitration of certain wage-hour claims.

229. Actions to enforce the provisions of this article for the collection of due and unpaid wages claimed by an individual may be maintained without regard to the existence of any private agreement to arbitrate.

Of course that law is preempted by the Federal Arbitration Act. The U.S. Supreme Court has said as much. 

The catch is that preemption applies only if the Federal Arbitration Act applies to the agreement to arbitrate.  The Federal Arbitration Act applies only to arbitration agreements made by employers in "interstate commerce."  So, technically, the employer looking to enforce an arbitration agreement in spite of section 229 has to establish FAA jurisdiction, or section 229 will apply and no wage claim arbitration will be permitted.

When Martin Lane sued Francis Capital Management over wage-hour and other issues, Francis petitioned to compel arbitration.  Lane invoked Labor Code section 229, arguing it precluded arbitration.  The Court of Appeal decided Francis did not establish it was subject to the Federal Arbitration Act:

Seeking to avoid application of section 229 to Lane's third cause of action, FCM contends that in the instant case, section 229 was preempted by the FAA. {Slip Opn. Page 13} (See Perry v. Thomas (1987) 482 U.S. 483, 492 [where FAA applies, it preempts section 229].) In the trial court, FCM's only mention of FAA preemption came in a footnote, and the court's rejection of the argument was predicated on FCM's failure to develop a factual record in support of preemption. Assuming the argument was preserved for appeal, we agree that FCM neither sought to nor succeeded in presenting facts sufficient to support a finding of FAA preemption.

So, lawyers, do not assume that a court will find that an employer is involved in "interstate commerce" within the meaning of the Federal Arbitration Act.  

Anyway, this case seems like it's anti-arbitration, but it's not.  The court rejected the trial court's conclusion that the arbitration agreement was void because it did not attach the American Arbitration Association's rules.  The court also held that section 229 applied to just one of the causes of action and the others would be arbitrated.   The court obviously can sense the winds of change in arbitration law. (The California Supreme Court will rule on the continuing viability of its arbitration jurisprudence within the next four months).

This case is Lane v. Francis Capital Management and the opinion is here.

Staffing Agency Not Liable for Employee Who Poisoned Co-Worker

Yes, you read that right.

Nursefinders is a placement company.  It provides nurses and other employees to hospitals and other health care facilities.  Nursefinders assigned Theresa Drummond to work at a Kaiser facility as a medical assistant.  Drummond had a few work related disagreements with another medical assistant at Kaiser, whose name is Montague.  Montague did not consider these squabbles to be important.  

Drummond, though, apparently took the disputes more seriously.*  Because one day, when Montague left a water bottle lying around, Drummond spiked it with carbolic acid, a rather dangerous substance to drink with water.  Montague became quite ill.

* Perhaps Drummond's fictional ancestors were Capulets.  

Montague and her husband sued Drummond and Nursefinders for intentional infliction of emotional distress.  But the trial court granted summary judgment to Nursefinders, finding that Drummond was Kaiser's special employee, and that Drummond's actions were beyond the course and scope of her employment. Therefore, Nursefinders could not be held vicariously liable for Montague's injuries (or her husband's loss of consortium).  The court also dismissed Montague's claim for negligent retention, supervision and hiring, holding there was a lack of causation between Nursefinder's hiring and Drummond's decision to spike Montague's water.

With respect to the IIED / vicarious liability claim, the court rejected Nursefinders' liability for two reasons.  First, the court of appeal held that there was no evidence the poisoning arose out of a work-related dispute, as opposed to personal animosity that Drummond developed for Montague.  Second, the Court held that Nursefinders, a staffing placement agency, could not be liable for an incident between two employees who were working at Kaiser. 

Montague's attempt to establish respondeat superior liability for Nursefinders simply because she and Drummond worked together at Kaiser is misguided. "The nexus required for respondeat superior liability—that the tort be engendered by or arise from the work—is to be distinguished from 'but for' causation. That the employment brought tortfeasor and victim together in time and place is not enough." (Lisa M., supra, 12 Cal.4th at p. 298, fn. omitted.) The facts, construed most favorably for Montague, do not support liability against Nursefinders because Drummond's poisoning of Montague was highly unusual and startling.

The Court also rejected the negligent training claim.  The plaintiff argued that Nursefinders had a duty to train Drummond not to handle workplace disputes by poisoning her co-worker?  Really?  

Well, the Court did not reject that argument. Rather it simply assumed, without deciding, that there is such a duty:

Montague alleged that Nursefinders had a duty to train Drummond regarding the proper handling of work-related disputes and that its negligence in this regard caused her harm. As a preliminary matter, we will assume without deciding, that Nursefinders had a duty to train its employees regarding the avoidance of workplace violence. (Phillips v. TLC Plumbing, Inc. (2009) 172 Cal.App.4th 1133, 1140 [Liability for negligent hiring, training, and supervision " 'is limited by basic principles of tort law, including requirements of causation and duty.' "].)

What about suing Drummond's kindergarten, parents, college, etc.?  "It's nice to share."  "Wash your hands." "Don't poison people you don't agree with."

Anyway, having assumed such a duty exists, without deciding, the court held that Montague did not establish that Nursefinders failed to conduct workplace violence training:

Drummond and the Nursefinders's branch director signed a document verifying that Drummond participated in Nursefinders's orientation which explained certain topics including "Workplace Violence." Nursefinders also admitted it trained Drummond on Kaiser's policies and procedures regarding "Violence in the Workplace" and "Management of Threats and Aggressive Behavior." Montague cites to Drummond's deposition testimony and her response to an interrogatory to show Drummond did not receive the specified training. Review of this evidence does not support her contention.

After rejecting Montague's argument that Drummond was not trained, she tried a different argument, which the Court also rejected.

