New California Law re Attorney's Fees in Wage Cases

Governor Jerry Brown signed SB 462 (here). This law amends Labor Code Section 218.5, which allows attorney's fees to be awarded to the prevailing party in lawsuits over unpaid wages, fringe benefits, or pension fund contributions.  The law previously permitted either the employee or employer to seek attorney's fees as the prevailing party. The revised statute authorizes attorney's fees to employers (or any other party that is not the "employee") only if the court determines the lawsuit was brought in "bad faith."   So, employers, say goodbye to attorney's fees in wage cases.

Ninth Circuit: Public Sector Independent Contractor Has No Property Interest and No Section 1983 Claim

42 U.S.C. Section 1983 allows public sector workers to challenge certain government employer action against public sector workers. The law permits state employees to challenge deprivations of due process or equal protection that amount to violations of the constitution.  But to use Section 1983, the employee must demonstrate a property right or liberty interest that the government employer deprived.  Many civil service workers are employed under conditions that virtually guarantee them a job that cannot end without sufficient cause.  Section 1983 lawsuits involving employment actions often are predicated on that sort of employment relationship.

The 9th Circuit Court of Appeals in Blantz v. California Dept. of Corr. and Rehab. considered Blantz's claim that the 14th Amendment protected her engagement as an independent contractor.  Here are the facts as stated by the court:

In July 2006, Blantz entered into a written agreement with Newport Oncology and Healthcare, Inc. (NOAH) to work as a nurse practitioner for the CDCR. The CDCR contracts with NOAH to identify available healthcare professionals and refer them to the CDCR to work in medical facilities owned by the CDCR throughout California. Blantz agreed with NOAH to provide medical services to the CDCR as an independent contractor. Pursuant to the agreement, Blantz’s wages would be paid by NOAH, not by the CDCR.

The CDCR ended the engagement without explanation.  Blantz then tried to obtain a new job with CDCR, but her references did not pan out.  So, she sued CDCR and officials under Section 1983, claiming that her independent contractor arrangement could not be ended without due process (e.g., a hearing and notice of the reasons etc.).

Blantz claimed that CDCR conferred a property right to her independent contractor arrangement by documents that CDCR gave her at orientation. But CDCR's contract with NOAH said CDCR could request her removal essentially at will.

The district court dismissed her case, and the Ninth Circuit affirmed.  The court would not decide whether an independent contractor - rather than an employee - could every have a 14th amendment interest in due process related to her engagement.  The court explained why Blantz's claim failed:

We hold that a state agency does not create constitutionally protected property interests for its independent contractors simply by instituting performance review procedures. Even assuming independent contractors can ever have constitutionally protected property interests in their positions, something more is required: either an affirmative grant of tenure or a guarantee from the government that termination can occur only for cause. Absent such assurances, there is no cognizable basis for an independent contractor to assert an entitlement to her continued position that is constitutionally protected. Because Blantz’s orientation documents did not contain such assurances, we affirm the district court’s dismissal of Blantz’s federal deprivation of property claim.

The court then rejected Blantz's claim that a poor reference deprived her of "liberty" when she was unable to obtain a new position with CDCR. 

the defendants here are not alleged to have precluded Blantz from all government employment, only employment with the CDCR. Blantz allegedly has been barred from employment with one division of the state government; but she is free to seek other nursing positions with the state. Thus, she has not alleged an unconstitutional deprivation of liberty.  See Llamas, 238 F.3d at 1128 (holding that the government had not deprived plaintiff of liberty when plaintiff was barred from future employment with one community college district, but was  free to pursue employment elsewhere).

This case is Blantz v. California Dept. of Corr. and Rehab. and the opinion is here.

 

Court of Appeal: No Post-Lawsuit Change to Arbitration Policy

The court of appeal's decision in  Avery v. Integrated Healthcare Holdings Inc. contains a number of lessons about administering policies and litigating.   So, yes, it's another arbitration decision, but more interesting.

First, Tenet owned some hospitals that it later sold to Integrated. Tenet had in place a “Fair Treatment Process,” which included arbitration.  Applicants and employees signed off on this process at a number of different points in their employment relationship. Integrated maintained the arbitration program after the purchase, but made some changes and called it the Alternative Dispute Resolution Process. 

Avery brought a class action for unfair competition, failure to pay appropriate overtime wages, failure to provide meal and rest periods, failure to pay wages when due, and failure to provide accurate wage statements. 

