Court of Appeal Finds Rest Periods Valid Even If Employees Potentially Could be Interrupted

The Court of Appeal ruled that security guards' rest periods were lawful, even though employees might have to respond to an emergency call during a rest period.  We're especially happy about this decision because we wrote an amicus curiae brief supporting the employer on behalf of the California Chamber of Commerce.

As explained by the Court:

Plaintiff Jennifer Augustus and others, formerly security guards employed by defendant ABM Security Services, Inc. (hereafter ABM), allege on behalf of themselves and a class of similarly situated individuals that ABM failed to provide rest periods required by California law in that it failed to relieve security guards of all duties during rest breaks, instead requiring its guards to remain on call during breaks. 

So, the security guards were posted a job sites, where they were responsible for ensuring the security of the property, responding to calls, etc.  They were provided rest periods in accordance with the law (at least 10 minutes, paid, for each four hours of work).  But

ABM admitted it requires its security guards to keep their radios and pagers on during rest breaks, to remain vigilant, and to respond when needs arise, such as when a tenant wishes to be escorted to the parking lot, a building manager must be notified of a mechanical problem, or an emergency situation occurs. 

Of note, the plaintiffs did not provide any evidence that an employee's rest period was actually interrupted. Ever. However, The trial court ruled that the Plaintiffs' rest periods were not valid, because of the potential for interruption.  The trial court also awarded the class $90 million in rest period premiums and penalties because every rest period was noncompliant.

The Court of Appeal disagreed.  In doing so, it analyzed what the employer must do to authorize and permit a valid rest period.  Here's the meat of the analysis:

The text of the wage order does not describe the nature of a rest period, but section 226.7 offers a partial definition: “An employer shall not require an employee to work during a meal or rest or recovery period.” (Italics added.)   *** Section 226.7 therefore provides our only guidance as to the nature of a rest break, and it says only that an employee cannot be required “to work” during a break. ***

Not only did the IWC decline to distinguish between on- and off-duty rest periods, its prescription that on-duty meal periods be paid, coupled with the mandate that all rest periods be paid, implies rest periods are normally taken while on duty, i.e., while subject to employer control. There is no support, therefore, in the text of Wage Order No. 4, the Labor Code, or any DLSE opinion letter for plaintiffs’ claim that a rest break is valid only if the employee is relieved of all duties. ***

After a petition for rehearing, the Court considered the effect of Mendiola v. CPS Security Solutions, a recent California Supreme Court decision that we blogged here.  There, the Supreme Court held that time an employee was required to remain on premises was compensable as hours worked, even though the employees were permitted to sleep and were not formally "on duty."  The Court rejected the plaintiff's argument that Mendiola required the court to hold that being on-call means no rest period:

On-call status is a state of being, not an action. But section 226.7 prohibits only the action, not the status. In other words, it prohibits only working during a rest break, not remaining available to work. * * *

“In sum, although on-call hours constitute “hours worked,” remaining available to work is not the same as performing work. (See Mendiola, supra, 2015 Cal. LEXIS at p. 9 [distinguishing readiness to serve from service itself]; see also Cal. Code Regs., tit. 8, § 11040, subd. 2(K) [distinguishing “hours worked” from work actually performed].) Section 226.7 proscribes only work on a rest break.” 

The Court then held that the trial court properly certified the class. However, the effect of that part of the ruling is to doom the entire class's claim.

This case is Augustus v. ABM Security Services, Inc. and the opinion is here.  Please note, however, that the court modified the opinion at the end, and the modifications have not yet been integrated into the main opinion.

Have a restful weekend!

CA Supreme Court: Employer Lawfully Fired Employee on CFRA Leave Who Violated Employer's Policy

The California Supreme Court did not decide whether an employer's "honest belief" that an employee is misusing family or medical leave is a defense to a claim against an employer for violating the California Family Rights Act.  Instead, the Court decided whether a court had the power to vacate an arbitrator's decision because the arbitrator's ruling adopted the "honest belief" defense.  BUT, if you get through the arbitration portion of this post, you'll see that the high Court announced an important rule regarding CFRA leave. 

First, arbitrators' decisions generally are NOT reviewable for legal error, because arbitration is supposed to be quick and less expensive than litigation. But a few years ago, the California Supreme Court carved out an exception for statutory claims based on "unwaivable" rights (such as the Fair Employment and Housing Act, or the California Family Rights Act).  The Court held in Pearson Dental Supply v. Superior Court (my post is here.) that an appellate court may vacate an arbitration award when the arbitrator's legal error denies the plaintiff a hearing. 