Montague's argument appears to be that because Nursefinders trained Drummond on avoiding workplace violence and the incident occurred, this evidence supports an inference that Nursefinders must have breached its duty to train Drummond in avoiding workplace violence and this breach caused her injuries. We reject this contention as the suggested inferences are based on speculation and not reasonably deducible from the evidence. Montague "cannot survive summary judgment simply because it is possible"

So, the takeaway is that employers should conduct workplace violence training to avoid the argument that lack of training could result in an employee's not knowing it's wrong to poison a co-worker's water.   Good news for management trainers like us.

This case is Montague v. AMN Healthcare and the opinion is here. 

San Francisco Employers: Time to Revise Employment Applications, Background Check Rules, as Supervisors "Ban the Box"

"Ban the box" means to get rid of boxes on employment applications asking for criminal history. The idea is so that employers don't automatically reject applicants with criminal convictions if they might otherwise be qualified to hold a job.

A number of jurisdictions have "banned the box," mainly in public sector employment.  Now, the San Francisco Board of Supervisors have passed an ordinance drastically limiting employers' reliance on criminal convictions.  No more criminal history information can be requested on the application.
 Even better, employers will have to comply with procedural requirements that differ from the Fair Credit Reporting Act when they do check criminal history.

We'll have an article soon with a more detailed analysis.  But the ordinance is here.  It's a big file.  The ordinance itself is long and hard to read.  A summary is on pages 55-58 of the linked  PDF.

This ordinance may take effect in a month or so.  The mayor theoretically could veto this ordinance. So, stay tuned.

Oh and YES, there will be another poster!  There may be a new ordinance requiring employers to build more walls soon.  Sure, laugh now.

Good luck out there.

February 1 is Deadline for Posting CalOSHA Log 300

Our friends at the California Chamber of Commerce is reminding employers that they must post a summary of job-related injuries and illnesses from 2013 at their place of business by February 1. Obligations may vary depending on the industry, etc. See the Chamber's post here, complete with links and other valuable information.

U.S. Supreme Court Decides What the Definition of "Clothes" Is

Section 203(o) of the federal Fair Labor Standards Act permits unions and employers to include provisions in their collective bargaining agreements re whether "changing clothes" is compensable time or not.

Sandifer and others sued their employer U.S. Steel under the FLSA.  They claimed that the protective gear they had to wear as part of their job duties were not "clothes." Therefore, they were not under the exemption in Section 203(o), or covered by their collective bargaining agreement's exclusion.

The principal dispute was over these items:

Petitioners point specifically to 12 of what they state are the most common kinds of required protective gear: a flame-retardant jacket, pair of pants, and hood; a hardhat; a “snood”; “wristlets”; work gloves; leggings; “metatarsal” boots; safety glasses; earplugs; and a respirator.

A "snood"?   More later.

Anyway,  if Section 203(o) did NOT apply, then the normal rules on "donning and doffing" would.  Under those regulations and under case law, the changing into these items likely would be compensable.  Therefore, the employees wanted Section 203(o) to be inapplicable. U.S. Steel wanted the CBA's provision and Section 203(o) to bar the claim.   As a result, the Supreme Court had to decide:  what does "changing clothes" mean under Section 203(o).

Justice Scalia, writing for a unanimous court (except Justice Sotomayor did not join fn 7), concluded the following:

Dictionaries from the era of §203(o)’s enactment indicate that “clothes” denotes items that are both designed and used to cover the body and are commonly regarded as articles of dress. See Webster’s New International Dic- tionary of the English Language 507 (2d ed. 1950) (Web- ster’s Second) (defining “clothes” as “[c]overing for the human body; dress; vestments; vesture”); see also, e.g., 2 Oxford English Dictionary 524 (1933) (defining “clothes” as “[c]overing for the person; wearing apparel; dress, raiment, vesture”). That is what we hold to be the meaning of the word as used in §203(o).

 

The Court rejected the employees' argument that "clothes" did not include any type of covering that was "indispensable" to performing the job, such that anything that provided extra safety would be excluded from the definition. The Court also rejected the employer's argument that clothes means the entire ensemble or "outfit."

That task accomplished, the Court next defined "changing." The employees argued that "changing" meant only substituting one article of clothing for another (i.e., changing shirts or pants from street wear to work pants). The Court, however, disagreed:

We think that despite the usual meaning of “changing clothes,” the broader statutory context makes it plain that “time spent in changing clothes” includes time spent in altering dress.

But seriously - what is a Snood? The Court answered the question when it applied its definition of "changing clothes" to the protective gear discussed above:

Petitioners have pointed to 12 particular items: a flame- retardant jacket, pair of pants, and hood; a hardhat; a snood; wristlets; work gloves; leggings; metatarsal boots; safety glasses; earplugs; and a respirator. The first nine clearly fit within the interpretation of “clothes” elaborated above: they are both designed and used to cover the body and are commonly regarded as articles of dress. That proposition is obvious with respect to the jacket, pants, hood, and gloves. The hardhat is simply a type of hat. The snood is basically a hood that also covers the neck and upper shoulder area; on the ski slopes, one might call it a “balaclava.” The wristlets are essentially detached shirt- sleeves. The leggings look much like traditional legwarm- ers, but with straps. And the metatarsal boots—more commonly known as “steel-toed” boots—are just a special kind of shoe.

Not sure why 9 Supreme Court justices would analogize to an Eastern European ukulele or a flaky pastry. I thought that ski slope gear was called a "dickey."  Live and learn.

But what of the remaining items: earplugs, glasses, and the respirator?  They are definitely not "clothes," the Court said.  The employer then argued that putting these items on was "de minimis."  No sale. The Court noted,

A de minimis doctrine does not fit comfortably within the statute at issue here, which, it can fairly be said, is all about trifles—the relatively insignificant periods of time in which employees wash up and put on various items of clothing needed for their jobs. Or to put it in the context of the present case, there is no more reason to disregard the minute or so necessary to put on glasses, earplugs, and respirators, than there is to regard the minute or so necessary to put on a snood.

