California Supreme Court Takes a Stand on Sitting Down

The California Supreme Court in Kilby v. CVS Pharmacy (opinion here)  issued a unanimous opinion interpreting California Wage Orders' (section 14(A)) requirement that employers provide

[a]ll working employees  . . . suitable seats when the nature of the work reasonably permits the use of seats.”

Also, Section 14(B) says:

When employees are not engaged in the active duties of their employment and the nature of the work requires standing, an adequate number of suitable seats shall be placed in reasonable proximity to the work area and employees shall be permitted to use such seats when it does not interfere with the performance of their duties.” 

Why is the state's highest court doing this?  In this case, the Ninth Circuit Court of Appeals asked the California Supreme Court to interpret California law, because the Ninth Circuit is trying to figure out whether certain class actions filed in federal court have merit.  No case interpreted this portion of the Wage Order before, because the class action lawyers were busy suing over rest periods, wage statements, and a host of other matters.  They finally made it down to section 14 - "suitable seating," and so here we are.  

With that background, here are the questions the California Supreme Court sought to answer:

(1) Does the phrase “nature of the work” refer to individual tasks performed throughout the workday, or to the entire range of an employee's duties performed during a given day or shift?

(2) When determining whether the nature of the work “reasonably permits” use of a seat, what factors should courts consider? Specifically, are an employer‟s business judgment, the physical layout of the workplace, and the characteristics of a specific employee relevant factors?  

(3) If an employer has not provided any seat, must a plaintiff prove a suitable seat is available in order to show the employer has violated the seating provision?.

This case involved CVS employees.  The named plaintiff, Kilby, had a customer service job that included duties such as: "operating a cash register, straightening and stocking shelves, organizing products in front of and behind the sales counter, cleaning the register, vacuuming, gathering shopping baskets, and removing trash. CVS did not provide Kilby a seat for these tasks."

This case also was consolidated with Henderson v. JP Morgan Chase Bank, which involved tellers at a bank.  They are covered by Wage Order 4 rather than 7.  The seating requirement, section 14(A), is identical in both Wage Orders.  The tellers 

had duties associated with their teller stations, including accepting deposits, cashing checks, and handling withdrawals. They also had duties away from their stations, such as escorting customers to safety deposit boxes, working at the drive-up teller window, and making sure that automatic teller machines were working properly. These duties varied depending on the shift or branch location and whether the employee was a lead or regular teller.

Against this backdrop, the Court answered the above questions.

1.   So, how does a court look at the "nature of the work" 

courts must examine subsets of an employee's total tasks and duties by location, such as those performed at a cash register or a teller window, and consider whether it is feasible for an employee to perform each set of location-specific tasks while seated. Courts should look to the actual tasks performed, or reasonably expected to be performed, not to abstract characterizations, job titles, or descriptions that may or may not reflect the actual work performed. Tasks performed with more frequency or for a longer duration would be more germane to the seating inquiry than tasks performed briefly or infrequently.

* * *

An employee may be entitled to a seat to perform tasks at a particular location even if his job duties include other standing tasks, so long as provision of a seat would not interfere with performance of standing tasks.

Mushy.  But what this means is that if a teller spends a certain period of time at a teller window, one looks at the tasks s/he performs at that location and then looks whether it's feasible to perform the tasks seated.  If not, can there be a seat available so that some tasks are performed seated.

The Court also looked at how employers  have to provide suitable seating for employees who may have to stand when they are actively working, but who may experience "lulls" in operation:

if an employee‟s actual tasks at a discrete location make seated work feasible, he is entitled to a seat under section 14(A) while working there. However, if other job duties take him to a different location where he must perform standing tasks, he would be entitled to a seat under 14(B) during “lulls in operation.” Although the seating inquiries under sections 14(A) and 14(B) are analytically different, the seat provided to an employee under section 14(A) may satisfy the requirement of section 14(B) to the extent it is within “reasonable proximity to the work area” (§14(B)) and is available when work is not required to be performed. 

2.  What does "reasonably permits" mean?  

The Court then turned to an examination of what factors courts would consider to determine if the nature of the work "reasonably permits" the use of a seat.  What if the employer thinks that employees should stand as a matter of respect or service?  What if the physical layout does not accommodate seats, even if the duties of the job might?  Etc.   

You crave simplicity and bright line rules?  No such luck:

Whether an employee is entitled to a seat under section 14(A) depends on the totality of the circumstances. Analysis begins with an examination of the relevant tasks, grouped by location, and whether the tasks can be performed while seated or require standing. This task-based assessment is also balanced against considerations of feasibility. Feasibility may include, for example, an assessment of whether providing a seat would unduly interfere with other standing tasks, whether the frequency of transition from sitting to standing may interfere with the work, or whether seated work would impact the quality and effectiveness of overall job performance. This inquiry is not a rigid quantitative analysis based merely upon the counting of tasks or amount of time spent performing them. Instead, it involves a qualitative assessment of all relevant factors.

Ok but what about business judgment? Can't the employer pay the employee to stand?  Well sure:

There is no question that an employer may define the duties to be performed by an employee. As the DLSE observes, “[a]n employer's business judgment largely determines the nature of work of the employee both generally, as well as duties or tasks specifically.” Contrary to plaintiffs‟ suggestion, such duties are not limited to physical tasks. Providing a certain level of customer service is an objective job duty that an employer may reasonably expect. An employee's duty to provide a certain level of customer service should be assessed, along with other relevant tasks and obligations, in determining whether the nature of the work reasonably permits use of a seat at a particular location. Providing “customer service” is an objective job function comprised of different tasks, e.g., assisting customers with purchases, answering questions, locating inventory, creating a welcoming environment, etc.

Wait, did I say "sure"?  Hold the phone:

However, “business judgment” in this sense does not encompass an employer's mere preference that particular tasks be performed while standing. The standard is an objective one. An employer's evaluation of the quality and effectiveness of overall job performance is among the factors that can be objectively considered in light of the overall aims of the regulatory scheme, which has always been employee protection. An objective inquiry properly takes into account an employer's reasonable expectations regarding customer service and acknowledges an employer's role in setting job duties. It also takes into account any evidence submitted by the parties bearing on an employer's view that an objective job duty is best accomplished standing. It protects employees because it does not allow employers unlimited ability to arbitrarily define certain tasks as “standing” ones, undermining the protective purpose of the wage order.

So, can an employer can pay an employee to stand?  Can the boss require employees to be standing when on the clock and customers are in view, because it's "classier"?  It seems the employer can define customer service duties, which include standing tasks. But a third party - jury or judge - will decide if they are objectively reasonable.  "I, for one, welcome our new overlords," said no business owner, ever.

