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.

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.