Yep, he mentioned the s-word again.

So, here's where the Court worked some magic that only the highest court in the land can do. It simply held that although ear plugs etc. were not "clothes," these additional items would still be subject to Section 203(o) collective bargaining.  That is, putting on earplugs would be compensable if the parties negotiated that.  

The employees won the argument, but lost the case.  Why?  Because the Court did not want to have district judges serving as time-study experts.  Not kidding:

it is most unlikely Congress meant §203(o) to convert federal judges into time-study professionals. That is especially so since the consequence of dispensing with the intricate exercise of separating the minutes spent clothes-changing and washing from the minutes devoted to other activities is not to prevent compensation for the uncovered segments, but merely to leave the issue of compensation to the process of collective bargaining.

This is a narrow decision that affects only the negotiation of "clothes changing" in a collective bargaining agreement.  It will have little applicability in the nonunion context.

The opinion in Sandifer v. U.S. Steel Corp. is here.

Some Recent Shaw Valenza Articles

I'll be posting our bi-weekly articles here from now on.  You can access these in a number of ways in addition to on this blog.  They'll automatically be posted on Twitter (@shawvalenza) and on our Facebook page here after I post them here. Just in case you want to read them 3 times.  And if you read the Sacramento legal newspaper, the Daily Recorder, you can read them there as well.

Our article on the new Family Friendly Workplace ordinance, which took effect 1/1/2014, is posted here.

Here's our summary on 2014 California employment laws:  Part 1 and Part 2.

And this is our recent article on subpoenas and employees' claims of medical privacy.

DGV

Court of Appeal Addresses Motivation in Retaliation Cases and the Role of Investigations

Mendoza was a long-term nurse for Western Medical Center - Santa Ana.  His performance had been excellent.  Mendoza claimed his new boss was harassing him.  Erdmann, the boss, claimed that Mendoza was sexually inappropriate to him.  The employer investigated and determined that both employees engaged in misconduct.  The employer fired both of them.

Mendoza sued for wrongful termination, claiming the hospital employer fired him for complaining about Erdmann's conduct.  He reasoned that the hospital would not have learned about any complaints about Mendoza had he not complained about Erdmann. An expert testified the hospital's investigation was not as thorough as it could have been, although the expert conceded he did not know of any facts that a "better" investigation would have uncovered.

A jury found in favor of Mendoza and awarded about $238,000 in economic and non-economic damages.  But the jury was instructed that it could find retaliation if an unlawful motive was "a" motivating reason. The Court of Appeal reversed and ordered a new trial:

It is therefore clear that the court erred in its instruction of the jury. The court should have instructed the jury to determine whether Mendoza’s report of sexual harassment was a substantial motivating reason for Mendoza’s discharge. Following Harris and Alamo, we conclude this error was prejudicial. The jury’s verdict in favor of Mendoza was extremely close (a nine to three vote). No other instructions provided to the jury could have cured the erroneous instruction with regard to the contested element. Viewing the evidence “in the light most favorable” to defendants (Huffman v. Interstate Brands Corp. (2004) 121 Cal.App.4th 679, 692), there is a reasonable probability that the
instructional error prejudicially affected the verdict.

The hospital claimed there was insufficient evidence of retaliation to support any verdict and asked the appellate court to direct a judgment in its favor.  The court of appeal ordered a retrial.  Bolstered by case law and law review articles, the court offered its thoughts (not evidence, but a basis for a plaintiff's argument) on why the jury might have found a retaliatory motive, which is the interesting part of this opinion for employers and HR professionals:

Retaliation, if it occurred, was not motivated out of a desire to protect Erdmann or punish Mendoza for harming Erdmann as such. But the protection of a specific supervisor is not the only logical reason an employer would retaliate against an employee reporting sexual harassment.. . .  . Perhaps defendants were substantially motivated by a desire to rid themselves of an individual who had become problematic by reason of his reporting sexual harassment, without regard to the accuracy of his accusations. . . . There is sufficient evidence in the record for the jury to conclude that a substantial motivating reason for Mendoza’s firing was his report of sexual harassment. Defendants terminated an excellent, long term employee soon after he reported sexual harassment by a recent hire, Erdmann. . . . Accepting Mendoza’s testimony as true (as we must for this purpose), Mendoza was not complicit in sexual misconduct at the hospital. Instead, Erdmann harassed Mendoza while Erdmann was acting as Mendoza’s supervisor at the hospital. After being confronted by defendants, Erdmann confirmed part of Mendoza’s story (i.e., that improper activity occurred) but accused Mendoza of being the instigator
and willing participant. With nothing to go on besides their respective statements, defendants claim they chose to believe Erdmann’s characterization of the incidents rather than Mendoza’s complaint.

So far, so good. But then, perhaps without taking into consideration the standard of employment at will (as it is not mentioned in the opinion), the Court seemed to impose a very high standard on at-will employers who discharge at-will employees.   

Importantly, in combination with the foregoing facts, Mendoza’s expert witness testified that there were numerous shortcomings in the investigation conducted by defendants following Mendoza’s complaint. (See Nazir v. United Airlines, Inc. (2009) 178 Cal.App.4th 243, 278-283 [inadequate investigation is evidence of pretext].) The lack of a rigorous investigation by defendants is evidence suggesting that defendants did not value the discovery of the truth so much as a way to clean up the mess that was uncovered when Mendoza made his complaint. Defendants point to the expert’s
concession that additional facts would not necessarily have been discovered had the alleged flaws in the investigation been addressed. But the question for the jury was defendants’ subjective motivation in deciding to fire Mendoza, not whether defendants actually had all available material before them. Moreover, a more thorough investigation might have disclosed additional character and credibility evidence for defendants to consider before making their decision.

