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.