The Court similarly considers the physical layout of the workplace to be a relevant consideration to whether it is reasonable to have suitable seating available.  But, employers - and architects - take note:

just as an employer's mere preference for standing cannot constitute a relevant “business judgment” requiring deference, an employer may not unreasonably design a workspace to further a preference for standing or to deny a seat that might otherwise be reasonably suited for the contemplated tasks. As the DLSE observes in its amicus curiae brief, the seating requirement is “a workplace condition aimed at the welfare of employees performing work and not an „engineering‟ or technically-based standard,” and “[w]hile facts regarding technical aspects of workplace configurations or studies may be relevant to determining whether suitable seating can be provided, the application of the standard is essentially one of overall reasonableness applied to the particular facts.” As the DLSE suggests, reasonableness remains the ultimate touchstone. Evidence that seats are used to perform similar tasks under other, similar workspace conditions may be relevant to the inquiry, and to whether the physical layout may reasonably be changed to accommodate a seat. As the DLSE states, reasonableness must be based on the particular circumstances.

3. Whose Burden Is It to Prove Suitable Seating Either Is or Is Not Available?

It is the employer's burden to show that no suitable seat was available, not the employee's burden to show that there was one.   The Court spent little time on this.  However, the language of the wage order appears to place this burden on the employer.

In sum, this case will be difficult to interpret for employers looking for a bright line rule on whether seating should be provided in work situations when seating is not necessarily an obvious part of a job.  It remains to be seen whether there will be more litigation in this issue, or whether employers will reconfigure businesses to permit more seating in California to avoid these lawsuits. 

California Supreme Court Upholds Arbitration Agreement Against Unconscionability Claim

Baltazar v. Forever 21, Inc. is one of the older employment cases on the California Supreme Court's docket. It has now been put to rest. And the employer came out the winner via a unanimous Court.  Justice Kruger wrote the opinion.

This is another arbitration case, focusing on whether an employer's agreement to arbitrate was "unconscionable" because it included certain provisions.  First, the Court does a nice job of summarizing its recent arbitration cases so that practitioners can one-stop shop  for case law. Thank you Supreme Court. 

When evaluating arbitration agreements, the courts look for procedural and substantive unconscionability. The more procedural unconsionability they find, the less substantive unconscionability they need to discern.  And vice versa.  They call this the "sliding scale."

Procedural Unconscionability

So, the first piece of business the Court addressed is the issue of "procedural unconscionability." That is, whether the arbitration agreement was "take it or leave it" and whether it was obtained via trick or surprise.

Now, as a practical matter, nearly every employment arbitration agreement has some degree of "procedural" unconscionability, because they are almost always "take it or leave it," or "contracts of adhesion."  And here's where the court explained that it will not count an "adhesion" contract as a significant amount of procedural unconscionability unless there is something more - evidence that the employer hid the agreement, or lied to the employee.   

In this case, Baltazar knew about the agreement And she even tried to refuse to sign it.  The employer told her if she did not sign, she would have no job.  The agreement was presented to her in a straight-forward way. Therefore, the court said it was a plain-old adhesion contract. 

The Court also addressed the argument that the employer did not attache the AAA rules to the arbitration contract as evidence of procedural unconscionability. The Court said that there was nothing Baltazar pointed to in the rules that affected her rights. Therefore, there was nothing in the rules that created more procedural unconscionability because they were not given to her.  

Substantive Unconscionability

The Court then turned to Baltazar's substantive unconscionability arguments.  Her first argument was that the arbitration agreement stated that either party could seek injunctive relief in accordance with the California Civil Procedure Code's section 1281.8.   Yes, she argued that the agreement was illegal because it included a statute's provision within it.   Bad argument?  Not when you consider that a previous court of appeal (Trivedi v. Curexo Technology Corp. (2010) 189 Cal.App.4th 387) had held just that.  The court in Trivedi held that a provision that simply stated that either party could seek injunctive relief was unconscionable because employers were more likely to use it.   Goodbye Trivedi.  The Supreme Court disapproved it.  It was on the books for 6 years too long.  

Baltazar also argued that the list of covered claims in the arbitration agreement was unconscionable because only employee-type claims were specifically mentioned.  Here's what the agreement said, as described by the Court:

The parties “mutually agree” to arbitrate “any claim or action arising out of or in any way related to the hire, employment, remuneration, separation or termination of Employee.” The agreement specifies that the disputes subject to arbitration “include but are not limited to: claims for wages or other compensation due; claims for breach of any employment contract or covenant (express or implied); claims for unlawful discrimination, retaliation or harassment . . . , and Disputes arising out of or relating to the termination of the employment relationship between the parties, whether based on common law or statute, regulation, or ordinance.”

The Court had no trouble finding that this language included all claims whether brought by the employer or employee:

The illustrative list of claims subject to the agreement is just that; the agreement specifically states that such claims “include but are not limited to” the enumerated claims, thus making clear that the list is not intended to be exhaustive. It thus casts no doubt on the comprehensive reach of the arbitration agreement. It is not particularly remarkable that the agreement’s list of examples might highlight certain types of claims that employees often bring, since part of the purpose of the agreement is to put employees such as Baltazar on notice regarding the scope of the agreement, thus eliminating any possible surprise.

Finally, Baltazar tried to argue that the agreement's provision protecting trade secrets and confidential information rendered the agreement unconscionable.  Again, the Court was not having it.

Baltazar argues that the arbitration agreement here is unduly one-sided because it provides that, in the course of arbitration, “all necessary steps will be taken to protect from public disclosure [Forever 21’s] trade secrets and proprietary and confidential information.” Baltazar contends that because the agreement neither defines “all necessary steps” nor specifies what constitutes “proprietary and confidential information,” the agreement unfairly demands that employees take whatever steps the employer deems “necessary” to protect whatever information the employer claims to be “proprietary and confidential.”

Baltazar misreads the confidentiality provision. Nothing in the agreement indicates that an employee must accede to any and all demands Forever 21 might make for the protection of confidential and proprietary information. As defendants explain: “This provision contemplates that if trade secret, confidential and proprietary information need[s] to be introduced into the arbitration that the parties [will] work with the arbitrator to make sure that such information is not disclosed to the public.” The agreement does not restrict the use of such information in the proceeding, nor does it pretermit any determination of whether a particular piece of information is a trade secret or otherwise qualifies as proprietary and confidential. Agreements to protect sensitive information are a regular feature of modern litigation, and they carry with them no inherent unfairness.

