Meet GINA

President Bush signed the "Genetic Information Nondiscrimination Act," or "GINA." Title I of the new law prohibits the use of genetic testing or genetic testing results to affect health insurance premiums. "Genetic testing" includes one's own test and the tests of family members.

Title II of the law addresses employment discrimination. Basically, the law follows Title VII of the Civil Rights Act of 1964, and bars employers' reliance on genetic information in making employment decisions. The law specifically says there are no disparate impact claims allowed, so intentional discrimination must be proved. It's also illegal to request genetic information, although there are exceptions for inadvertent requests (such as family history) and when information is disclosed as part of an FMLA procedure.

I'm not sure whether any employers were discriminating based on genetic information, or where they were getting it. Apparently, Congress saw a need to step in, though. So, you genetic testers and discriminators - knock it off. Actually, the law takes effect in 18 months. By that time, remember to update your handbooks, applications, training programs, and EEO statements. Also, I'm sure there will be a new poster(!)

Here's the text of the new law.

H/T to Ross Runkel for the link and for lots of other information.

Court of Appeal Examines "Same Actor" Inference

Nita White-Ivy was a senior HR manager. She was Marietta Harvey's boss at a company called Pyramid. Then, White-Ivy became VP of Global HR for Sybase. She hired Harvey to be a director of HR at Sybase. Both women are Filipina. At Sybase, White-Ivy promoted Harvey several times, up to where she was the second-highest ranking employee in the department. Later, White-Ivy was considering demoting Harvey because she was unhappy with Harvey's performance and wanted to reduce her responsibilities. Harvey spoke with other executives about this proposed demotion. White-Ivy did not go forward with the demotion. However, she called Harvey on the carpet for "back-stabbling" and eliminated her position. Also, in response to some other executives' feedback, White-Ivy had commented that there were too many Asian females in the HR department, and she was interested in hiring more males, and more white males.

Harvey sued Sybase for race /national origin and sex discrimination. Thus, she accused White-Ivy, another female Filipina, of firing Harvey because of discrimination. That's the same White-Ivy who supervised Harvey at two companies, hired her at Sybase, and gave her several promotions. Harvey also claimed she was fired for discussing her salary in violation of the Labor Code.

A jury obviously found that there was no way White-Ivy was motivated by sex or national origin discrimination when she decided to fire Harvey, right? Wrong. The jury awarded her $1.8 million, including $500,000 in punitive damages.

The Court of Appeal rejected Sybase's argument that the same actor evidence - evidence that White-Ivy had treated Harvey well on so many occasions over a long period of time - was dispositive. The Court found "substantial evidence" on which the jury could have found discrimination - that White-Ivy was motivated to replace Asian females with males and non-Asians. Under well-settled principles, if a jury's verdict is based on substantial evidence, the jury is is privileged to reject contrary evidence, even if compelling. So, the Court affirmed the jury's verdict, acknowledging the evidence of non-discrimination was strong.

There are a number of lessons to be learned from this case, including about "diversity" efforts. Announcing a desire to hire members of one protected group or another to improve the mix of races and sexes in a department may be used as evidence of discrimination by members of other groups. Even a manager with a history of favoring members of one group may be found to have discriminatory motivations. Finally, the "same actor" inference remains part of employment law, particularly in the context of motions for summary judgment. However, it is unclear how this case, decided after a verdict, will affect courts' analysis.

The case is Harvey v. Sybase and the opinion is here.

Proposed SB 1583 Imposes Liability for Bad Independent Contractor Advice

Non-attorney HR consultants - heads up!

SB 1583, now pending in the legislature, would impose penalties on third parties who merely advise employers that a given worker can be classified as an independent contractor. The penalty applies only if the worker is later found to have been mis-classified. The penalty is $200 per day per contractor. Licensed attorneys are exempt from this bill (whew).

The proposed bill text is here. Be careful out there!

DGV

Newspaper Delivery Drivers Are Employees for Workers' Comp. Purposes

State Compensation Insurance Fund assessed Antelope Valley Press workers' compensation premiums for newspaper delivery workers. AVP classified these persons as independent contractors, not employees, and challenged SCIF's decision in court. The Court of Appeal affirmed the trial court's conclusion that the delivery workers were properly considered employees.

The Court of Appeal found “the evidence does not show that in making deliveries. . . the carriers are engaged in a distinct occupation or business of their own” and “delivering papers requires no particular skill.” Moreover, the same company had employees, whom they admitted were employees, performing the same duties as the purported contractors. In addition, applying the seminal case of S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341, found that nearly all the factors therein pointed to employee status. In particular, AVP controlled numerous aspects of how the deliverypersons handled their duties.

Three recent court of appeal opinions have found employee status with respect to delivery persons. The previous ones were JKH Enterprises v. Dept. of Industrial Relations and Estrada v. Federal Express. The current case is Antelope Valley Press v. Poizner and the opinion is here.

Thanks to Matt Norfleet of our San Francisco office for pointing out the decision.

Contractual Attorneys' Fees Provision Bites Employer

Profit Concepts Management, Inc. sued Greg Griffith, a former employee, for trade secrets violations in California Superior Court. Griffith moved to quash service on the basis of no personal jurisdiction. Profit Concepts did not oppose the motion and the trial court dismissed the case.

The confidentiality agreement that formed the basis for the lawsuit contained a provision awarding attorneys' fees to the prevailing party. Griffith, having secured dismissal, moved for attorneys' fees under the agreement. Profit Concepts opposed that motion.

The Court of Appeal decided Griffith was the "prevailing party" under Civil Code 1717, which authorizes recovery of contractual attorneys' fees as costs to a prevailing party "regardless" of whether the case proceeds to final judgment. Profit Concepts vainly argued that there was no determination of who prevailed under the contract itself. The court said that section 1717 did not require the prevailing party to win on the contract claim itself.

The case is Profit Concepts Management, Inc. v. Griffith. The opinion is here.

Happy Birthday Jennifer Shaw

OK, I know it's a little gross for me to post this. But I know Jennifer's clients and friends check in on the blog from time to time. Please give her a shout for her birthday! I know she'll be happy to hear from you.