In the present case, Richey v. Autonation, the Supreme Court held that the court of appeal did NOT have the power to vacate an arbitrator's decision that Automation lawfully fired Richey, based on its honest belief that Richey was abusing CFRA leave. Regardless of whether the honest belief defense is valid in California, the arbitrator's decision is unreviewable for that kind of claimed legal error.

The error addressed in Pearson Dental therefore kept the parties from receiving a review on the merits. Its narrow rule was sufficient to resolve the case. (Ibid.) Plaintiff here has not advocated for a greater scope of judicial review in cases involving unwaivable statutory rights, and thus, there is no reason to go beyond the framework Pearson Dental established.

But that's only half the story.

The Court also ruled that even if the arbitrator relied on the "honest belief" defense erroneously, Richey would have lost anyway.  That is because, the Court found, Automation justifiably fired Richey while he was on CFRA leave, because Richey violated Automation's policy prohibiting work during CFRA leave:

Even if the arbitrator erred, and even if such an error could serve as a basis for vacating an arbitration award, plaintiff has not shown that the error was prejudicial.  

Here, the arbitrator found plaintiff was fired because he violated Power Toyota‘s employment policy against outside work while on approved CFRA medical leave, not because he was on approved leave. 3 The evidence to support that finding, as reflected in the arbitrator‘s factual findings, was overwhelming. Power Toyota explicitly warned plaintiff that its policy prohibited any outside employment, including self-employment, while on leave. Plaintiff knowingly ignored the warnings. Power Toyota invited plaintiff to communicate regarding his outside employment, and he deliberately avoided any such communication. ***

[P]laintiff blatantly ignored his superiors‘ clear instructions not to work at the restaurant while on CFRA leave. To ignore this fact and to hold that Power Toyota could not have fired plaintiff under any circumstances for violating company policy while on leave would ignore the rule that plaintiff had ―no greater right to reinstatement or to other benefits and conditions of employment than if [he] had been continuously employed‖ during the statutory leave period. (29 C.F.R. § 825.216(a).)

The arbitrator found plaintiff‘s firing was based on a clear violation of company policy — a legally sound basis for upholding the arbitrator‘s award — and would likely have made that finding regardless of the evidence or findings as to the employer‘s honest belief plaintiff was misrepresenting his medical condition. 

So, you thought it was an arbitration case, but it's really a very significant CFRA case.  Richey v. Automation is here.

California Employers: A Reminder from CalOSHA

CalOSHA reminds employers to post their Form 300A, which must include any reportable injury or death during the previous reporting period.  See the handy press release here, which contains links to forms and other information

A Pot Pourri of Recent Employment Law Decisions

Here are some recent significant California employment law developments I missed. Long post, but chock full of employment law goodness. Or something:

Employer's Summary Judgment on Disability Discrimination and Related Claims
The court of appeal in Swanson v. Morongo Unified School District (opinion here) reversed summary judgment in favor of the school district.

Swanson was a teacher who was treated with breast cancer.  The school district voted not to renew her contract based on her performance.  Swanson believed the district's vote was based on her cancer and treatment.  She also claimed that the district failed to accommodate her by refusing to allow her to teach a second grade class rather than the assignment they gave her, and failed to adequately engage in the "interactive process."

On the discrimination claim, the court of appeal acknowledged the district demonstrated Swanson's poor performance as a legitimate reason.  That shifted the burden to Swanson to raise a triable issue of fact regarding whether discrimination motivated the district, rather than performance. Here is the pretext analysis:

Swanson had to present evidence showing (1) the District’s stated reason for not renewing her contract was untrue or pretextual; (2) the District acted with a discriminatory animus in not renewing her contract; or (3) a combination of the two. *** We conclude Swanson met this burden by presenting evidence establishing a triable issue of fact on whether the District intentionally discriminated against her when making its teaching assignments and its treatment of her after her cancer diagnosis and medical leaves. ***We conclude Swanson met this burden by presenting evidence establishing a triable issue of fact on whether the District intentionally discriminated against her when making its teaching assignments and its treatment of her after her cancer diagnosis and medical leaves. 