To the extent that Baltazar’s complaint is instead that the agreement calls for the protection of an employer’s confidential information without similarly calling for the protection of the confidential information of employees, we disagree with the suggestion that this omission renders the arbitration agreement unduly harsh or one-sided. As we stated in Armendariz, supra, 24 Cal.4th at page 117: “ ‘[A] contract can provide a “margin of safety” that provides the party with superior bargaining strength a type of extra protection for which it has a legitimate commercial need without being unconscionable. [Citation.]’ ” Here, the basis for the extra measure of protection is a legitimate commercial need to protect Forever 21’s “valuable trade secrets and proprietary and confidential information” from public disclosure. Although Baltazar may dislike the wording of the confidentiality provision, she does not dispute that it is based on a legitimate commercial need. Moreover, nothing in the agreement precludes employees from seeking comparable protection for their personal information during arbitration proceedings, as circumstances may warrant.

So, this case is another one that will make it easier to draft arbitration agreements without worrying about excessive false mutuality.   You know what I mean.

This case is Baltazar v. Forever 21, Inc. and the opinion is here. 

California Supreme Court: Plaintiffs Who Settle for Money are "Prevailing Parties" for Costs Purposes

Here's a quick post, mostly for litigators in employment law cases.  But clients should make sure that settlement agreements are drafted correctly when they review them.

The California Supreme Court once again interpreted California's costs statute, Civil Procedure Code section 1032.  The case happens to be an employment law lawsuit, but the facts do not really matter.

Section 1032 awards "costs" of suit, such as deposition transcripts, subpoena fees, filing fees, and the like to the "prevailing party" in litigation.

The "prevailing party" can mean "the party with a net monetary recovery, a defendant in whose favor a dismissal is entered, a defendant where neither plaintiff nor defendant obtains any relief, and a defendant as against those plaintiffs who do not recover any relief against that defendant."

Well, if the case settles before trial and the defendant pays the plaintiff money, does that mean that the plaintiff is prevailing party because the plaintiff is "the party with a net monetary recovery?"  Could be!  

But wait. Isn't defendant also the prevailing party because there's a "dismissal" in favor of defendant?  Probably so!  Can there be two prevailing parties then?   Who gets the costs?  Whatever will happen to us now?  

That's why there's a Supreme Court and here's what the Court said:

When a defendant pays money to a plaintiff in order to settle a case, the plaintiff obtains a net monetary recovery, and a dismissal pursuant to such a settlement is not a dismissal in [the defendant‘s] favor. (§ 1032(a)(4).) As emphasized below, this holding sets forth a default rule; settling parties are free to make their own arrangements regarding costs.

So, that means that when there's a settlement, it's very important for the parties to expressly include in the settlement agreement and/or the request for dismissal "each side will bear his/her/its/their own costs."  Unless the parties address the issue, the "default rule" will apply. The plaintiff can go into court and file for costs, which can mean more money on top of the settlement that the defendant paid

Sometimes legal mumbo-jumbo in settlement agreements matters and this is one of those times.

This case is  DeSaulles v. Community Hospital of the Monterey Peninsula and the opinion is here. 

California Supreme Court Takes Up Important Rest Period Case:

I posted about Augustus v. ABM here.  The California Supreme Court has granted review of the case. That means this published decision no longer is citable, unfortunately.   It also means that the Supreme Court will decide what a "rest period" means.  Must the employer relieve the employee of all duty, as the plaintiff argued?  Or is it enough to be refraining from work, but subject to be called back to work if needed?   Or something else?  We will keep you posted.

This could be the "Brinker" of rest period cases.  Here's hoping we don't have to wait as long as we did for Brinker!

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 Supreme Court Narrows the Inside Sales Exemption in California

The California Supreme Court unanimously decided the following:  "an employer may not attribute commission wages paid in one pay period to other pay periods in order to satisfy California‟s compensation requirements."

This decision will affect employers and employees trying to qualify for the inside sales exemption for sure, which was the issue before the court.  Will it affect other areas of wage-hour law?  What other areas?  Gee, you ask a lot of questions.   Read on.

Here are the relevant facts per the Court:

From July 2008 to May 15, 2009, Susan Peabody was a Time Warner account executive selling advertising on the company's cable television channels. Every other week, Time Warner paid $769.23 in hourly wages, the equivalent of $9.61 per hour, assuming a 40-hour workweek. About every other pay period, Time Warner paid commission wages under its account executive compensation plan.

Peabody claimed she worked more than 40 hours per week.  In some weeks, she worked 48 hours.  In those weeks, she would earn less than minimum wage per hour if there was no commission payment that week.

Hold the phone - Time Warner claimed Peabody was an exempt, inside sales person.  To qualify under the inside sales exemption, she must, among other things, satisfy two compensation criteria.  The one that matters here is "'that an employee's 'earnings exceed one and one-half (1 1/2) times the minimum wage” (ibid.), i.e., $12 per hour. '"

Peabody of course did not earn $12.00 per hour in base pay.  As shown above, she earned less than $10.00 per hour. So, for the exemption to apply, commissions would have to make up the difference.

Time Warner paid its commissions about once a month.  And therein lies the issue the Court decided.  Could Time Warner allocate the monthly commission payments over the course of the month in which they were paid?   Could Time Warner allocate the commissions across the time period during which the commissions were "earned"?

No, no, and.....no, said the California Supreme Court, unanimously.  Yes that was three "nos."

It was clear in this case that Peabody did not receive 1.5 times minimum wage for the hours worked on many of her paychecks.  Time Warner argued that the commissions it paid Peabody "counted" towards the period during which the commissions were "earned."  So, if the commission check was paid on March 23 for commissions earned in February, then the minimum wage calculation had to take into consideration those commission wages.

Agreeing with Peabody, the Court rejected that argument.  The Court held that commissions may be earned over time. It may be that a sale occurs in January, but is not earned until payment is received in April.  That's fine with respect to wage-hour law governing commissions.

But if the commission check is paid in April because the commissions are finally earned, then those commissions are counted towards minimum wage only during the (bi-weekly or semi monthly) pay period  for which the pay check is paid.

Whether the minimum earnings prong is satisfied depends on the amount of wages actually paid in a pay period. An employer may not attribute wages paid in one pay period to a prior pay period to cure a shortfall.

The Court then explained why it was making satisfying the exemption difficult:

Making employers actually pay the required minimum amount of wages in each pay period mitigates the burden imposed by exempting employees from receiving overtime. This purpose would be defeated if an employer could simply pay the minimum wage for all work performed, including excess labor, and then reassign commission wages paid weeks or months later in order to satisfy the exemption‟s minimum earnings prong. 

