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.

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

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

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

130785 [Administrative Code - Family Friendly Workplace Ordinance]

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

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

PASSED, ON FIRST READING by the following vote:

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

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

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

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

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

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

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

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

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

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

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

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

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

Ninth Circuit Upholds Certification of On-Duty Meal Period Class

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Two More Changes to California Employment Law

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Understand?  Right. 

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

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