Here's the evidence the court found significant:

The evidence the parties presented establishes the following disputed facts creating a triable issue on Swanson’s liability theory: (1) Swanson performed well in the teaching assignments she held during her first two years with the District, but the District gave her a new teaching assignment for the first full school year after she completed her cancer treatments; (2) the District gave Swanson the new assignment knowing it would require her to spend additional time planning and preparing to teach her new class and Swanson’s weakened health condition impaired her ability to do so; (3) the District denied Swanson’s request to teach a second grade class similar to one she recently had taught at her previous school, and instead assigned the available second grade class to another teacher; (4) the District assigned Swanson to teach a kindergarten class even though she had not taught kindergarten in nearly 30 years and expressed concern her weakened immune system could not protect her from the many illnesses prevalent in kindergarten classes; (5) although promising to do so, Lowe did not provide Swanson the preevaluation format she needed to prepare for her first series of teacher observations; (6) the District did not provide Swanson the mentor teacher she requested after receiving the remediation plan or any of the other training or assistance she requested; (7) Lowe told Swanson the District wanted him to make a determination on her employment status before he had time to complete the second series of teacher observations; (8) Lowe asked Swanson to resign her teaching position even though he gave her a positive review on the first teaching observation following the remediation plan and implied her review on the second observation also would be positive; and (9) the District’s Board of Education voted not to renew Swanson’s contract before she completed the remediation plan and all of the observations were conducted.

This is to say that the court of appeal felt that a jury should decide whether the district's personnel actions against Swanson that led to her poor performance were motivated by her disability. Therefore, to win these cases, the employer should show on summary judgment that it treated the plaintiff the same as the other, similarly situated, employees.

On the failure to accommodate claim, the plaintiff claimed she would have been able to perform her essential job functions if she was assigned to teach a second grade class, rather than the kindergarten class she was assigned. Although the district showed the court several accommodations it provided, the court was unpersuaded that the district was entitled to summary judgment:

Swanson does not claim the District failed to grant her leave or any other scheduling accommodation. Instead, she alleges the District failed to reasonably accommodate her cancer-related conditions because it refused to provide her the accommodation she sought after the District decided to move her out of the reading specialist position she held during the 2007/2008 school year. Specifically, she alleges the District refused her request to teach an available second grade class. According to Swanson, the second grade class assignment was a reasonable accommodation that would allow her to perform her essential job functions because she recently had taught a second grade class when working in another district, and therefore was familiar with the curriculum and children of that age. Swanson alleged any other new teaching assignment would require additional time to prepare and plan lessons, but the effect of her cancer treatments jeopardized her ability to prepare for her new assignment. 

         *  *  *

To meet its initial burden on Swanson’s failure to accommodate claims, the District therefore had to present evidence showing the second grade position Swanson sought was not available or otherwise was not a reasonable accommodation, or the fifth grade or kindergarten assignments the District offered were reasonable accommodations that would have allowed Swanson to adequately perform her essential job functions. The District produced no such evidence. 

The court also held that the district did not adequately engage in the interactive process to determine an accommodation:

The District contends Swanson’s interactive process claims fail because it engaged in the interactive process by switching her from fifth grade to kindergarten when she objected to the fifth grade assignment. That contention is not adequate to satisfy the District’s initial burden on summary judgment. The FEHA required the District to engage in an ongoing dialogue regarding the accommodations Swanson believed she needed to mitigate her cancer-related conditions, but the District failed to present any evidence to show it engaged Swanson in such a dialogue. For example, the District offers no evidence to show it discussed with Swanson the second grade assignment she sought or provided any explanation why it could not grant her request as a reasonable accommodation. To the contrary, the evidence shows the District simply assigned Swanson to teach kindergarten and failed to engage in any further discussion with her. Accordingly, the trial court erred in granting summary judgment on the interactive process claims. 

Arbitration Compelled Even Though Insufficient Proof Unsigned Arbitration Policy Was in Effect

Stephanie Cruise signed an employment application with Kroger Corporation, in which she agreed to mandatory, final, binding arbitration. The application referenced a separate mediation and arbitration policy, which was "incorporated by reference."  After her termination, Cruise sued Kroger. Kroger moved to compel arbitration. The trial court denied the motion, holding that Kroger had not proved that Cruise had received the arbitration policy, or that the one attached to the motion was the one she had allegedly received.

The court of appeal reversed the trial court and ordered arbitration. The court held that the following language in the application "eliminate[d]" Cruise's argument there was no agreement to arbitrate:

“MANDATORY FINAL & BINDING ARBITRATION: I acknowledge and understand that the Company has a Dispute Resolution Program that includes a Mediation & Binding Arbitration Policy (the ‘Policy’) applicable to all employees and applicants for employment . . . . I acknowledge, understand and agree that the Policy is incorporated into this Employment Application by this reference as though it is set forth in full, . . . the Policy applies to any employment-related disputes that exist or arise between Employees and the Company . . . and that the Policy requires that any Employee who wishes to initiate or participate in formal proceedings to resolve any Covered Disputes must submit the claims or disputes to final and binding arbitration in accordance with the Policy.” (Italics added.)