The Court then dropped a footnote to drive the point home re the importance of investigations in "he said-he said (or he said/she said) cases:

At oral argument, defense counsel asked (perhaps rhetorically) just what employers were expected to do when faced with a scenario in which two employees provide conflicting accounts of inappropriate conduct. Our answer is simple: employers should conduct a thorough investigation and make a good faith decision based on the results of the investigation. Here, the jury found this did not occur. Hopefully, this opinion will disabuse employers of the notion that liability (or a jury trial) can be avoided by simply firing every employee involved in the dispute.

To be sure, a thorough, competent investigation is a good preventive measure that can result in better decisions.  However, there is no legal duty to investigate before firing an employee at will. The sole issue here was whether the employer fired Mendoza for a lawful reason or not.  As the courts always say, the employer need not be "wise or correct" in making its decision.  And they also say: The court does not sit as a "super-personnel department" either. 

Perhaps if the employer seeks rehearing in this case (hint hint) , it will argue that the investigation duty the Court imposed applies only in the case of employment "for cause."  The proper standard for at-will employees is as follows:

"Where the employment contract itself allows the employer to terminate at will, its motive and lack of care in doing so are, in most cases at least, irrelevant." (Guz, supra, 24 Cal.4th 317, 351; cf. Cruey v. Gannett Co. (1998) 64 Cal.App.4th 356, 365 [76 Cal.Rptr.2d 670].) Since an employer does not require good cause to terminate an at-will employee, in the normal course of events an employer need not either articulate or substantiate its reasons, except to provide an advance refutation for any inference that the true reason was illegal. Unless at-will employers are to be held to a good-cause standard for termination, no inference of discrimination can reasonably be drawn from the mere lack of conclusive evidence of misconduct by the employee.
* * *
As to the investigation being flawed and biased, Employee complains that he was not informed of the charges against him by Employer or Mistry. But he cites no provision of his employment contract or employment law in general entitling an at-will employee to advance notice and a hearing before termination. His employment contract provided that he could be terminated without notice.

McGrory v. Applied Signal Technology, Inc., 212 Cal. App. 4th 1510 (2012).  (emphasis added)

This case is Mendoza v. Western Medical Center, Santa Ana, and the opinion is here.

Ninth Circuit Poses Questions to CA Supreme Court Re Suitable Seating Obligations

Happy New Year!
The Ninth Circuit is considering several class action appeals over California's "suitable seating" requirement contained in its wage orders.  Here is an example from Wage Order 7-2001, governing the retail industry:

14. Seats.(A) All working employees shall be provided with suitable seats when the nature of the work reasonably permits the use of seats. 

The Ninth Circuit is considering appeals in two cases.  One involves bank tellers.  One involves retail clerks.

In the retail case, CVS's cashiers spend about 90% of the time working a cash register, ringing up transactions.  The other 10% of the time, she has to walk around the store, performing various tasks. CVS does not provide seats for the cashiering duties, believing that standing employees provide better customer service.  CVS told the plaintiff her job involved extensive standing when it hired her. 

In the bank case, tellers spend a great deal of time at their windows, making deposits, processing withdrawals, etc.  They also escort customers to safety deposit boxes, check ATMs and perform other duties that require mobility.

The employees argue:

if an employee is engaged in a task that can objectively be performed while seated, the employer must provide the employee with a suitable seat. Under this interpretation, neither the employee’s other tasks nor the employer’s business judgment would affect whether the nature of the work reasonably permits the use of seats.

On the other hand, the employers say: 

courts should discern the nature of an employee’s work by considering the entire range of tasks the employee actually performs in combination with the employee’s job description, the layout of the workplace, the employer’s business judgment concerning the employee’s job, and any other factors the court deems relevant. An employer would only be subject to Section 14(A) when all of these factors taken together reasonably permit the use of a seat.

The Court's dilemma is that the Wage Order's text permits either interpretation because it's vague.

So, does the "nature of the work" in either or both cases reasonably permit the use of seats?  And who gets to decide?  The Ninth Circuit wants to know how the California Supreme Court interprets "the nature of the work."  Here are the questions the federal court would like answered:

1. Does the phrase “nature of the work” refer to an individual task or duty that an employee performs during the course of his or her workday, or should courts construe “nature of the work” holistically and evaluate the entire range of an employee’s duties? 

a. If the courts should construe “nature of the work” holistically, should the courts consider the entire range of an employee’s duties if more than half of an employee’s time is spent performing tasks that reasonably allow the use of a seat? 

2. When determining whether the nature of the work “reasonably permits” the use of a seat, should courts consider any or all of the following: the  employer’s business judgment as to whether the  employee should stand, the physical layout of the workplace, or the physical characteristics of the employee? 

3. If an employer has not provided any seat, does a  plaintiff need to prove what could constitute “suitable seats” to show the employer has violated Section 14(A)?

As the Ninth Circuit points out in its request, if the Supreme Court agrees to answer these questions, it will have a significant effect on California employers and employees:

Section 14 could have a dramatic impact on public policy in California as well as a direct impact on countless citizens of that state, both as employers and employees. Even a conservative estimate would put the potential penalties in these cases in the tens of millions of dollars. See Cal. Lab. Code § 2699(f)(2) (“If, at the time of the alleged violation, the person employs one or more employees, the civil penalty is one hundred dollars ($100) for each aggrieved employee per pay period for the initial violation and two hundred dollars ($200) for each aggrieved employee per pay period for each subsequent violation.”); see also Home Depot U.S.A., Inc. v. Super. Ct., 120 Cal. Rptr. 3d 166, 177 (Cal. Ct. App. 2010) (finding California Labor Code § 2699(f)(2) applies to Section 14 of Wage Order 7-2001); Bright v. 99cents Only Stores, 118 Cal. Rptr. 3d 723, 730 (Cal. Ct. App. 2010) (same).