DGV

Court of Appeal: No Individual Liability for Wages or UCL

The Wins Corporations were three garment manufacturers owned by the Wongs. After some business reverses, the businesses did not pay all wages due. The Labor Commissioner sought to hold the Wongs personally liable for the wages under a variety of theories. The trial court held they could not be personally liable. On appeal, the Labor Commissioner argued that managing agents like the Wongs may be held personally liable when the Labor Commissioner commences an action to recover wages under Labor Code section 1193.6. Relying on the Supreme Court's decision in Reynolds v. Bement, 36 Cal.4th 1075 (2003), the court of appeal held no personal liability for unpaid vacation, final pay, or associated penalties was available under the common law definition of "employer" applicable to these claims.
The court also rejected the Labor Commissioner's argument that the unfair competition law, Bus. Prof. Code section 17200 allowed for personal liability. The court reasoned that the remedy available under 17200 - restitution - could not apply to the Wongs. That's because they personally did not withhold the subject wages. As such, the could not be held liable for "restoring" those wages to the plaintiffs.
Of note, the Labor Commissioner did not dispute the superior court's conclusions that the Wongs were not "alter egos" and therefore waived the issue for appeal. (The superior court had determined the Wongs had respected corporate formalities and adequately capitalized the companies and, therefore, were not alter egos.) The Labor Commissioner also did not challenge the superior court's conclusion that the Wongs could not be held liable under a special statute applicable to the garment industry (section 2673.1) because she did not pursue that liability properly in the administrative forum. So, these theories remain potentially viable ways of holding corporate executives personally liable.

The case is Bradstreet v. Wong and the opinion is here.

CA Supreme Court Rules on California Family Rights Act Issues

So, Lonicki was an employee claiming major depression and work-related stress stopped coming to work and requested medical leave. In the employer’s view, the employee did not have a serious health condition and was capable of performing her duties. The employer ordered the employee to return to work, and fired her when she did not. The twist: While taking FMLA/CFRA leave, she worked for another employer. While her other job was not identical, there was a substantial overlap.
The Supreme Court considered two issues: First, could the employer just fire Lonicki without seeking additional medical certifications as provided by the CFRA statute? The court concluded (6-1) that employers need not do so. Justice Moreno, though, said that the employer must follow that procedure before denying leave based on an employer's belief that the employee is not eligible for leave.
The second issue is the one that got the headlines: If an employee seeks FMLA/CFRA leave for her own health condition, and she works another job, does she really have a serious health condition? Here, the Supreme Court split 4-3 that she MIGHT. The court decided that working another position is evidence that the employee's condition might not qualify for FMLA or CFRA. But the Court refused to hold that working in a comparable job was "conclusive" evidence no serious health condition justified leave. So, off to trial with Lonicki and her employer.

The case is Lonicki v. Sutter Health Central and the opinion is here.

Another Arbitration Agreement Invalidated

Metters worked for Ralphs Grocery. He believed he was a victim of discrimination and harassment and complained to human resources, and to the President of the company via a hotline.
Ralphs Grocery has a dispute resolution policy and an arbitration agreement that it includes with a request for dispute resolution. The language requiring arbitration, although on the second page of the form, is surrounded by a border box, is in white type on a black background, and emphasizes that arbitration is required. However, the arbitration agreement is contained in the request for dispute resolution, not in a separate document that is styled "arbitration agreement" or something similarly unambiguous.
The trial court and court of appeal agreed that the Ralphs forms did not establish an "agreement to arbitrate" because there was no contractual "meeting of the minds." Therefore, there was no need to decide whether the arbitration agreement was unconscionable, or whether the Federal Arbitration Act required arbitration. Without an agreement to arbitrate, the FAA does not apply.
The court of appeal found significant that Ralphs would have had a duty to investigate Metters' claims even if he did not submit the request for dispute resolution form. Yet, Ralphs apparently did not adequately explain Metters' options to him.
The case is Metters v. Ralphs Grocery. The opinion is here.

Ninth Circuit Holds Applicant Drug Testing Policy Violates Fourth Amendment

The City of Woodburn, Oregon, has an applicant drug testing policy. All prospective applicants must be screened for illegal drugs prior to hire.

As a government employer, Woodburn is bound to follow the U.S. Constitution. Drug testing is a "search" within the meaning of the Fourth Amendment. To avoid securing a warrant to conduct the search, the City must demonstrate a sufficient reason to conduct the drug testing without one.

Lanier applied for a job as a part-time worker in the city's library. She refused the drug test and was not hired. She claimed that requiring her to take a drug test as an applicant violated her rights. The Ninth Circuit agreed. The court held that the city's articulated reasons - general societal problems with drug abuse, protecting children in the library, and the adverse effect drug use has on work performance were sufficiently special. Not so, said the court of appeals. Rather, to conduct applicant drug testing, the City would have to demonstrate that these factors were specific problems in the City's workforce, and involving the particular job for which Lanier applied.

Unless the U.S. Supreme Court reverses this decision, many government drug testing programs for applicants will be invalid. The case also may have ripple effects for private employers. In California, for example, applicant drug testing by private employers is generally lawful. The courts have relied on constitutional jurisprudence in reaching that decision. So, stay tuned.
The case is Lanier v. City of Woodburn. The opinion is here.

Resident Employees Paid Only For Time Worked

Industrial and Welfare Commission Order No. 5-2001 contains a special provision applicable to employees who are required to reside on the premises. These employees are required to be paid only for the time spent actually working, rather than their entire time on the premises, even if they are "on call." The Isners were resident managers of a non-profit home for the elderly. They were required to live on the premises. When they were "on call," they had to remain within earshot of call alarms and respond to "emergencies." They sought compensation for all on-call time. But the Court of Appeal decided that their employer, Falkenberg, compensated them properly for only the time they actually spent working.
The case is Isner v. Falkenberg. The opinion is here.

Recent Shaw Valenza Articles Winter/Spring 2008

In case you missed them, here are some recent articles we've published on a variety of topics. None was an Oprah selection of the month.

NO INDIVIDUAL LIABILITY FOR RETALIATION UNDER THE FEHA
By Jennifer Brown Shaw and Shane Anderies
The Daily Recorder
12 March 2008

NEW PROPOSED REGULATIONS FOR THE FMLA
By Jennifer Brown Shaw
The Daily Recorder
26 February 2008

ONE TOKE OVER THE LINE
By D. Gregory Valenza
The Daily Journal
15 February 2008

EXPANSION OF FMLA LEAVE FOR FAMILIES OF SERVICE MEMBERS
By Jennifer Brown Shaw and Matthew J. Norfleet
The Daily Recorder
13 February 2008

LEDBETTER V. GOODYEAR: WHAT DOES IT STAND FOR AND WILL IT STAND?
By Carolyn G. Burnette and D. Gregory Valenza
Employment & Labor Relations Law - American Bar Association
1 February 2008

FREE SPEECH AND THE PRIVATE SECTOR WORKPLACE
By Jennifer Brown Shaw and Becki D. Graham
The Daily Recorder
30 January 2008

