The Colorado Appeals Court Harshed My Mellow.

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

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

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

Why?  Here's what the court said:

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

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

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

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

Attorney Demand Letter: Sting but No SLAPP

Ever get one of these attorney demand letters?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

* * *

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Catching Up - Friday Pot Pourri

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

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

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

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

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

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

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

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

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

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

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

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