The court rejected Cruise's argument that the employer did not sign the application, reasoning that the employer submitted the application to Cruise of signature, and that it was Kroger's own application, after all.

BUT, what of the policy?  The court of appeal accepted the trial court's conclusion that the employer had not established the existence of the policy, which governed the terms and procedures re arbitration. The court of appeal, however, ruled that Cruise was still obligated to arbitrate, only under the California Arbitration Act.

The only impact of Kroger‟s inability to establish the contents of the 2007 Arbitration Policy is that Kroger failed to establish that the parties agreed to govern their arbitration by procedures different from those prescribed in the CAA (§ 1280 et seq.). Unless the parties otherwise agree, the conduct of an arbitration proceeding is controlled by the CAA. (See, e.g., §§ 1281.6, 1282, 1282.2.) Here, because Kroger failed to establish an agreement to the contrary, the instant arbitration proceeding is to be governed by the procedures set forth in the CAA. Because this arbitration is controlled by California statutory and case law, Cruise‟s arguments that Kroger‟s Arbitration Policy is unconscionable, both procedurally and substantively, are meritless.

If this case remains good law, then (1) employers can include clear agreements to arbitrate in applications and (2) they can rely on the California Arbitration Act rather than prescribe specific procedures.

This case is Cruise v. Kroger Co .and the opinion is here.

                                                                 * * *
Here are some narrow decisions, but which may contain helpful holdings for other cases.

LA Hotel Service Charge Ordinance - Class Action - UCL Claim 

The court of appeal in Audio Visual Services Group, Inc. v. Superior Court opinion here, handled a narrow issue: whether Los Angeles's Hotel Service Charge Reform Ordinance applied to third party employees who do not traditionally depend on tips.  The Ordinance requires certain hotels to pay certain employees all service charges added to customers bills.  The Audio Visual employees provided AV services to hotels, for which they charged a fee plus a service charge. The plaintiffs sued, claiming they were owed that service charge. The Court of Appeal issued a writ, sustaining the employer's demurrer to the class complaint (extraordinary in and of itself). The court of appeal decided that the ordinance does not apply to Audio Visual's employees.  Of note, the court clearly held that the employees "unfair competition claim" under Business and Professions Code section 17200 was not actionable because the statutory claim also was without merit. So, this case can help in other UCL actions. Money quote:

In light of our construction of the Ordinance that Solares, an audio-visual technician, is not among the class of hotel workers entitled to be paid service charges pursuant to the Ordinance, Solares cannot assert a UCL claim against PSAV. Business and Professions Code section 17200 defines “unfair competition” as “any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by Chapter 1 (commencing with [Business and Professions Code ] Section 17500) of Part 3 of Division 7 of the Business and Professions Code.” The UCL claim is dependent upon a violation of the Ordinance. Thus, the class action complaint failed to state a cause of action.

U.S. Supreme Court: Whistle Blower Under Homeland Security Act Protected

Department of Homeland Security v. MacLean (opinion here)  involves an Air Marshall who reported  to MSNBC that the TSA had canceled Air Marshall missions during a time when there was a heightened security alert regarding possible Al Qaeda highjackings.  He had been told that TSA canceled missions to save money.  After MacLean made the disclosure, TSA reversed its position under pressure from Congress.

The TSA discovered MacLean was the leaker and fired him in 2006.  He sued for whistleblower retaliation. TSA argued that MacLean's disclosure was "specifically prohibited" by its regulation, which was as good as "law." TSA had issued regulations prohibiting disclosure of what they called "sensitive security information." That information could include "information concerning specific numbers of Federal Air Marshals, deployments or missions, and the methods involved in such operations.”

Federal law generally provides whistleblower protections to an employee who discloses information revealing “any violation of any law, rule, or regulation,” or “a substantial and specific danger to public health or safety.” 5 U. S. C. §2302(b)(8)(A). An exception exists, however, for disclosures that are “specifically prohibited by law.”

So, the question for the Court was whether MacLean's disclosure was prohibited by law.  The Court held (7-2) that the statute's use of "specifically prohibited by law" meant statutory law, rather than regulations.  The Court reasoned that Congress had used "law, rule or regulation" throughout the whistleblower law, but limited the disclosure exception only to "law."