SHOULD PAY CARDS BE TREATED THE SAME AS PAYCHECKS?
By D. Gregory Valenza
The Daily Journal
18 January 2008

EMPLOYEE TERMINATIONS: STEPS TO REDUCE LIABILITY
By Jennifer Brown Shaw
The Daily Recorder
15 January 2008

PREVENTING UNION ACTIVITIES VIA COMPANY EMAIL GETS EASIER
By Jennifer Brown Shaw
The Daily Recorder
2 January 2008

UPDATED EMPLOYEE POLICIES FOR 2008
By Jennifer Brown Shaw
The Daily Recorder
18 December 2007

DISABILITY AS A JUSTIFICATION FOR EMPLOYEES' MISCONDUCT?
By D. Gregory Valenza
The Daily Journal
7 December 2007

Cease and Desist Letter Gets SLAPP Protection

Here's the way the court put it:

An employer fired one of its employees amid allegations that the employee had misappropriated customer lists and solicited his employer’s customers to start a
competing business. Several months before litigation was commenced by the employer against its former employee, the employer’s attorney drafted a letter to the employer’s customers that accused the employee of breach of contract and
misappropriation of trade secrets, and that “suggest[ed]” to the customers that, to avoid potential involvement in any ensuing litigation “as a material witness, or otherwise,” the customers should not do business with the former employee. The employee commenced a defamation action against the former employer. We hold that, in the circumstances of this case, the lawyer’s letter to the customers was a “writing made in connection with an issue under consideration or review by a . . . judicial body” (§ 425.16, subd. (e)(2)) and therefore covered by the anti-SLAPP statute because the letter directly related to the employer’s claims against the employee, and the employer was seriously and in good faith contemplating litigation against the employee.

Of note, the court also ruled that it made no difference that the lawyer sent the letter to its customers rather than just the former employee. The court also said that the litigation privilege was irrelevant to whether the communication satisfied the requirements of the anti-SLAPP statute. However, the litigation privilege would be relevant to the second prong of anti-SLAPP analysis - the plaintiff's chance of success on the merits.

This case is good news for practitioners who send out "cease and desist" letters to former employees accused of violating restrictive covenants. It's also good news for employers, as they could have found it harder to find lawyers to send out such letters if the former employee could freely sue for defamation.

The case is Neville v. Chudacoff. The opinion is here.

California Court of Appeal Upholds Rare Attorneys Fees Award Against Plaintiff

Daniel Villanueva sued the City of Colton for discrimination under the Fair Employment and Housing Act. The trial court sustained nearly all of the City's objections to his evidence, leaving him with virtually no opposition to the City's motion for summary judgment. He lost. Then the trial court awarded the City $39,000 in attorneys fees for pursuing a frivolous case. The Court of Appeal held that the City properly won summary judgment, that the unchallenged evidentiary objections precluded the court's consideration of excluded evidence, and that on the merits there was nothing to the case. The court then held that 1) the trial court must consider the employee's ability to pay an attorneys' fees award and 2) the plaintiff put on no evidence of inability to pay. So, the trial court's award of fees was upheld, as the case was frivolous.

The case is Villanueva v. City of Colton. Opinion is here.

Court of Appeal: $44 recovery; $500 in fees

The Second District Court of Appeal reversed a trial court's refusal to grant attorneys' fees in a wage and hour case. The amount in controversy was: $44.63. The plaintiff, Harrington, unsuccessfully tried to bring a class action. His individual claim was for one day of unpaid overtime. Because of penalties, etc., the case settled for $10,500, plus "reasonable attorneys fees." The trial court said that the $10,500 was enough to pay the attorneys.
The Court of Appeal held that the trial court was required to award "reasonable" attorneys' fees to Harrington as the prevailing party. The court then said there was "no way on earth" that Harrington's attorneys were entitled to the $46,000 in fees they claimed. Instead, the court fixed a reasonable amount at ... $500. That's enough for a nice lunch for the whole office, guys. Celebrate the win!

Harrington v. Payroll Entertainment Services, Inc.

California Supreme Court: No Individual Liability for Retaliation Under FEHA

Years ago, lower courts held that individual managers may be held liable for "retaliation," i.e, taking negative action against an employee for his or her engaging in protected activity. At the same time, the courts decided individual managers could not be held liable for "discrimination," i.e., taking adverse action based on an employee's membership in protected groups. Back in 1998, the California Supreme Court ruled in Reno v. Baird that supervisors could not be held liable for discriminatory decisions amounting to "personnel actions."

The difference in the courts' treatment of these two types of actions apparently was based on differences in language between the statute barring "discrimination" and the section prohibiting "retaliation." However, a primary policy underlying Reno - permitting managers to manage without fear of personal liability - was inconsistent with holding managers personally liable for retaliation. That is, a manager's "retaliatory" decision is based on an unlawful motivation, just as a "discriminatory" decision.

The California Supreme Court finally reviewed the issue of individual liability for managers based on allegations of retaliation in violation of FEHA. In Jones v. Lodge at Torrey Pines, the Court decided that Reno's rationale controlled the question and that individuals could not be held personally liable. The opinion is here.

The Legislature has never overturned Reno. When the Supreme Court held in Carrisales v. Dept. of Corrections that individual non-supervisors could not be held personally liable for harassment, the Legislature moved quickly and specifically passed a law imposing such liability.

Perhaps the Legislature will seek to do so again. However, as the Court pointed out, a manager facing personal liability for normal personnel actions (demotion, termination, failure to promote, compensation, discipline, etc.) will face a conflict of interest every time he or she faces the issue of whether to take adverse action against an employee. With harassment, on the other hand, a manager may avoid liability simply by refraining from engaging in conduct that may amount to "harassment." Hopefully, the Legislature will consider that issue carefully before seeking to overturn Reno or Jones.

U.S. Supreme Court: A Charge by Any Other Name... Is Still a Charge

The U.S. Supreme Court decided 7-2 that an EEOC Intake Questionnaire was a valid substitute for the official "Charge" of Discrimination. Justice Kennedy, writing for the Court, reasoned that the Intake Questionnaire, coupled with an attached affidavit, contained all the information required of a Charge by regulation. The attached affidavit also contained a request for the EEOC to act. That was enough in the case at bar. However, the EEOC need not deem every Intake Questionnaire to be a Charge.

The employer, Federal Express, did not receive notice of the Charge, nor was it given the opportunity for conciliation, all of which appear to be contemplated by the Age Discrimination in Employment Act. The majority recognized that problem, suggesting the district court can stay the civil action pending the conciliation process.