Finally, the court refused to rely on Fair Labor Standards Act cases interpreting the federal inside sales exemption, aka "7(i)."  Under federal law, the employer may pay commissions at greater intervals than per pay period and still comply with the exemption.

So, bottom line re inside sales exemption in California:

- to satisfy the exemption, the employee must receive in each pay check at least 1.5 times the minimum wage, for the hours worked during the applicable workweeks covered by that pay check. That means $13.50 per hour worked, starting July 1 of this year.  An employer who pays commissions less frequently than semi-monthly or bi-weekly must pay a sufficient hourly rate to ensure the 1.5 times minimum wage threshold is met.

-  This requirement will increase the non-commission earnings, by increasing the hourly pay required to maintain the exemption. That will have two consequences. First, payroll expense will increase absent a reduction in the commission rate.  Second, the inside sales exemption depends on a second criterion:  the employee must make more than 50% of wages from commission.  Paying a higher hourly rate will make it harder for employers to meet that 50% threshold.

Moving on... on the bright side the Court unanimously endorsed the view that commissions are earned when conditions are met, even if there is a delay between when a sale occurs and when commissions are earned:

an employment agreement may require receipt of a client's payment before any commissions on sold advertising are earned. If a client routinely pays its bills on the 15th of each month, commissions will be earned and owed once a month. Yet this does not create a monthly pay period in contravention of section 204(a). To summarize, section 204 establishes semimonthly pay periods, but there is no obligation to pay unearned commission wages in any pay period. Commissions are owed only when they have been earned, even if it is on a monthly, quarterly, or less frequent basis.

(emphasis is mine).

Finally, some thoughts:

-   If commissions are only counted towards minimum wage in the pay period during which they are actually received, will that holding also affect the "regular rate of pay" calculation in California?  Overtime pay is based on the "regular rate of pay."  The "regular rate of pay" can include hourly wages and commissions.  The calculation of the "regular rate" may include allocating periodic payments like bonuses or commissions over the periods during which they are earned. So, if  commissions are only counted towards wages earned in the pay period in which payment is made, then should those commissions be counted for overtime earnings purposes only during that same pay period?

If this Peabody rule applies outside the inside sales exemption context, then during the pay period when the commission check is received, there will be a high regular rate of pay, and during non-payment weeks, the regular rate of pay will be low.   That could drastically affect employees' overtime pay calculations.  What about quarterly bonuses?  If Peabody is extended to overtime calculations, will "retroactive" overtime still be due for pay periods during which the bonuses were not paid?

My guess is that the courts will continue to allocate periodic payments over longer periods of time for overtime purposes.  For one thing the allocation of commissions or bonuses over more than one pay period for overtime purposes is settled federal law, and California appears to have followed that rule.

-  I still want to know if the inside sales exemption is valid in California under Wage Order 4, which applies to businesses that do not involve a "retail concept."  Under federal law, there is no inside sales exemption outside of retail, e.g., you can't have an  exempt, inside salesperson at a hospital.   Under state law, there appears to be a broader exemption because non-retail employees can qualify for the state exemptoin. If federal law requires overtime, but a state law exemption applies, isn't that an issue?  Can you be exempt under state law, but non-exempt under federal law?  (I also ask a lot of questions.)

The case is Peabody v. Time Warner Cable and the opinion is here.

Be careful out there!

Greg

California Supreme Court Again Weighs in on Class Certification

The California Supreme Court decided Duran v. U.S. Bank Nat. Assn., 59 Cal.4th 1, just a few weeks ago.  We  discussed that here.  That was a major decision on class actions.  The Court there explained how courts are to consider whether to certify a class action. The Court suggested that trial courts must consider not only whether there are "common questions" but whether a class action is "manageable" in that the individual issues won't drown the trial court. From the opinion in Duran:

In the misclassification context, as in other types of cases, trial courts deciding whether to certify a class must consider not just whether common questions exist, but also whether it will be feasible to try the case as a class action. Depending on the nature of the claimed exemption and the facts of a particular case, a misclassification claim has the potential to raise numerous individual questions that may be difficult, or even impossible, to litigate on a classwide basis. Class certification is appropriate only if these individual questions can be managed with an appropriate trial plan.

Now, the Court has issued another class-action-related opinion in Ayala v. Antelope Valley Newspapers, Inc., opinion here.  Here, the court considered another "misclassification case," one involving the issue of independent contractors.  The Court's focus again was whether common issues "predominate" and how trial courts make that determination.

Curiously, other than a quick cite to the opinion for an unremarkable proposition of law, there is no discussion of Duran in this latest case.  Perhaps that is because this case is a roadmap to certification of independent contractor v. employee class actions.

In Ayala, the plaintiff's case involves the test for employee v. independent contractor status.  The Court made clear that to determine whether common issues predominate, one must look at the nature of the legal claims.  Said the Court:

We begin by identifying the principal legal issues and examining the substantive law that will govern. In doing so, we do not seek to resolve those issues. Rather, the question at this stage is whether the operative legal principles, as applied to the facts of the case, render the claims susceptible to resolution on a common basis. (Brinker, supra, 53 Cal.4th at pp. 1023–1025; Sav-On Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319, 327 [the focus ―is on what type of questions—common or individual—are likely to arise in the action, rather than on the merits of the case‖].) 

* * *

A court evaluating predominance ―must determine whether the elements necessary to establish liability [here, employee status] are susceptible to common proof or, if not, whether there are ways to manage effectively proof of any elements that may require individualized evidence.‖ (Brinker, supra, 53 Cal.4th at p. 1024.)

So, it's more than just the plaintiff's "theory" that drives whether issues are common. That "theory" has to be valid within the context of the substantive law.

Here, the theory was that Antelope Valley's "right to control" its newspaper carriers rendered them employees, rather than independent contractors.  That indeed is the central issue in employee v. independent contractor cases.  So, the Court evaluated whether that right to control was susceptible to resolution via common proof.

at the certification stage, the relevant inquiry is not what degree of control Antelope Valley retained over the manner and means of its papers‘ delivery. It is, instead, a question one step further removed: Is Antelope Valley‘s right of control over its carriers, whether great or small, sufficiently uniform to permit classwide assessment? That is, is there a common way to show Antelope Valley possessed essentially the same legal right of control with respect to each of its carriers? Alternatively, did its rights vary substantially, such that it might subject some carriers to extensive control as to how they delivered, subject to firing at will, while as to others it had few rights and could not have directed their manner of delivery even had it wanted, with no common proof able to capture these differences?