As a former restaurant worker, I was thinking that if the plaintiffs' interpretation is correct, then a waiter taking an order would have the right to sit down at the table?  Taking the order, after all, is a duty that may be accomplished while seated.  How about the bartender?  There are other industries where the task-based approach could change the workplace significantly. Third base coach?  Factory worker?  Professor?  Will the seat have to have wheels if some movement is required within the work area (because that is "suitable")?  Does the employer have any say in what the "nature of the work" involves, or will that be up to the courts / a jury / the Division of Labor Standards Enforcement?   

Anyway, we'll see in the next few weeks if the California Supreme Court is interested in answering these and other questions.  Let's hope these questions are addressed so employers and lower courts may understand what is expected of them.

The case is Kilby v. CVS and the Ninth Circuit's request to the California Supreme Court is here.  As of now, there is no Supreme Court online docket for this case. 

Court of Appeal: Wages Earned at "Inferior" Job Do Not Count as "Mitigation" of Damages

Employee was a maintenance planner earning  $65,699 per year.  His employer lays him off. 

He moves to another town to be closer to his wife's job.  Employee finds new employment, but 2-3 hours from his new location.  So, he pays $500 per month for a room an hour away from the new job and he saees his family on days off. The new position is maintenance supervisor, paying $69,300 per year.  In all, employee was out of work 8 months.

Employee sues for discrimination, wrongful termination, etc.  He wins his case.  How much is the lost wages? Yes, about $44,000, which is about 8 months' salary.  I know this because that's how much the employee's lawyer asked for during closing argument.  

But the jury awarded $198,000 in lost wages, about 3 years' pay.  That happened to be equivalent to his prior annual salary from the termination date until the trial. 

The employer challenged the verdict on appeal, arguing that the jury did not take into account the employee's mitigation efforts and his actual earned wages.  

The court of appeal decided that the jury had the right to conclude that the longer commute rendered the replacement job "inferior," and that wages earned from an "inferior" job need not be counted against lost wages.

The evidence in the instant case reflects Villacorta’s job at National was located two to three hours away from the home where his family resided. As a result, Villacorta rented a room Lancaster, which was one hour away from National’s plant in Lebec. Villacorta could not find a closer rental because Lebec was “kind of a remote area.” As a result, Villacorta was only able to see his family on weekends. Villacorta’s family consisted of his wife and two daughters, who were seven and 11 years old at the time of trial. Based upon the foregoing evidence, a jury could reasonably conclude the job at National was inferior to the job at Cemex because of the burden placed on Villacorta by the location of the job. The burden included not seeing his family during workdays and having to pay for a second residence. Since the jury could reasonably conclude the National job was inferior, it was reasonable for the jury to not use Villacorta’s National wages to mitigate the Cemex losses.

This decision could lead to a lot of litigation over the quality of replacement employment.  In this case, the employee secured a new job for more money than he was earning at his old job.  Yes, it was far from his home. But he voluntarily moved his home to a remote location, making it more difficult to find replacement employment near his home.  Additionally, the court simply accepted the premise that a job that pays more, and that involves comparable work in a comparable industry still is inferior, but only because of a longer commute.  

It seems like the court is expanding plaintiffs' opportunity to recover damages for "back pay" when they did not actually suffer a financial loss. What is the role of damages for economic loss?  Is it to make a plaintiff "whole?" Or is it to provide a plaintiff with more money than he would have earned if he had stayed employed with the employer that fired him?  

This case is Villacorta v. Cemex Cement, Inc. and the opinion is here.

U.S. Senate Considering Ban on (Nearly) All Credit Checks

I just read that the U.S. Senate, via Senator Elizabeth Warren, is introducing a bill to ban the use of pre-employment credit checks altogether.  The proposed bill is here.

The bill (as introduced) simply would amend the Fair Credit Reporting Act to make it illegal for employers to rely on credit reports to take adverse actions.  Employees would no longer be able to consent to disclosure.

Any exceptions?  Certainly.  For example, credit checks will still be allowed when the position involves national security.  Wait a minute there.  How could credit checks possibly be relevant to national security?  Could it be that an applicant's credit report has something to do with integrity?  Well, Senators, maybe that's why employers find credit checks relevant to employer security.  Another exception - when credit checks are required by law.  Why would credit checks be required by law?  The EEOC says credit checks are discriminatory.  How could something discriminatory be required by law?

Anyway, that's it for exceptions. As written, this bill does not expressly create any exception for positions involving cash handling, banking, etc.  If this bill is passed, unless the job is one of "national security" or unless a credit check is "required by law," the rest of you employers will be out of luck.

Employers may desire to run investigative consumer reports, credit reports and criminal background checks in part to verify information that applicants provide on their applications.  Application fraud appears to be a big problem, according to surveys discussed here, and here, and here.  Hey - perhaps the Senate will also introduce a bill making it illegal for applicants to lie on their employment applications!  Fat chance.

This bill may not make it through either house, or it could be amended.  But the trend among state and local governments is to get rid of credit checks, criminal background checks, and other pre-employment tools that help employers determine who is a financial or other risk.   So, employers should keep abreast of this trend, and make plans to alter hiring practices as the law evolves.

Enjoy your holidays!  Humbug.

California Employers Must Timely Post Undertaking to Appeal Labor Commissioner Ruling

Must.   Igor Palagin was a welder.  He filed a labor commissioner claim for underpayment against Paniagua Construction. Paniagua claimed Palagin was not its employee; rather, he was a subcontractor.   The DLSE found in favor of Palagin.