The majority also suggested that the result might be different under Title VII. The procedural rules and laws differ slightly under the ADEA, which permits lawsuits after agency inaction for more than 60 days. The EEOC also may commence litigation under the ADEA without a charge, so long as it first attempts to conciliate.

Justice Thomas, joined by Justice Scalia, dissented.

This case will create problems for employers seeking to invoke the statute of limitations in federal discrimination actions. Additionally, as Justice Thomas pointed out in the dissent, becaause not every Intake Questinonaire will qualify as a Charge, there most likely will be litigation over this issue, driving up litigation costs and delays. It remains to be seen whether the EEOC accepts the Court's suggestion to clarify its rules on filing Charges.

The case is Federal Express Corporation v. Holowecki, and the opinion is here.

U.S. Supreme Court Punts on "Me Too" Evidence in Discrimination Cases

Mendelsohn sued Sprint for age discrimination. At trial, she attempted to admit evidence that other Sprint employees were subjected to age discrimination, even though by different supervisors at different times, and otherwise unrelated to the discrimination she experienced. This is known as "me too" evidence. The district court held the evidence was irrelevant and inadmissible. The Tenth Circuit Court of Appeals reversed, believing the district court adopted a "per se" rule excluding "me too" evidence based on Tenth Circuit precedent.
The U.S. Supreme Court, in a unanimous ruling, reversed the Tenth Circuit. However, the Court did not analyze the extent to which "me too" evidence is admissible. Rather, this case was decided as a matter of civil procedure / evidence law. On the merits, the court said that "me too" evidence is neither per se admissible or inadmissible, and the decision to admit it is within the trial court's discretion based on factors normally applicable to the relevance analysis. No guidance on this issue at all.
The case is Sprint / United Mgmt. Co. v. Mendelsohn. The opinion is here.

U.S. Supreme Court: ERISA Actions Against Fiduciaries

There is nothing like an ERISA case to stimulate debate and discussion at the water coolers of all employment lawyers' firms. OK, I'm kidding. I think. But from what I'm reading, this is an important ERISA case that may result in more claims.

The Supreme Court decided that individual members of a defined contribution plan may sue plan fiduciaries for misconduct that depletes the value of the individual account within the plan. The case is Larue v. DeWolff et al. and the opinion is here.

U.S. Supremes: Arbitrate Claims Under Labor Commissioner's Jurisdiction

The California Labor Commissioner has primary jurisdiction over disputes under California's Talent Agencies Act. (Lab. Code section 1700 et seq.). But some television star named "Judge Alex" (not the Chief Judge of the Ninth Circuit) Ferrer, and his entertainment lawyer, Preston, agreed in their contract to arbitrate any disputes between them. When Preston attempted to collect fees he alleged were due him, the Labor Commissioner took the claim and refused to stay it pending arbitration.

Judge Alex sought an order compelling arbitration, which was denied. The California Court of Appeal held that Federal Arbitration Act did not trump the Labor Commissioner's jurisdiction, because the FAA does not apply to administrative agency jurisdiction.

The U.S. Supreme Court disagreed, and held that an arbitrator gets to decide whether Preston's agreement with Ferrer was enforceable under the Talent Agencies Act. In so holding, the Court clarified that when a party challenges an entire contract is unenforceable, not just the arbitration clause, the arbitrator decides that issue, even if the alternative forum is an administrative agency under state law.

The case is Preston v. Ferrer. The opinion is here.

NLRA Preempts California Wrongful Termination Claim

Richard Luke was suspended for alleged dishonesty regarding his whereabouts. He then sent an email to his employer's parent's management entitled "trouble brewing." He was promptly fired the next day for circulating an anti-management petition and for ignoring the "chain of command." He testified at his deposition that he and other employees discussed working conditions such as being passed over for promotion, and physical conditions at the wine-label manufacturing plant at which he worked. He thought that was why he was fired. He said discharging him for that reason violated the public policy expressed in Labor Code section 232.5 (no adverse action against employee who "discloses" working conditions.).
In Luke v. Collotype Labels USA, Inc., opinion here, the court of appeal found that section 232.5 is preempted by the National Labor Relations Act. Essentially, Luke's working with other employees to complain about promotions and plant conditions was a "concerted activity" that were "arguably" protected by the NLRA. As such they fall within the "Garmon" preemption doctrine.
Although the court in Luke did not even cite the court of appeal's decision in Grant-Burton v. Covenant Care, 99 Cal.App.4th 1361 (2002), opinion here, this decision contradicts Covenant Care's holding that a common law wrongful termination claim based on section 232 (prohibiting discharge for discussing wages) was viable. The court in Covenant Care addressed the NLRA, but noted the parties had not raised Garmon preemption on appeal, and left that issue for remand. (That sound you hear is me, smacking my forehead really hard.) With all due respect to the court of appeal in Covenant Care, that case was incorrectly decided, as shown by the decision at blog.

U.S. DOL Proposes Revised FMLA Regulations

The U.S. DOL has been hard at work considering revisions to the FMLA regulations. We posted about the initial report here. Lots of time has passed, and the present administration is coming to a conclusion. So, I'm sure employers were wondering if there would indeed be new regulations as much as we were.

Wait no longer! There will be new proposed regulations published in the Federal Register on February 11. Here they are, all 470ish pages of discussion, analysis and proposed regulations. There also are proposed regulations regarding the new FMLA amendments regarding servicemembers.

We will publish an article on the draft regulations in the coming weeks. Until then, get your reading glasses, you're on your own. Thank you Ross Runkel and your Employment Law Memo!

DGV

Court of Appeal Holds IT Employee Is... Exempt

A network administrator's job is described as follows in the opinion -

Combs served first as manager of capacity planning, and then as director of network operations. He voluntarily resigned in November 2004. Combs's resumé, which he prepared after he left Skyriver, indicated that as Skyriver's director of network operations, he was responsible for (among other things) "project management, budgeting, vendor management, purchasing, forecasting, [and] employee management"; management of "overseas deployment of wireless data network"; management of "the integration and standardization of three networks into the Skyriver architecture"; and the overseeing of "day to day Network Operations." At trial, Combs acknowledged his resumé was accurate. He testified that his "core" responsibility at Skyriver was "maintaining the well-being of the network," and he spent 60 percent to 70 percent of his time carrying out that responsibility. Combs called a number of witnesses who also confirmed that Combs's resumé was accurate. Specifically, Scott Akrie, who as Skyriver's chief technical officer supervised Combs from 2001 to about mid-2003, and Edward West, Skyriver's former vice president of operations, who supervised Combs from late 2003 until Combs left Skyriver, both testified that Combs's description of his duties in his resumé was accurate, as did Michael Williams, Skyriver's director of field operations. Combs's own testimony and the documentary exhibits (including Combs's resumé and some of his e-mails) showed that he was responsible for maintaining, developing and improving Skyriver's network, and his duties involved high-level problem solving and "troubleshooting"; preparing reports for Skyriver's board of directors; capacity and expansion planning;
planning to integrate acquired networks into Skyriver's network; lease negotiations; and equipment sourcing and purchasing.