The Court then assessed whether the trial court properly decided that Antelope Valley's "right to control" the carriers was susceptible to common proof.  The Court decided the trial court applied the wrong analysis, because it focused on the degree to which Antelope Valley actually exercised control. The trial court believed that because it did not uniformly exercise control, the case would splinter into mini-trials of whether each carrier was a contractor or employee.

The Supreme Court instead focused on Antelope's contract with the carriers, which was uniform in that it applied to all of the carriers.  The contract specified the "right to control," thereby providing a sufficient "common issue":

At the certification stage, the importance of a form contract is not in what it says, but that the degree of control it spells out is uniform across the class. Here, for example, the two form contracts address, similarly for all carriers, the extent of Antelope Valley‘s control over what is to be delivered, when, and how, as well as Antelope Valley‘s right to terminate the contract without cause on 30 days‘ notice.

* * *

Evidence of variations in how work is done may indicate a hirer has not exercised control over those aspects of a task, but they cannot alone differentiate between cases where the omission arisesbecause the hirer concludes control is unnecessary and those where the omission is due to the hirer‘s lack of the retained right. That a hirer chooses not to wield power does not prove it lacks power. (Malloy, at p. 370 [―It is not essential that the right of control be exercised or that there be actual supervision of the work of the agent.

The Court summarized:

For class certification under the common law test, the key question is whether there is evidence a hirer possessed different rights to control with regard to its various hirees, such that individual mini-trials would be required. Did Antelope Valley, notwithstanding the form contract it entered with all carriers, actually have different rights with respect to each that would necessitate mini-trials?

Then the Court explained how to address whether there is variation in the right to control, such that there is no "common" question.  For example, the Court explained that, despite the written contract, there could be evidence of the parties' course of dealing that showed individual rights to control depending on the carrier involved.  The Court explained that when there is a dispute in the evidence over the central issue, a trial court must consider it if certification "depends on" resolution of that dispute:

The extent of Antelope Valley‘s legal right of control is a point of considerable dispute; indeed, it is likely the crux of the case‘s merits. To address such an issue on a motion for class certification is not necessarily erroneous. We recently reaffirmed that a court deciding a certification motion can resolve legal or factual disputes: ―To the extent the propriety of certification depends upon disputed threshold legal or factual questions, a court may, and indeed must, resolve them.‖ (Brinker, supra, 53 Cal.4th at p. 1025; see Dailey v. Sears, Roebuck & Co. (2013) 214 Cal.App.4th 974, 990–991.) But we cautioned that such an inquiry generally should occur only when ―necessary.‖ (Brinker, at p. 1025.) The key to deciding whether a merits resolution is permitted, then, is whether certification ―depends upon‖ the disputed issue. (Ibid.)

Finally, the Court addressed the "secondary factors" that apply in independent contractor cases.  These include who specifies the location of the work, whether the contractor uses his or her own tools, how the relationship is terminated, the form of compensation, etc.  The Court wrote that trial courts must weigh individual v. common issues, but give special weight to whether the "more important" factors are susceptible to common proof. 

Accordingly, the impact of individual variations on certification will depend on the significance of the factor they affect. Some may be of no consequence if they involve minor parts of the overall calculus and common proof is available of key factors such as control, the skill involved, and the right to terminate at will; conversely, other variations, if they undermine the ability to prove on a common basis the most significant factor or factors in a case, may render trial unmanageable even where other factors are common. The proper course, if there are individual variations in parts of the common law test, is to consider whether they are likely to prove material.

All 7 justices agreed the trial court erred. But the majority opinion, by Justice Werdegar, is joined by  (Liu, Kennard, Corrigan, and CJ. Cantil-Sakauye).  Justice Baxter wrote a concurring opinion, joined by Justice Corrigan, in which he argued that most of the majority's opinion was unnecessary to the decision.  It is a bit strange that Justice Corrigan joined Justice Baxter's concurrence, but also joined the majority opinion.  And Justice Chin concurred in the result only, authoring a long opinion explaining his view of the record and the flaws in the majority's analysis. 

So, bottom line:

- The California Supreme Court's recent decisions in Duran and Ayala have clarified class certification practice. However, on the whole, class certification will be easier to obtain.

- Class action defense must change strategies to defeat certification.  The proffered "differences' among the putative class members have to concern the common issues advanced by the plaintiff.  

- Larger employers facing class actions in a variety of contexts may wish to consider arbitration agreements containing class action waivers.

- Companies relying on large groups of independent contractors to perform aspects of their work should review their independent contractor agreements and consider (1) whether the classification is defensible and (2) whether the "right to control" is common enough to allow for class certification, or whether the agreement can build in variations in the right to control.

California Supreme Court Washes Unclean Hands. And After Acquired Evidence, Too

The defense of "after acquired evidence" is a variation on the equitable defense of "unclean hands." A party's "unclean hands" are supposed to "close the courthouse door" to those guilty of wrongdoing directly related to the heart of his or her claims.  "Unclean hands" is supposed to apply only when the wrongdoing goes to the heart of the claims the employee is asserting.

After-acquired evidence is a broader concept, in that the focus is on whether the employer would have denied employment to the employee, had the employer known about the misconduct during the hiring process or before termination.  As the Supreme Court explained:

The doctrine of after-acquired evidence refers to an employer‟s discovery, after an allegedly wrongful termination of employment or refusal to hire, of information that would have justified a lawful termination or refusal to hire.

Unlike unclean hands, the after-acquired information may not have to cut to the heart of the employee's case. But the employer must prove that the employee would not have been hired or would have lost his or her job.

In the employment law context, for example, a California court once held that someone who lied on his employment application, that he was not convicted of a crime, was not permitted to sue for martial status discrimination under the Fair Employment and Housing Act. The court reasoned the employee was not entitled to the job in the first place because of his misconduct, because he never would have been hired. (Camp v. Jeffer Mangels et al.) Another court held that an employee who was unauthorized to work in the U.S. could not proceed on termination-based claims because she was not entitled to the job in the first place.  (Murillo v. Rite-Stuff Foods).

Under federal employment laws, such as Title VII, however, these defenses can limit damages available, but are not complete bars to liability. McKennon v. Nashville Banner Publishing Co. (1995) 513 U.S. 352.  That is, if the employer proves it would have fired an employee had it known about information acquired after the termination, the employer can argue that damages should be reduced, but cannot assert a complete defense.

The California Supreme Court just decided in Salas v. Sierra Chemical that the federal rule is the better one.

Vicente Salas intentionally and repeatedly used someone else's social security number to obtain employment with Sierra Chemical Company. He signed an I-9 form under penalty of perjury, attesting to the documents he submitted in support of his eligibility to work in the U.S.  Because his job with Sierra was seasonal, Salas repeatedly misrepresented his social security number, every time he re-applied for seasonal work.