 

CA Supreme Court: On-Premises, On-Call Time = Hours Worked (All Sleeping Time Too).

The California Supreme Court (unanimously) affirmed the Court of Appeal's decision in Mendiola v. CPS Security Solutions, Inc.  We posted about the Court of Appeal's decision here.  However, the Supreme Court actually went farther than the Court of Appeal in deciding that security guards' on-premises, on-call time is compensable as hours worked.

At issue were security guards who were required to remain on premises and on call at times when they were not active.  When "on-call" time applied, they could stay in trailers provided for their use on the construction sites to which they were assigned.  They were paid for time actually worked, but not for time they were "on call" in the trailers. There are more details in the post linked above.

The Supreme Court agreed with the court of appeal that the on-call time involved significant enough employer control to constitute hours worked.  Here's some of the key analysis:

California courts considering whether on-call time constitutes hours worked have primarily focused on the extent of the employer’s control.  * * * Indeed, we have stated that “[t]he level of the employer’s control over its employees . . . is determinative” in resolving the issue. * * *  ‘When an employer directs, commands or restrains an employee from leaving the work place . . . and thus prevents the employee from using the time effectively for his or her own purposes, that employee remains subject to the employer’s control.  According to [the definition of hours worked], that employee must be paid.’ ”  (Id. at p. 583.)
Courts have identified various factors bearing on an employer’s control during on-call time:  “ ‘(1) whether there was an on-premises living requirement;  (2) whether there were excessive geographical restrictions on employee’s movements;  (3) whether the frequency of calls was unduly restrictive;  (4) whether a fixed time limit for response was unduly restrictive;  (5) whether the on-call employee could easily trade on-call responsibilities;  (6) whether use of a pager could ease restrictions; and  (7) whether the employee had actually engaged in personal activities during call-in time.’  ([Owens v. Local No. 169 (9th Cir. 1992) 971 F.2d 347,] 351, fns. omitted.)”  (Gomez v. Lincare, Inc. (2009) 173 Cal.App.4th 508, 523-524 (Gomez).)    Courts have also taken into account whether the “[o]n-call waiting time . . . is spent primarily for the benefit of the employer and its business.”  

The Supreme Court, applying these factors, easily found sufficient control:

The guards here were required to “reside” in their trailers as a condition of employment and spend on-call hours in their trailers or elsewhere at the worksite.  They were obliged to respond, immediately and in uniform, if they were contacted by a dispatcher or became aware of suspicious activity.  Guards could not easily trade on-call responsibilities.  They could only request relief from a dispatcher and wait to see if a reliever was available.  If no relief could be secured, as happened on occasion, guards could not leave the worksite.  CPS exerted control in a variety of other ways.  Even if relieved, guards had to report where they were going, were subject to recall, and could be no more than 30 minutes away from the site.  Restrictions were placed on nonemployee visitors, pets, and alcohol use. 

Additionally, the Court of Appeal correctly determined that the guards’ on-call time was spent primarily for the benefit of CPS.  

So, we're not talking about a beeper or a requirement that on call employees call into work within 30 minutes of a page.  We're also not talking about special rules applicable to ambulance drivers. We're talking about people required to live on the premises during on-call periods. We are also not talking about the specific sleep provisions contained in Wage Order 5 and 9. So,
relax those of you who have on-call employees who are not required to stay at work.

Of note, though, the Court rejected federal regulations that allow on-premises employees to be uncompensated when they are free to engage in personal pursuits.  Therefore, the level of control that one must exercise over an on-premises employee is not dependent on federal case law.

The Court of Appeal cut CPS some slack, holding that an employee could agree that 8 of a 24 hour shift was unpaid sleep time under certain conditions. But the Supreme Court was having none of it.
Analyzing the control issue, the Court said that the employees were sleeping on premises, they were restricted and, therefore, they were "engaged to wait."

Finally, the Court took a slap at the Legislature concerning the difficulty employers have in deterring how to conduct themselves under the myriad wage hour laws:

We acknowledge CPS’s efforts to ascertain whether its policy complied with California’s labor laws and recognize the difficulty it and other employers can face in this regard.  Several factors may contribute to ongoing uncertainty, including the defunding of the IWC and the lack of adequate funding for DLSE enforcement.  Such issues, however, must be addressed by the Legislature

So, employers should ensure that their on-call policies comply with this new decision, particularly employers who exercise significant control.  The Court did not reject or modify the multiple factor test for on-call employees who are not required to live or sleep on premises.

The case is Mendiola v. CPS Security Solutions and the opinion is here.

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