The Court of Appeal decided the employee was exempt under the administrative test. Of note, the Court decided that the trial court was not required to analyze the case under the "administrative/production" dichotomy that has become important in recent cases. Acknowledging the importance of federal FLSA regulations in the analysis of the exempt duties under California law, the court had no trouble upholding the trial court's determination that Combs spent over 50% of his time on exempt, administrative duties, and that he had the
requisite discretion and independent judgment.

The case is Combs v. Skyriver Communications and the opinion is here.

California Supreme Court Takes Up "Stray Remarks"

In a discrimination case, the plaintiff may attempt to introduce allegedly biased comments by a person unrelated to the negative decision that is the subject of the lawsuit. A number of courts, including in California, have characterized these as 'stray remarks' that have no bearing on the plaintiff's case, and which do not defeat motions for summary judgment.

In last year's decision in Reid v. Google (opinion here), the Court of Appeal expressed disdain for the "stray remarks" doctrine, saying the trial court should have let a jury decide their importance. The California Supreme Court accepted review and will consider whether such evidence defeats a motion for summary judgment.

The Cal. Supreme Court appeared to leave untouched a number of other issues the Court of Appeal addressed, such as whether the "shifting burdens" analysis is mandatory, the use of statistics in individual discrimination cases, and other bedrock employment law issues.

The Supreme Court also will resolve once and for all - must the trial court specifically rule on objections to evidence submitted in support or opposition to a summary judgment motion? The Reid court decided trial courts need not do so, contrary to a recent spate of appellate decisions holding that they must.

Oh, and I, for one, welcome our new Google overlords. They do host this blog after all.

FMLA Amendments Signed - Leave for Relatives of Military

Congress passed FMLA amendments expanding FMLA protection leave taken under certain circumstances by relatives of soldiers. We covered the amendments here. The president initially vetoed the law in which the FMLA amendments were contained. Now he has signed them. They are included within HR 4986, as section 585. (It's a big bill, concerning a number of issues related to defense; so, please scroll to that section). We will be writing an article regarding compliance with this new law over the next couple of weeks.

Greg

Court of Appeal: Stock Options OK Form of Payment

The Court of Appeal upheld a stock option plan against a claim that it worked illegal forfeitures under the California Labor Code. The Court held that Citigroup's stock option plan was valid because, in a "two-step" transaction, it gave employees cash with the right to buy options at a heavily discounted price. The catch was they forfeited it if they did not remain employed.
The Court held this plan, as drafted, was not an illegal forfeiture.

The Court also noted even if the options were granted directly, the forfeiture would be valid because it was express and clear.
Of significance to wage and hour wonks, like me, the court also addressed whether payment in stock options was a violation of the Labor Code's requirement of the form of payment. I once posited that issue to a DLSE official and received a chilling answer. But no. The court said Section 212 does not apply when payment is made in stock options. That should give everyone a sigh of relief. ::Sigh::: The case is Schachter v. Citigroup and the opinion is here.

Ninth Circuit: Cab Operators Were Employees, Not Independent Contractors

When a union organizes an employer's workers, the National Labor Relations Act governs the union election. Independent contractors cannot be organized because they are not considered "employees." When an employer claims that workers are independent contractors as a defense to union organizing, the NLRB (and a reviewing court) will apply federal law. In NLRB v. Friendly Cab Co., opinion here, the Ninth Circuit held that Friendly's cab drivers were employees, not independent contractors, and therefore were properly organized by the union. The opinion thoroughly discusses the criteria federal courts apply to independent contractor analysis in the labor law context.

February 1 Is OSHA Log Day!

February 1 is when all good employers' thoughts turn to their OSHA 300 logs.
Here is a helpful reminder from our friends at the California Chamber of Commerce.

Greg

California Supreme Court: No Accommodation for Medical Marijuana

The California Supreme Court decided today that there is no duty under the Fair Employment and Housing Act to "reasonably accommodate" medical marijuana use as treatment for a "disability." The Court also held the plaintiff could not state a claim for wrongful termination in violation of public policy based on California's Compassionate Use Act, aka Prop. 215. The Legislature may pass a law amending FEHA to require accommodation of medical marijuana use, assuming the Governor would sign such a bill. Or, another initiative may be presented to the voters. Until then, though, employers may deny employment based on positive drug tests for marijuana, medical or otherwise. The case is Ross v. RagingWire Telecomm., Inc. The opinion is here.

I admit this is an especially nice post to write, considering I principally authored the employer's briefs at the Court of Appeal and in the Supreme Court. Shameless plug, I know, but this has been a long time coming! And a thank you to my former colleagues Marlena (Ct.App.) and Tim (S.Ct.) for their hard work on the briefs, and to my former partner, Rob, for arguing at the Supreme Court.

Greg

No Workers' Compensation Benefits for Mean Employee

So Verga is a United Airlines employee. She is tough on her co-workers. They resent it and are mean to her. Verga files a workers' compensation claim for "stress" caused by the co-workers' "disdain." The Court of Appeal, agreeing with the Workers' Compensation Appeals Board, held: "No benefits for you!"

Here is the gist of it:

The Workers’ Compensation Appeals Board (the WCAB) concluded that Rosemary
Verga was not entitled to compensation for psychiatric injury while employed by United Airlines. According to Verga, her psychiatric injury was the result of harassment and persecution by her supervisor and co-workers. However, the WCAB found “the true fact remains that [Verga] was not actually subject to harassment or persecution, she instead brought upon herself the disdain of her co-workers” because Verga was “a difficult person to get along with”; she was impolite, unpleasant, and co-workers “never knew when [she] might get upset.” The WCAB held: “That disdain is not an actual event of employment” within the meaning of the statute. [par.] We issued a writ of review and shall now affirm the WCAB order.

The case is Verga v. WCAB and the opinion is here.

More Discrimination Charges May Be Filed?