Mirabile dictu, the social security bureaucracy figured out that Salas's social security number was bogus. Of course, that was the social security office of many years ago; the one that issued "no-match" letters and required an explanation from the employees whose numbers did not match their names.  Sierra Chemical apparently didn't do anything about the employees with no-match letters.  They allowed Salas and the other employees to continue working.

Meanwhile, in 2006, Salas injured himself  He returned to work the next day, with restrictions, which Sierra honored.  He returned to full duty a couple of months later, in June. But in August, he hurt himself again, and required modified duty until December, when he was laid off for the season (as he had been in the past).

Salas went to work for another company after the layoff.  But then his Sierra managers called him and asked if he wanted to return to work. They then told him he would have to have a release from his doctor - to full duty - before he could return. (Spot the issue, accommodation mavens).

Salas told his boss he would try to get the release by June 2007. The boss said he would hold open Salas's job.  But Salas did not contact the boss again.  Instead, he sued.  He claimed denial of reasonable accommodation under the Fair Employment and Housing Act, and retaliation for filing a workers' compensation claim, in violation of public policy.

As the trial date approached, both parties filed motions in limine regarding evidence.  Salas acknowledge it is a crime (illegal) under federal and state law:

for a person to use false identification documents to conceal the person‟s true citizenship or resident alien status. Plaintiff stated that he would testify at trial and assert his privilege against self-incrimination under the Fifth Amendment to the United States Constitution if asked about his immigration status. He asked that he be allowed to assert the privilege outside the jury's presence and that the court and counsel not comment at trial on his assertion of the privilege. 

So, Salas' disclosure for the first time prompted the defense to investigate the bona fides of Salas' immigration status.  The defendant found out that Salas' social security number actually belonged to a person on the East Coast.

Sierra moved for summary judgment on the ground that Salas falsified his employment authorization paperwork. The company submitted a sworn statement from the real owner of the social security number and of the company's president, who said they would have fired Salas had they known of his deception.

Yet the trial court denied Sierra's motion for summary judgment.  The Court of Appeal, on the other hand, held Salas's claims were barred. Per the Supreme Court:

The Court of Appeal reasoned that the doctrine of after-acquired evidence barred plaintiff‟s causes of action because he had misrepresented to defendant employer his eligibility under federal law to work in the United States. It also held that plaintiff‟s claims were subject to the doctrine of unclean hands because he had falsely used another person's Social Security number in seeking employment with defendant, he was disqualified under federal law from working in the United States, and his conduct exposed defendant to penalties under federal law.

The lower court's decision was entirely consistent with California law up to this point.

But the California Supreme Court disagreed with the Court of Appeal and held that "after-acquired evidence" or "unclean hands" defenses are not complete bars to liability under FEHA.  Rather, the Court decided, these defenses in some cases may be used only to limit damages. As a result, summary judgment based on the defenses no longer is an option.

California law protects  immigrant workers who are unauthorized to work by guaranteeing them access to the same employment laws that protect those legally entitled to work.  So, Salas argued, if late-discovered unauthorized status resulted in application of unclean hands, these worker would be barred from bringing wrongful termination claims.

The Court agreed with Salas. First, the Court decided that federal immigration laws do not preempt California's laws preserving illegal aliens' employment-based claims. If federal law preempted California law, the California statutes would not impede the application of unclean hands. The Court engaged in a lengthy analysis of federal preemption jurisprudence, concluding that California was free to pass laws guaranteeing illegal aliens the right to benefit from employment law on the same terms as authorized workers.

The Court could have limited its discussion to whether unclean hands / after acquired evidence may be applied to hose who lie about their immigration status / identification documents.  But no.

The Court then examined, and gutted, the application of after-acquired evidence / unclean hands in FEHA cases generally.  The Court decided that the defenses are not complete bars in Fair Employment and Housing Act cases because employers should not be insulated from liability for making unlawful employment decisions, even those taken against employees who should never have been employed in the first place.  The Court reasoned that the employer made the challenged decisions without knowing of the employee's misconduct that would have led to termination or refusal to hire.

The Court then decided that, like under the federal rule, employees found to have engaged in misconduct that would have disqualified them from employment should be limited in their potential remedies:

Generally, the employee's remedies should not afford compensation for loss of employment during the period after the employer‟s discovery of the evidence relating to the employee‟s wrongdoing. When the employer shows that information acquired after the employee‟s claim has been made would have led to a lawful discharge or other employment action, remedies such as reinstatement, promotion, and pay for periods after the employer learned of such information would be “inequitable and pointless,” as they grant remedial relief for a period during which the plaintiff employee was no longer in the defendant‟s employment and had no right to such employment. (McKennon, supra, 513 U.S. at p. 362.)

The remedial relief generally should compensate the employee for loss of employment from the date of wrongful discharge or refusal to hire to the date on which the employer acquired information of the employee‟s wrongdoing or ineligibility for employment. Fashioning remedies based on the relative equities of the parties prevents the employer from violating California‟s FEHA with impunity while also preventing an employee or job applicant from obtaining lost wages compensation for a period during which the employee or applicant would not in any event have been employed by the employer. In an appropriate case, it would also prevent an employee from recovering any lost wages when the employee's wrongdoing is particularly egregious.

The lower courts apparently are left to decide what an "appropriate case" or "egregious" means in this context.

The significance of the Court's no-preemption holding now becomes clear.  If preemption applies, it is likely that federal law would preclude any post-termination or back pay to an employee who falsifies employment documents to obtain employment.  Given the California Supreme Court decided state law is not preempted, its holding under state law is viable.  But if the U.S. Supreme Court hears this case and decides federal immigration law applies, it could be that unauthorized workers are entitled to no post-termination pay, but could still recover for pre-termination damages due to unlawful harassment, for example.

The Court then separated the "unclean hands" defense from the "after-acquired evidence" analysis.  But then the Court simply said that the defense of unclean hands, normally a complete bar, would not apply in FEHA cases either, but again authorized trial courts to fashion appropriate equitable remedies.  It's hard to tell, but it seems like the courts will apply the same analysis whether the defense is expressed as "unclean hands" or "after-acquired evidence."  Again, "unclean hands" likely will apply only when the misconduct relates to serious application fraud, but it appears not to matter anymore.

Retired Justice Joyce Kennard wrote the opinion for 5 justices; her final gift to the plaintiffs' bar.  Retiring Justice Baxter wrote a concurrence/dissent, joined by Justice Ming Chin, the editor of the "leading employment law treatise" in the words of a recent court opinion.  Justice Baxter opined that federal immigration law indeed precludes any remedy to employees who falsify eligibility to work in the U.S. And Justice Baxter pointed out that the "unclean hands" defense, when applicable, generally is a complete bar to a plaintiff's access to court.