Paniagua sought a "trial de novo" in superior court.  To obtain that new trial, the employer must post a bond or cash payment (called an "undertaking") in the amount of the labor commissioner's award.  The undertaking ensures the employee will be paid if the employer loses the appeal de novo and does not pay the adverse award.

Here's the thing - the "appeal" must be filed within 10 days of service of the Labor Commissioner's award (or 15 days if the award was served by mail).  AND, the undertaking must be submitted as a "condition" of filing the appeal.  So, employers must arrange for the undertaking quickly.  That means there is little time to deliberate over whether to appeal.

So, Paniagua did not post an undertaking when it filed its appeal.  Paniagua sought leave of court to submit the undertaking late, which the court granted.

Palagin appealed to the court of appeal, which decided the trial court had no jurisdiction to allow the filing of the undertaking late.  Why such an inflexible rule?  The court explained:

as long as a notice of appeal cannot be filed without an undertaking, the absence of an undertaking means the appeal does not come into existence, and thus there is no need for the employee to move to dismiss and no delay in obtaining a dismissal; further, by not allowing the posting deadline to be extended, the employer does not have time to hide or transfer assets.

So, if you plan to appeal an adverse ruling of the labor commissioner, submit the undertaking on time or the right to appeal will be lost.

The case is Palagin v. Paniagua Construction, Inc.  and the opinion is here.

San Francisco Flexible Family Friendly Fully Fabulous Foster!

Sorry. I meant "Pabulous!"  Looks like I almost ran out of F-words to describe the new San Francisco Flexible Family Friendly Ordinance.  

Never fear. The poster is here:  POSTER.  Download, copy to your heart's content, and get that on the wall by 1/1/14.  

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(Guess who's been hitting the egg nog)

IRS Announces 2014 Standard Mileage Rate

The IRS made its annual determination of the standard mileage rate link is here.

Beginning on Jan. 1, 2014, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

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

Last year's business rate was 56.5 cents.  So, this is actually a small reduction.

This change will affect employers' expense reimbursement policies.

Court of Appeal Finds Way to Certify Exempt / Overtime Class Action

In recent months, some California courts of appeal appear to have changed their analysis of how to analyze the class certification question.  In the most recent example, the court reversed an order denying certification of a proposed class of restaurant managers.

This case involved all salaried employees of Joe's Crab Shack, including the general managers and assistant managers.  The plaintiffs submitted evidence that class members performed non-exempt work, and that they lacked sufficient discretion and independent judgment.  They relied on corporate policies, as well as declarations from 27 of the management employees.  However, named plaintiffs could not testify how much time they spent on exempt or non-exempt tasks, and admitted that their time spent on different tasks varied from day to day.  The employer put on evidence showing that management employees uniformly spent more than 50% on exempt duties.

The way class certification has appeared to work in the past is that courts certify a class if common questions predominate over individual ones.  In an exemption classification, if the proof shows that a common issue does not determine the liability to the entire class, then individual issues predominate over common ones.  Thus, it may be that an employer classifies all managers as exempt.  That uniform policy and a uniform job description are some evidence of commonality.  If that job description said "all managers are exempt and earn less than 2X minimum wage" then that would be a predominant common question.  Why?  Because the salary is too low to qualify for exempt treatment.  Similarly, if a job description requires employees to perform non-exempt work > 50% of the time, that's an issue that potentially could lead to liability in favor of everyone covered by the job description.

In a case like this one, though, the evidence before the trial court seemed to demonstrate that there would be too many individual issues pertaining to how the managers spent their time, such that it would be impossible to say that all managers in the class were mis-classified as non-exempt.   Only mis-classification is illegal.  Uniform classification is not.

I wasn't on the panel, though.  The court of appeal appeared to reject this analysis.  The court did not cite to the case law that says a common issue must decide liability for the entire class, or that common questions must predominate in a way that affects liability.

In fact, the court seems to say that it is appropriate to certify a class action even if there are putative class members who were properly, lawfully deemed exempt:

even if there were individual managerial employees whose work remained more than 50 percent managerial in nature, if CAI’s and Landry’s policies as implemented across California resulted in managerial employees being undercompensated for performing exempt work, class relief is appropriate.

Well, that just doesn't make any sense.  The lawsuit asserts the company unlawfully classified a class of managers as exempt.  The class, therefore, should not include people who were lawfully classified.  If you cannot discern the lawful from the unlawful, you do not have a liability issue that is common to the entire class.  As the court noted,  “‘As a general rule if the defendant’s liability can be determined by facts common to all members of the class, a class will be certified even if the members must individually prove their damages.’”

The court of appeal seemed to say that Brinker v. Superior Court requires courts to "prefer" class treatment for nearly all wage-hour issues:

We have not ignored the substantial case authority, including our own, upholding trial court decisions not to certify class actions for claims similar to those raised here (see, e.g., Dailey v. Sears, Roebuck & Co. (2013) 214 Cal.App.4th 974; Mora v. Big Lots Stores, Inc., supra, 194 Cal.App.4th 496; Arenas v. El Torito Restaurants, Inc. (2010) 183 Cal.App.4th 723); nor do we express any disagreement with the outcome of those cases. However, we understand from Brinker, supra, 53 Cal.4th 1004, a renewed direction that class-wide relief remains the preferred method of resolving wage and hour claims, even those in which the facts appear to present difficult issues of proof.

So, despite the evidence that there is no common proof of liability, the Court sent the case back to superior court.

Perhaps the Supreme Court will once again review class certification standards.  Brinker does not require certification of a class action if there are "any" common questions.  In every case involving one employer, there are common issues - whether all employees worked for the same corporation, whether they all wore the company logo, whether they worked at a restaurant.   The key issue is whether the plaintiff presents a common issue that is dispositive of liability.  And that's not the analysis that the court of appeal has presented in this case.