The California Department of Fair Employment and Housing has implemented a new, online system for beginning the process of filing discrimination charges. Read the press release here. The online system actually is a way to set up an appointment for intake. Previously, employees had to scheduled those appointments over the telephone during the day. When they're at work. And when the DFEH representative is available to answer the telephone. The new system does not automate the actual charge-filing process. So, employees who were discouraged from making an appointment during the workday will now be able to do so when they're surfing the internet. That will lead to more appointments scheduled. But the intake process will then continue in the old-fashioned way. So, it's unclear how many new charges will actually be filed as a result of the new system.

Have a nice weekend.

DGV

Directors Not "Employees" under Federal Law

The Board of Directors of a non-profit did not count as "employees" under the federal ADEA or ADA. Media Center provides public access programming in Nevada. One of its employees sued under ADEA and ADA for age and disability discrimination. The district court dismissed the case because Media Center did not have sufficient "employees" when one disregarded the directors as well as certain volunteer "producers."

As the court pointed out, whether the directors count as "employees"

is governed by the United States Supreme Court’s analysis in Clackamas
Gastroenterology Associates, P.C. v. Wells, 538 U.S. 440 (2003). In Clackamas, the Court addressed whether physicians that were also directors and shareholders of a clinic were employees for purposes of the ADA. The Court noted that Congress had intended the word “employee” to describe “the conventional master-servant relationship as understood by common-law agency doctrine.” Id. at 445 (internal quotation marks and citation omitted). The Court then described six factors relevant to determining whether a director is an employee:

• Whether the organization can hire or fire the individual or set the rules and regulations of the individual’s work
• Whether and, if so, to what extent the organization supervises the individual’s work
• Whether the individual reports to someone higher in the organization
• Whether and, if so, to what extent the individual is able to influence the rganization
• Whether the parties intended that the individual be an employee, as expressed in written agreements or contracts
• Whether the individual shares in the profits, losses, and liabilities of the organization.

Applying this test, the Court held directors are not "employees." The case is Fichman v. Media Center and the opinion is here.

DGV

Ninth Circuit STAYS Injunction, Allowing SF Health Care Ordinance to Go Forward

Stay with me here.....

In late-December, the U.S. District Court enjoined San Francisco's Health Care Security Ordinance. That meant that it could not go into effect. Here is our post on the injunction.

The City appealed. Typically, the injunction remains in effect until the appeal is over.

But the City decided to ask the 9th Circuit Court of Appeals to stay the injunction pending resolution of the appeal. That is, the City wants to implement its law that the district court says is illegal.

No way, right? I mean if the stay issues, then the law goes into effect. That's not fair. If the law is later found preempted by the court of appeals, who is going to pay back all those employers who were subjected to an illegal law? (No one.) So, of course, the Ninth Circuit would not engage in an exercise of raw power and basically pre-decide an appeal to facilitate San Francisco's universal health care law, right?

Wrong. The Ninth Circuit just granted the stay based on an expedited motion and an argument on January 3. In granting the stay, the Court basically decided that the city is going to win on appeal. The panel could not have been much stronger in its language. Here is the opinion.

Here's a question the court did not tackle: What's the point of having an full appeal procedure when the court is willing to say, based on an appeal that took less than a week to file, argue, and decide, that there is a "strong likelihood" of reversal? Not much. So, if you ever want to see how well your appeal is going to fare before the Ninth Circuit, apply for a stay!

It seems that if the Golden Gate Restaurant Association intends on winning, it will have to convince the en banc court to decide this case, or the U.S. Supreme Court. In the meantime, the SF Health Care Security Ordinance is going to go into effect. That means we have to read and digest what it requires... which I will do in the future.

DGV

FMLA Amendments Vetoed

Proposed amendments to the FMLA, discussed here, intended to expand the law to cover leave to care for members of the military, are on hold. The President vetoed the proposed legislation, which included a bundle of unrelated measures. The FMLA amendments may pass as part of a new bill. Stay tuned.

Bates v. UPS Redux

We originally posted about the Ninth Circuit's panel decision in Bates v. UPS here. It's back. The court decided to reconsider the case with a 15 judge "en banc" panel. The court overhauled the panel's opinion and overruled some prior precedent as well.
At issue was a hearing test UPS required for drivers of certain trucks. The trucks were below the weight that would have required federal DOT hearing tests. UPS decided to use the federal testing standards for the lower weight trucks. The hearing tests of course screened out those with hearing impairments. A class action of hearing impaired applicants sued under the ADA.
Sitting en banc, the court decided the following:
- When an employer expressly takes a "disability" into account in making an employment decision (here, disqualifying the hearing impaired who failed the test), then no "burden shifting" case analysis is necessary.
- Even in such a case, the plaintiff must establish a prima facie case (that s/he has a disability, an adverse action, and causation), and that s/he is a "qualified" individual.
- To show "qualified," the plaintiff must establish (1) s/he satisfies the minimal prerequisites for the job and (2) that s/he can perform the essential job functions with or without reasonable accommodation.
- Essential job functions are duties. The employer has the burden of production to establish the essential job functions.
- There is a difference between duties and qualification standards, which include physical and mental requirements. The parties agreed that the ability to communicate effectively and drive safely were essential job functions. Hearing, on the other hand, is a qualification standard. It may be useful or necessary to perform the essential functions, but hearing in and of itself is not an essential duty.
- The employees must meet the burden of establishing "safe driving" as an essential job function before the employer is required to show that its qualification standard - satisfactory hearing - is job-related and consistent with business necessity.
- "To successfully assert the business necessity defense to an allegedly discriminatory
application of a qualification standard, test or selection criteria, an employer bears the burden of showing that the qualification standard is (1) 'job-related,' (2) 'consistent with business necessity,' and (3) that 'performance cannot be accomplished by reasonable accommodation.' The court overruled prior case authority suggesting the employer had to establish undue hardship or a "BFOQ" as part of the business necessity defense."
- "To show 'job-relatedness,' an employer must demonstrate that the qualification standard fairly and accurately measures the individual’s actual ability to perform the essential functions
of the job."
-"To show that the disputed qualification standard is 'consistent with business necessity,' the employer must show that it 'substantially promote[s]' the business’s needs. This is a high burden, the court noted.
- "Finally, to show that 'performance cannot be accomplished by reasonable accommodation,' the employer must demonstrate either that no reasonable accommodation currently
available would cure the performance deficiency or that such reasonable accommodation poses an 'undue hardship' on the employer."
- "[T]he employer is entitled to use a method of selecting drivers that will retain the overall safety record of its driver pool. Any suggestion in the district court’s opinion that hearing-impaired drivers may be held to a lower safety standard than hearing drivers is disapproved."
- "UPS is entitled to use as some evidence of its business necessity defense the fact that it relied on a government safety standard, even where the standard is not applicable to the category of conduct at issue."