The opinion in Salas v. Sierra Chemical Co. is here.

CA Supreme Court Will Answer Ninth Circuit's Suitable Seating Questions

We wrote an article about the California wage orders' "suitable seating" requirement here.

We blogged about the Ninth Circuit's certified questions to the California Supreme Court here. 

Turns out the California Supreme Court just agreed to answer the 9th Circuit's questions.  You can sign up to follow the case here.

The questions presented are: For purposes of IWC Wage Order 4-2001 § 14(A) and IWC Wage Order 7-2001 § 14(A), "(1) Does the phrase 'nature of the work' refer to an individual task or duty that an employee performs during the course of his or her workday, or should courts construe 'nature of the work' holistically and evaluate the entire range of an employee's duties? (a) If the courts should construe 'nature of the work' holistically, should the courts consider the entire range of an employee's duties if more than half of an employee's time is spent performing tasks that reasonably allow the use of a seat?

(2) When determining whether the nature of the work 'reasonably permits' the use of a seat, should courts consider any or all of the following: the employer's business judgment as to whether the employee should stand, the physical layout of the workplace, or the physical characteristics of the employee? 

(3) If an employer has not provided any seat, does a plaintiff need to prove what would constitute 'suitable seats' to show the employer has violated Section 14(A)?

We'll keep you posted....

Ninth Circuit Poses Questions to CA Supreme Court Re Suitable Seating Obligations

Happy New Year!
The Ninth Circuit is considering several class action appeals over California's "suitable seating" requirement contained in its wage orders.  Here is an example from Wage Order 7-2001, governing the retail industry:

14. Seats.(A) All working employees shall be provided with suitable seats when the nature of the work reasonably permits the use of seats. 

The Ninth Circuit is considering appeals in two cases.  One involves bank tellers.  One involves retail clerks.

In the retail case, CVS's cashiers spend about 90% of the time working a cash register, ringing up transactions.  The other 10% of the time, she has to walk around the store, performing various tasks. CVS does not provide seats for the cashiering duties, believing that standing employees provide better customer service.  CVS told the plaintiff her job involved extensive standing when it hired her. 

In the bank case, tellers spend a great deal of time at their windows, making deposits, processing withdrawals, etc.  They also escort customers to safety deposit boxes, check ATMs and perform other duties that require mobility.

The employees argue:

if an employee is engaged in a task that can objectively be performed while seated, the employer must provide the employee with a suitable seat. Under this interpretation, neither the employee’s other tasks nor the employer’s business judgment would affect whether the nature of the work reasonably permits the use of seats.

On the other hand, the employers say: 

courts should discern the nature of an employee’s work by considering the entire range of tasks the employee actually performs in combination with the employee’s job description, the layout of the workplace, the employer’s business judgment concerning the employee’s job, and any other factors the court deems relevant. An employer would only be subject to Section 14(A) when all of these factors taken together reasonably permit the use of a seat.

The Court's dilemma is that the Wage Order's text permits either interpretation because it's vague.

So, does the "nature of the work" in either or both cases reasonably permit the use of seats?  And who gets to decide?  The Ninth Circuit wants to know how the California Supreme Court interprets "the nature of the work."  Here are the questions the federal court would like answered:

1. Does the phrase “nature of the work” refer to an individual task or duty that an employee performs during the course of his or her workday, or should courts construe “nature of the work” holistically and evaluate the entire range of an employee’s duties? 

a. If the courts should construe “nature of the work” holistically, should the courts consider the entire range of an employee’s duties if more than half of an employee’s time is spent performing tasks that reasonably allow the use of a seat? 

2. When determining whether the nature of the work “reasonably permits” the use of a seat, should courts consider any or all of the following: the  employer’s business judgment as to whether the  employee should stand, the physical layout of the workplace, or the physical characteristics of the employee? 

3. If an employer has not provided any seat, does a  plaintiff need to prove what could constitute “suitable seats” to show the employer has violated Section 14(A)?

As the Ninth Circuit points out in its request, if the Supreme Court agrees to answer these questions, it will have a significant effect on California employers and employees:

Section 14 could have a dramatic impact on public policy in California as well as a direct impact on countless citizens of that state, both as employers and employees. Even a conservative estimate would put the potential penalties in these cases in the tens of millions of dollars. See Cal. Lab. Code § 2699(f)(2) (“If, at the time of the alleged violation, the person employs one or more employees, the civil penalty is one hundred dollars ($100) for each aggrieved employee per pay period for the initial violation and two hundred dollars ($200) for each aggrieved employee per pay period for each subsequent violation.”); see also Home Depot U.S.A., Inc. v. Super. Ct., 120 Cal. Rptr. 3d 166, 177 (Cal. Ct. App. 2010) (finding California Labor Code § 2699(f)(2) applies to Section 14 of Wage Order 7-2001); Bright v. 99cents Only Stores, 118 Cal. Rptr. 3d 723, 730 (Cal. Ct. App. 2010) (same).

As a former restaurant worker, I was thinking that if the plaintiffs' interpretation is correct, then a waiter taking an order would have the right to sit down at the table?  Taking the order, after all, is a duty that may be accomplished while seated.  How about the bartender?  There are other industries where the task-based approach could change the workplace significantly. Third base coach?  Factory worker?  Professor?  Will the seat have to have wheels if some movement is required within the work area (because that is "suitable")?  Does the employer have any say in what the "nature of the work" involves, or will that be up to the courts / a jury / the Division of Labor Standards Enforcement?   

Anyway, we'll see in the next few weeks if the California Supreme Court is interested in answering these and other questions.  Let's hope these questions are addressed so employers and lower courts may understand what is expected of them.

The case is Kilby v. CVS and the Ninth Circuit's request to the California Supreme Court is here.  As of now, there is no Supreme Court online docket for this case. 

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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CA Supreme Court: LA County Union Entitled to Home Addresses and Phone Numbers of Non-Union Employees

The California Supreme Court in a unanimous opinion addressed employees' privacy rights in the public sector union context. The decision has implications for non-union, private sector employers as well, so read on.

The Service Employees International Union, Local 721, represents Los Angeles County's employees.  However, employees within the union's collective bargaining unit may choose not to join the SEIU as a member. Here's how it works per the CA Supreme Court.