If this trend continues, there will be many more class actions certified. Employers will have to try their cases as class actions or settle.  Settlements of class actions often occur because of fear of class wide liability.  Settlement of a class action like this means paying managers who were not mis-classified.  Therefore, making it easy to certify class actions simply encourages payouts to undeserving putative class members.  At least for now, the courts do not seem to be losing sleep over this injustice.  Have a nice day!

This decision is Martinez v. Joe's Crab Shack Holdings and the opinion is here.

Court of Appeal Reverses Order Decertifying Class

Allstate employs auto insurance field adjusters. They track work  time via a computerized system. The system "assumes" that the arrival at the first job site for the day is the beginning of the work day. Therefore, there is the potential that adjusters performing work for the company before the arrival is "work off the clock."

Among the overtime tasks those adjusters declared they performed outside their eight-hour shifts were (1) logging onto their work computers, (2) downloading their assignments, (3) making courtesy calls to auto repair shops and car owners to confirm appointments, (4) checking their voice mail, and (5) traveling to and from their first and last appointments of the day.

Allstate claimed it had a policy prohibiting work off the clock.  It had a policy requiring approval for overtime.  If an adjuster worked before the start of the day, there was a means to claim the work time.

The Allstate workers filed a class action, in part alleging that Allstate's timekeeping system was illegal because Allstate permitted off the clock work.  The trial court initially granted certification.  After Wal-Mart v. Dukes came out, though, the company filed a motion to "decertify" the class.  The trial court granted decertification, which prompted the plaintiff to appeal.

The Court of Appeal here reversed the trial court and decided that the class should have been certified.  Here are the key points:

-  A motion to "decertify" a previously certified class action can be brought only when there has been a significant change - newly discovered facts or new law.

- On review of a motion to decertify, the court of appeal evaluates the trial court's stated rationale.  If the trial court's stated rationale is wrong, the appellate court will reverse.

- The court will ignore individual issues regarding how to calculate damages for individual employees if there is a common question applicable to all class members regarding liability:

Damage calculations have little, if any, relevance at the certification stage before the trial court and parties have reached the merits of the class claims. At the certification stage, the concern is whether class members have raised a justiciable question applicable to all class members. Although Allstate may have presented evidence that its official policies are lawful, “this showing does not end the inquiry.” (Jimenez, supra, 2012 WL 1366052, *8.) Here, the question is whether Allstate had a practice of not paying adjusters for off-the-clock time. (Ibid.) The answer to that question will apply to the entire class of adjusters. If the answer to that question is “yes” – which is the answer the trial court initially assumed when it first certified the Off-the-Clock class, and is the answer we must presume in reviewing decertification (Brinker, supra, 53 Cal.4th at p. 1023) – then, in Duke’s phrase, that answer is the “glue” that binds all the class members. (Dukes, supra, 131 S.Ct. at p. 2552 [a class requires the “glue” of a single answer for a question applicable to all class members].) If some adjusters had more uncompensated time off the clock than other adjusters, that difference goes to damages.

- The court's analysis of whether common questions predominate - usually the central issue on a motion for class certification is notable because it is part of a recent trend of holding that the absence of commonality does not preclude a finding of commonality:

Commonality exists when the class claim poses a question for which the answer advances the litigation. As Dukes explained, class “claims must depend upon a common contention . . . . That common contention, moreover, must be 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.” (Dukes, supra, 131 S.Ct. at p. 2551.) * * *

* * * *
Allstate disputes whether a company-wide practice existed of adjusters working off the clock. According to Allstate, it instructs adjusters not to begin work before they arrive at their first appointment. Allstate asserts that at most “the evidence shows that reactions differed from manager to manager and from employee to employee, purportedly leading some adjusters to work off-the-clock, while others did not.” Allstate also asserts its policy is to pay for all overtime that adjusters work, and indeed, appellant concedes he received overtime pay 70 times.

But the Court of Appeal wasn't hearing it:

We need not, however, address the accuracy of Allstate’s assertions because doing so goes to the merits of the class claims. As our Supreme Court said in Brinker, supra, 53 Cal.4th at page 1024, inquiries into the merits as part of a certification motion are “closely circumscribed.” We instead assume based on the evidence appellant and other adjusters put to the trial court that Allstate had a company-wide practice of adjusters working off-the-clock. (Id. at p. 1023 [court assumes claims have merit].) An unlawful practice may create commonality even if the practice affects class members differently. “[C]lass treatment does not require that all class members have been equally affected by the challenged practices—it suffices that the issue of whether the practice itself was unlawful is common to all.”

So, this means that to defeat class certification, it is necessary to establish through evidence the absence of an unlawful practice. Yet, the court says that the employer's evidence that a practice is not unlawful as to all potential class members is part of the "merits" and, therefore, not part of the certification inquiry. That seems like a rather one-sided ruling, says Captain Obvious.

Anyway, this case is an important warning to employers with timekeeping systems that "assume" that hours worked start at a given time.  Employers should ensure timekeeping systems are not based on automatic punching and allow a worker to clock in or out based on when the work day (or meal breaks) actually starts and stops.

This case is Williams v. Superior Court and the opinion is here.

CalChamber's List of New California Employment Laws for 2014 and Beyond

Our friends at the California Chamber of Commerce posted this long list of new, California employment laws that will take effect in 2014.  You can review the list here.  The list also includes the San Francisco ordinance allowing requests for flexible schedules.

It goes without saying, but that's never stopped me before: Please amend your policies and employee handbooks, track down the new posters, etc. before these laws take effect.

For an analysis of these statutes, as well as case law developments that will affect your employee relations in 2014, sign up for our annual legal update here.  NB: that's a 1/14/04 webinar; our live update is sold out.