While the lawsuit was pending, Integrated unilaterally changed the arbitration clause by adding a class arbitration waiver.  Integrated posted the change on its intranet page.  But it did not provide employees with a copy of the new employee handbook containing the arbitration provision change, instruct employees to review the new handbook on the intranet, or even notify employees of the existence of the new handbook.

Integrated tried to compel arbitration of each individual plaintiff's claim. The trial court denied its motion to compel. The Court of Appeal affirmed.

The court made two important decisions.  First, the court held that Integrated's class action waiver was unenforceable, but not because of the ongoing war about class action waivers.  Rather, the court held that it was invalid because it was issued after the claims arose, and Integrated failed to notify employees about the new employee handbook. As a result, Integrated was required to rely on the arbitration clause in the Tenet Employee Handbook, the Fair Treatment Process.

 

an employer may not make unilateral changes to an arbitration agreement that apply retroactively to “accrued or known” claims because doing so would unreasonably interfere with the employee’s expectations regarding how the agreement applied to those claims.  (Peleg v. Neiman Marcus Group, Inc. (2012) 204 Cal.App.4th 1425, 1465 (Peleg).)  Similarly, the employer must give the employee reasonable notice regarding changes the employer makes so the employee is aware of his or her rights under the agreement.  (Serpa v. California Surety Investigations, Inc. (2013) 215 Cal.App.4th 695, 706-708 (Serpa).)  Both of these rules prevent Integrated from applying the Alternative Dispute Resolution Process to Plaintiffs’ claims.

Of note, although there are cases disfavoring "policy" based arbitration provisions, the court emphasized that it is ok to have an arbitration agreement in a policy, and even to make changes. But those changes have to be prospective in application only, and the employer must ensure the employees receive reasonable and actual notice of the changes.

Second, the court decided that the trial court correctly denied the motion to compel arbitration, even under the Tenet policy.  Why?  Because the Integrated could not prove that employees had agreed to the Fair Treatment Process that it attached to its motion.  So, the employees signed off on the application and other forms stating they had received the Fair Treatment Process, but there was evidence that there was more than one of those in existence.  The court had no way of knowing if the Fair Treatment Process that was attached to the motion was the one employees agreed to.

Integrated contends the trial court erred in denying its motions to compel arbitration because Plaintiffs each agreed to arbitrate their claims under the Fair Treatment Process set forth in the Tenet Employee Handbook. According to Integrated, the Employee Acknowledgment Form, Application for Employment, and Transition Letter Plaintiffs signed incorporated the Fair Treatment Process and established its binding arbitration provisions as the exclusive means for resolving all claims regarding Plaintiffs’ employment. Although we agree Plaintiffs (except Cade) generally agreed to a Fair Treatment Process by signing one or more of these documents, we nonetheless affirm the trial court’s order denying the motions to compel arbitration because Integrated failed to present sufficient evidence establishing the specific Fair Treatment Process it presented to the trial court was the Fair Treatment Process to which Plaintiffs agreed.

The lesson here?  Ensure that there is a way of identifying handbooks and other documents (such as a control number, version, etc.).  In this case, the application and other documents "incorporated by reference" the full text of the Fair Treatment Process, but there was no way of knowing which version the employee agreed to.  It is critical to have a way of matching the receipt to the policy document.

This case is Avery v. Integrated Healthcare Holdings, Inc. and the opinion is here.

Court of Appeal: Volunteer Reserve Cop Has No Discrimination Claim

L.A. has a corps of volunteer, reservist police in addition to the regular police force.  They grant these volunteers workers' compensation benefits and a $50 per shift expense reimbursement, but no salary. 

Frank Estrada was a volunteer for some 17 years.  The police force ended his engagement after he was investigated for some misconduct related to his regular job.  

He sued for disability discrimination under the Fair Employment and Housing Act.  The court had to decide whether Estrada was an "employee."   (Only applicants/employees can sue under FEHA for disability discrimination).

Agreeing with the trial court, the Court of Appeal said that Estrada was not an employee.  The city did not "appoint" him to an employee position.  That the city chose to extend workers' compensation benefits to its volunteers was a policy decision, the court said.  Here is the punchline:

Estrada was a volunteer who served without remuneration. He was appointed to a volunteer position, rather than to a position in the classified civil service. Accordingly, Estrada was not an employee of the City. (Board Civil Service Rules,§ 1.17.) Therefore, Estrada is incapable of maintaining a cause of action against the City for disability discrimination pursuant to the FEHA.

So, employers may be able to argue that it is possible to cover volunteers with workers' compensation insurance and yet maintain non-employee, volunteer status. But, this case was decided in great part based on Los Angeles' status as a charter city.  So, a private sector employer could come out with a different result. Be careful.

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