This obviously is a significant ruling for employers to consider when setting job qualification standards that focus on physical or mental abilities. We will write a more detailed article in the weeks to come.

DGV

NLRB: Employees Have No Right to Email About Unions

Not news: Employees use email for personal reasons. News: Employees have no special right to use email for union activities. Employees and their advocates argued to the National Labor Relations Board that employers' property rights should yield to employees' right to communicate under section 7 of the National Labor Relations Act. In a case of first impression, the NLRB said "no" in The Guard Publishing Company, opinion here. So, Employers have the right to ban employees from using their email system for personal reasons.
But if employees email each other about sports, gossip, etc., can the employer selectively ban union talk? Not necessarily. Employers that single out section 7 rights for discriminatory treatment commit an unfair labor practice under section 8(a)(3) of the NLRA. The Board had an answer for that issue as well. In the opinion, the Board re-defined what constitutes "discrimination" in the context of employer policies. The employer may lawfully ban communications about non-work-related activities, so long as the employer's distinctions are not "along section 7 lines." Example: the employer may allow solicitations by charitable organizations, but ban all other solicitations (including by unions).
The decision was 3-2 over a strong dissent, the Board is about to turn over some members, and I hear there's an election coming up next year. So, the degree to which employers may rely on this decision for the long term is unclear. For now, however, employers have more latitude regarding their policies regarding the use of employer property, and their solicitation and distribution policies.

DGV

ERISA Preempts San Francisco Health Care Ordinance

The Golden Gate Restaurant Association took on San Francisco's attempt at universal health care - the Health Care Security Ordinance - and won. It turns out you CAN fight City Hall, particularly when City Hall decides to pass legislation that is clearly preempted by ERISA.

The San Francisco Health Care Security Ordinance was set to take effect January 1, 2008, and would have phased in based on employer size. Basically, employers had to spend a certain amount of money on health care or contribute to a San Francisco fund (read: another tax). But, unless the Ninth Circuit stays the district court's decision and allows the statute to take effect [which would be an insanely burdensome and expensive error if the law ultimately is deemed preempted] the SF ordinance is not going to take effect. Btw, the City is asking the Ninth Circuit to stay the district judge's order.

The district judge's opinion is here. (H/T Workplace Prof's blog for the link to the opinion).
You can learn about the ordinance and the ERISA preemption issues there. Here's the holding:

The Ordinance’s health care expenditure requirements are preempted because they have an impermissible connection with employee welfare benefit plans. By mandating employee health benefit structures and administration, those requirements interfere with preserving employer autonomy over whether and how
to provide employee health coverage, and ensuring uniform national regulation of such coverage. The Ordinance’s provisions also make unlawful reference to benefit plans because they refer to, are designed to act immediately upon, and
cannot operate successfully without the existence of employee welfare benefit plans.

:::temporary editorial breach of the fourth wall - "Speaking of tips: to my friends at that firm with initials that start with C. -- maybe for the New Year you can adopt the "hat tip" as your very own technique for acknowledging those of us who actually do the work!" ::::: [End the editorial narrowcast attack on lazy competitor].

Happy New Year everyone, even the folks at the C. firm!

Greg

California Court of Appeal Enforces Employment at Will

After the California Supreme Court's 2006 decision in Dore v. Arnold Worldwide, discussed here, it is hard to dispute a provision that provides for termination at will, even if the term "at will" is not expressly used.

The Court of Appeal in Bernard v. State Farm, opinion here, held this language provided for employment at will:

“III A. You or State Farm have the right to terminate this Agreement by written notice delivered to the other or mailed to the other’s last known address.
“III B. In the event we terminate this Agreement, you are entitled upon request to a review in accordance with the termination review procedures approved by the Board of Directors of the Companies, as amended from time to time.”

The court rejected the plaintiff's argument the agreement was "ambiguous," thereby allowing the admission of "parol" evidence to explain the contractual term. The court also rejected the notion that the review of termination provision limited State Farm's power to terminate the contract.

In an unpublished portion of the decision, the court rejected the argument that the employer's alleged misrepresentations about the circumstances that led to termination could give rise to a fraud claim. Hunter v. Up-Right remains good law on this point.

No wonder I don't see many implied contract claims anymore.

Greg

California Court of Appeal Upholds 30X Attorneys' Fees Award

So, you litigate a discrimination case and you win. The jury's verdict is about $30,000, which probably is considered a low verdict by your client and you. Silver lining - attorneys fees are available. What are the plaintiffs' attorneys' fees awarded in this case? (Insert Dr. Evil impression here:) About one million dollars. (Pause for dramatic effect with the whole pinky under the chin thing). In fairness, the case was litigated for years and a jury did find intentional discrimination in promotional opportunities at the airport.

The Court of Appeal affirmed nearly all the award, holding it was within the trial court's discretion to award the substantial fees based on a "lodestar" formula (the number of hours expended times a reasonable rate). The court rejected the employer's several arguments that fees should be a multiple of three times recovery, allocated in proportion to the time spent on successful claims, etc. The case is Harman v. City and County of San Francisco, opinion here.

The defense's claim that the recovery should limit the fees is supported by case law. But the trial court has discretion to make such adjustments and apparently did not abuse its discretion here. Unfortunately, the employer's settlement offer was close to the recovery. But there is no mention of a statutory offer to compromise, which could have resulted in a lower fee award. Here's a link to my article on the use of offers to compromise under Code of Civil Procedure section 998. Article.

Greg

Court of Appeal Upholds Denial of Meal/Rest Class Action

The Court of Appeal gave a mixed bag of coal and presents to H.F. Cox, Inc. The court held that class certification should have been granted on an overtime claim and on whether a vacation policy violated California law. However, the court upheld the trial court's decision to deny certification on a meal and rest break claim.
The opinion is interesting because the overtime claim appears to involve a lot of individual issues regarding whether each truck driver was exempt under federal or state exemptions for truckers. But the court found no substantial evidence of individual issues.
The vacation claim is interesting because the plaintiffs should not win on the merits, because the trucking company's policy of paying a flat sum of vacation pay (rather than basing it on the plaintiffs' actual pay, is probably quite legal. So, class certification may be a hollow victory, since the defendant can bring a motion for summary judgment.
The meal period claim should warm the hearts of defense attorneys. The court had no trouble finding there substantial evidence of individual issues regarding whether and to what extent employees took meal breaks. There was no argument over whether they must be affirmatively "provided" or forced.
There was also a claim for off-the-clock work, for which certification was denied. Again, the court of appeal found substantial evidence that individual issues predominate.