DGV

Court of Appeal: Request for Accommodation Not Protected Activity Supporting FEHA Retaliation Claim and Much More

The Legislature passed a paid, organ donation leave provision a couple of years ago (Labor Code Sections 1508-13), which became effective January 1, 2011.  (The court calls it the Donation Protection Act or DPA) Upon hire in September 2010, Scott Rope told his new employer, Auto-Chlor System of Washington, Inc. that he would need time off in February 2011 to donate a kidney to his sister.   When he found out about the new paid leave law, he asked for a longer leave under the new statute.

But Auto-Chlor fired Rope on December 30, 2010, just two days before the effective date of the new law, for poor performance.  Rope sued on a variety of theories.

The court did not allow Rope to sue based on the Labor Code provision, as it did not apply to his employment.  Statutes do not operate retroactively unless the legislature specifies that they do.  This law did not so specify.   But that's not why I posted.

Retaliation for Requesting Accommodation

Although Rope's DPA lawsuit was cut short, he also claimed he suffered retaliation for requesting an accommodation under the Fair Employment and Housing Act.  Putting aside that the request was not for his own disability (he had none), the court addressed whether a retaliation claim will lie when the employee alleges retaliation based on requesting an accommodation under FEHA.  The court held it could not.  First the court defined what type of conduct FEHA retaliation claims may be based on:

Rope alleged he suffered retaliation for engaging in the FEHA ―protected activities of requesting leave for his sister‘s disability/medical condition....The question here is whether Rope‘s request for paid leave as an accommodation qualifies as a ―protected activity within the meaning of section 12940, subdivision (h). ...

Protected conduct under section 12940, subdivision (h) may take many forms. The statute ―makes it an unlawful employment practice [f]or any employer . . . to discharge, expel, or otherwise discriminate against any person because the person has opposed any practices forbidden under this part or because the person has filed a complaint, testified, or assisted in any proceeding under this part.(Yanowitz, supra, 36 Cal.4th at p. 1042.)  ...

FEHA‘s implementing regulations help clarify what constitutes protected activity. They state: ―(a)(1) Opposition to practices prohibited by [FEHA] includes, . . . : [¶] (A) Seeking the advice of the Department [Department of Fair Employment and Housing] or Commission [Fair Employment and Housing Commission], . . . ; [¶] (B) Assisting or advising any person in seeking the advice of the Department or Commission, . . . ; [¶] (C) Opposing employment practices which an individual reasonably believes to exist and believes to be a violation of the Act; [¶] (D) Participating in an activity which is perceived by the employer or other covered entity as opposition to discrimination, whether or not so intended by the individual expressing the opposition; or [¶] (E) Contacting, communicating with or participating in the proceeding of a local human rights or civil rights agency regarding employment discrimination on a basis enumerated in the Act. [¶] (2) Assistance with or participation in the proceedings of the Commission or Department includes, but is not limited to: [¶] (A) Contacting, communicating with or participating in the proceedings of the Department or Commission due to a good faith belief that the Act has been violated; or [¶] (B) Involvement as a potential witness which an employer or other covered entity perceives as participation in an activity of the Department or the Commission.‖ (Cal. Code Regs., tit. 2, § 7287.8, subd. (a).)

And here is the conclusion:

we find no support in the regulations or case law for the proposition that a mere request—or even repeated requests—for an accommodation, without more, constitutes a protected activity sufficient to support a claim for retaliation in violation of FEHA. On the contrary, case law and FEHA‘s implementing regulations are uniformly premised on the principle that the nature of activities protected by subdivision (h) demonstrate some degree of opposition to or protest of the employer‘s conduct or practices based on the employee‘s reasonable belief that the employer‘s action or practice is unlawful....)

So, no retaliation claims based on a requested accommodation. 

Discrimination Based on Association

Rope himself did not have a disability. But he claimed he was "associated" with his sister, who did. The Court addressed (maybe for the first time under FEHA) a claim of discrimination against an "association" with a person who has a disability.  The court relied on a federal case out of the Seventh Circuit, quoting from the opinion:

Three types of situation are, we believe, within the intended scope of the rarely litigated . . . association section. We‘ll call them "expense," "disability by association," and "distraction." They can be illustrated as follows: an employee is fired (or suffers some other adverse personnel action) because (1) (expense) his spouse has a disability that is costly to the employer because the spouse is covered by the company‘s health plan; (2a) (disability by association) the employee‘s homosexual companion is infected with HIV and the employer fears the employee may also have become infected, through sexual contact with the companion; (2b) (another example of disability by association) one of the employee‘s blood relatives has a disabling ailment that has a genetic component and the employee is likely to develop the disability as well (maybe the relative is an identical twin); (3) ('distraction‘) the employee is somewhat inattentive at work because his spouse or child has a disability that requires his attention, yet not so inattentive that to perform to his employer‘s satisfaction he would need an accommodation, perhaps by being allowed to work shorter hours.

After discussing these categories, the court found that Rope could proceed on his association claim, and the derivative common law claim for wrongful termination:

In our view, Rope has pleaded minimally sufficient facts to state a prima facie ―expense‖ association claim under FEHA The SAC alleges that: From October through December 2010, Rope informed his superiors at Auto-Chlor that he intended to donate a kidney to his sister and that he intended to take a leave of absence to make the organ donation in February 2011; in or about November 2010, Rope informed his superiors about the DPA and requested 30 days paid leave under the DPA, beginning in February 2011; after January 1, 2011, Rope‘s leave under the DPA would cause Auto-Chlor to incur certain expense; and Auto-Chlor terminated Rope‘s employment on the pretext of poor performance on December 30, 2010, two days before the DPA took effect. The reasonable inference is that Auto-Chlor acted preemptively to avoid an expense stemming from Rope‘s association with his physically disabled sister.

This case is Rope v. Auto-Chlor System of Washington, Inc. and the opinion is here.