Each of the County‟s bargaining units has a memorandum of understanding (MOU), with SEIU. Most of these MOUs have an agency shop provision that gives County employees four options: (1) join SEIU and pay dues; (2) decline to join and pay a fair share fee; (3) decline to join, object to the fair share fee, and instead pay an agency shop fee; or (4) decline to join, claim a religious exemption, and pay the agency shop fee to a nonreligious, nonlabor charitable fund. A recognized bargaining agent acts on behalf of
all employees in a bargaining unit, whether the employees are union members or not.

Every year, the union sends out a packet of information.  Those who do not respond are deemed "fair share" fee payers.  The vast majority of non-members are "fair share" fee payers.  The "fair share" fee covers activities related to collective bargaining, but does not include contributions for the union's non-bargaining related activities, such as political activity.

The County historically did not disclose non-members' addresses and phone numbers. Instead, the union would send the packets to a third party, the LA County Employee Relations Commission, for distribution to the non-members.

In 2006, the union sought to amend the collective bargaining agreements to require the County to turn over the addresses and phone numbers of non-members. After the County refused, the union filed an administrative charge with the County ERC. The ERC held the County's refusal was an unfair labor practice.  The County filed a writ proceeding in Superior Court, which held that the non-members' privacy interests would have to yield to the union's need to discharge its duties as bargaining representatives of the non-members.

The Court of Appeal also held the union was entitled to the information, but for different reasons than the superior court.  The appellate court decided that the non-members had a right to notice and the opportunity to opt-out of disclosure, similar to the rights courts have fashioned in the context of class action litigation.

The California Supreme Court accepted the County's request for review.  First, the Court noted that the National Labor Relations Act does not apply to the County's union relationship.  The County's relationship is governed by state law, the MMBA.  LA County's ERCOM (rather than the NLRB in the private sector or the PERB that covers state workers and counties other than LA) enforces the MMBA.  I know, lots of acronyms.  Bottom line, though, is that PERB interpretations of the MMBA and the NLRB's decisions under the NLRA are persuasive authority.

The Court analyzed the PERB and NLRA decisions as well as the statute and other authorities. The Court concluded that the union is entitled to the names and addresses of the employees it represents, even when the employees do not sign up as "members" of the union and pay only the agency fee.

The Court then considered whether California's right to privacy outweighed the union's right to the information. The Court first decided that applicants and employees had a reasonable expectation that employers would keep personal contact information private.  The Court noted:

A job applicant who provides personal information to a prospective employer can reasonably expect that the employer will not divulge the information outside the entity except in very limited circumstances. For example, various laws require employers to disclose information to governmental agencies, such as the Internal Revenue Service and Social Security Administration, and disclosure may also be necessary for banks or insurance companies to provide employee benefits. (See Belaire-West Landscape, Inc. v. Superior Court (2007) 149 Cal.App.4th 554, 561 (Belaire-West).) But beyond these required disclosures, it is reasonable for employees to expect that their home contact information will remain private "in light of employers‟ usual confidentiality customs and practices."

This conclusion is important to private sector, non-union employers, because it means that employees should be notified and should consent to disclosure to third parties, such as customers or vendors.  These notices and consents usually occur when employees sign up for benefits and the like.  Employee handbooks can contain a policy notifying employees that sometimes names and addresses will be disclosed to customers, vendors, etc. if that is a concern.

The Court next decided that disclosure of names and addresses amounted to a serious intrusion, another essential element of an invasion of privacy claim.

So, the County having established a reasonable expectation of privacy and a serious intrusion, the union had to show its legitimate interest in the information outweighed the employees' privacy interest.  The Court agreed that the union's interest was sufficiently important to justify the intrusion. 

The Court noted that employees and the County could put into place procedural safeguards themselves that would limit or preclude disclosure of non-members' information such as via collective bargaining: 
 

Employers like the County remain free to bargain for a notice and opt-out procedure in negotiating collective bargaining agreements with employee unions. Public employers can also draft employment contracts that will notify employees their home contact information is subject to disclosure to the union and permit employees to request nondisclosure. Finally, nothing in the relevant statutes or case law appears to prohibit agencies such as PERB or ERCOM from developing notice and opt-out procedures that would allow employees to preserve the confidentiality of their home addresses and telephone numbers

The decision is LA County v. Los Angeles County Employee Relations Commission and the opinion is here.

DGV






 

California Supremes Expanding Employment Law Docket

The California Supreme Court is taking up several cases for review that will have significant effects on California employment law.  Once the Supreme Court grants review, the lower court opinion is not precedent and cannot be cited in briefs or relied upon unless the Court says otherwise.

Here are two recent "grants," courtesy of the California bar's employment law section email blast (and thank you, Phyllis Cheng as always):

In this case, the court of appeal expanded appellate review of arbitration decisions beyond what was previously the law.  One of the reasons parties turn to arbitration is finality - no appeals unless there are very specific circumstances.  This case carved a huge loophole.  This case also rejected the employer's argument that it had an "honest belief" that an employee was faking the need for medical leave, justifying discharge.

Richey v. Autonation, Inc. (2012) 149 Cal.Rptr.3d 280 (SC S207536/B234711review granted 2/13/13) CFRA/honest belief defense Petition for review after the Court of Appeal reversed the judgment in a civil action. This case presents the following issues: (1) Is an employer’s honest belief that an employee was violating company policy or abusing medical leave a complete defense to the employee’s claim that the employer violated the Moore-Brown-Roberti Family Rights Act (Gov. Code, §§ 12945.1, 12945.2)? (2) Was the decision below to vacate the arbitration award in the employer’s favor consistent with the limited judicial review of arbitration awards? Review granted/brief due.

This one is a "grant and hold" that likely will depend on the outcome of the pending Iskanian decision, which addresses overlapping issues.  The Court is going to decide whether class action waivers are lawful in California after the U.S. Supreme Court's decision in ATT Mobility v. Concepcion.

Franco v. Arakelian Enterprises, Inc. (2012) 149 Cal.Rptr.3d 530 (SC S207760/B232583 review granted 2/13/13) Class Action Waiver Petition for review after the Court of Appeal affirmed an order denying a petition to compel arbitration in a civil action. The court ordered briefing deferred pending decision in Iskanian v. CLS Transportation Los Angeles, LLC, S204032 (#12-97), which includes the following issue: Did AT&T Mobility LLC v. Concepcion (2011) 563 U.S. __ [131 S.Ct. 1740, 179 L.Ed.2d 742] impliedly overrule Gentry v. Superior Court (2007) 42 Cal.4th 443 with respect to contractual class action waivers in the context of non-waivable labor law rights?  Review granted/briefing deferred. The High Court of course has a number of other significant employment law cases pending. f you want to review all of the cases the California Supreme Court has on its docket (employment law and otherwise), the Court keeps a list here.