The opinion, Bell v. Superior Court, is here.

Congress Amends FMLA to Cover Leave for Relatives on Active Duty in the Military

Congress has amended the FMLA. The bill is here. The President has not signed the bill yet, but is expected to do so soon.
The new provision permits (1) up to 26 weeks of leave in a one-time 12-month period to care for a service member with a "serious illness" who is injured in the line of active duty and (2) up to 12 weeks of leave in any 12-month period for a "qualifying exigency" related to a service member's call to active duty.
The Department of Labor will define "qualifying exigency."
The 26-week leave is a one-time leave. The "qualifying exigency" leave is available like FMLA - 12 weeks per 12 month period.
The reinstatement rights, benefit protections, etc. will be the same as under the current FMLA. This is all new, so stay tuned. Expect to revise your FMLA policies and replace your posters.

Greg

San Francisco Minimum Wage Going Up

The SF minimum wage increases to $9.36 per hour effective 1/1/08. Please replace your posters, too. Information on the new minimum wage and the poster available here.

Happy holidays!

Greg

EEOC Issues New Guidance on Employment Testing

The Equal Employment Opportunity Commission has issued new "enforcement guidance" on "Employment Tests and Selection Procedures," link here.

The Guidance does not contain a lot of analysis. However, it is interesting for a couple of reasons:

- the EEOC considers background checks - such as criminal and credit checks - to be "tests," analyzed under disparate impact and treatment theories. This could have wide-ranging implications. It may be that applicants challenge such tests under an "adverse impact" theory. If adverse impact is shown, the employer will have to prove the tests are "job-related and consistent with business necessity." That means that background/credit/criminal checks for all employees could be challenged.

- the EEOC also identifies "performance appraisals" under the same rubric.

Otherwise, the Guidance briefly discusses anti-discrimination laws and how employment selection procedures may violate them. It also summarizes some EEOC litigation.

H/T to Storm.

Greg

Arbitration Policy Not Enforceable as Agreement

If you have a handbook policy referring to a separate arbitration agreement, a court will expect to see a separate arbitration agreement if the employer tries to enforce it. So, if an employee does not sign the separate agreement contemplated by the policy, the employer should not expect the court to consider the short policy as evidence of an agreement to arbitrate. That's what the court of appeal said in Mitri v. Arnel Management Co, here.
This case is NOT saying that an arbitration agreement cannot be contained within a handbook. Rather, this case says that if the employer says there is a separate agreement in its handbook, the employer should ensure that the separate agreement is signed.

DGV

California Court: USERRA Claims Cannot Be Released

General releases are ineffective to release a growing list of statutory claims. Claims under the FLSA, FMLA, and claims for unpaid wages under California law are just some of the claims that may not be included in a release. The California Supreme Court is going to decide whether claims for unpaid expenses under Lab. Code section 2802 may be released, as was held in Edwards v. Arthur Andersen, discussed here.

So, add another statute to the list of un-releseable laws: USERRA. The Court of Appeal decided in Perez v. Uline, Inc. that a general release was ineffective against a later claim for wrongful termination in violation of public policy and breach of contract. USERRA contains language invalidating such waviers:

This chapter supersedes any State law . . . contract, agreement, . . . or other matter that reduces, limits, or eliminates in any manner any right or benefit provided by this chapter . . . .

Applying this section, the Court held that a release of USERRA claims was invalid. The common law Tameny and contract claims, however, are not USERRA claims. But the Court of Appeal did not make that distinction.

An alternative practice may be to have the employee agree (if true) that he or she has received all wages and leave to which he or she is entitled.

USERRA claims will be more prevalent as more soldiers return to work from duty in Iraq and Afghanistan. Employers should be aware of their obligations under this law. A release apparently is not an option.

As a final note, the case is interesting, too, because it reminds practitioners that waivers of Civ. Code section 1542 are not required in a release for it to be enforceable:

Plaintiff testified he understood he was releasingclaims arising under all statutes the agreement referred to, even those he did notunderstand. This knowledge is sufficient to withstand the provisions of Civil Codesection 1542. Nothing in that statute requires that it be designated in the release or that aparty specifically waive its provisions. While it might have been more comprehensive to have a reference to Civil Code section 1542 in the release, “‘To be effective, a releaseneed not achieve perfection . . . .’ [Citation.]”

This is not exactly news, but it may be new to you. For the record, we always recommend inclusion of the waiver to avoid disputes over the enforceability of a general release.

Greg

California Supreme Court to Consider Administrative Exemption

The California Supreme Court accepted review in Harris v. Superior court (discussed here). The Court may be doing this to clarify the extent to which California will follow federal guidance regarding exemptions from overtime. In the Harris case, the court took a narrow view of the "administrative" exemption, and expounded on who is a "production" employee (not entitled to the exemption). Stay tuned to this space (for a couple of years) and we'll find out.

IRS Standard Mileage Rate for 2008

The IRS announced the 2008 standard mileage rate: $0.505 per mile, which is $0.02 more than in 2007. The IRS is really feeling the pinch at the gas pump, eh? The IRS press release is here.

The California DLSE's enforcement position is that employers may reimburse employees' business use at the IRS standard mileage rate without running afoul of Labor Code section 2802. Remember, though, that the California Supreme Court in the Gattuso decision (discussed here) did not endorse the IRS standard mileage rate as conclusively adequate under section 2802. Therefore, if an employee wishes to track "actual" costs and seek a different reimbursement rate, that request at least must be evaluated under the statute.

Defective offer to compromise is expensive

In ENGLE v.COPENBARGER AND COPENBARGER, the Court of Appeal held that the defendant's offer to compromise under section 998 did not include the plaintiffs' attorneys' fees and costs. That is because the offer as expressed in the section 998 offer did not expressly provide fees and costs were included. So, the plaintiff was able to collect the settlement and then file for attorneys' fees and costs on top of that. They should have read my article (here)!*

DGV

* [Of course...the 998 was served a few years before I wrote the article. Don't mess with my premise. I'm marketing over here. You're also having a conversation with yourself. Can both of us bill then?]

Waiting time penalty statute of limitations

What if you settle up with an employee for all wages due, but the employee gets a lawyer to sue for waiting time penalties alone in court? Well, the court of appeal just saved you a bunch of money.

In McCoy v. Superior Court (Kimco Staffing), the employee sued for waiting time penalties after receiving all wages due. The defendant argued that the applicable limitations period for penalties was one year. The plaintiff argued that the statute of limitations is the same as the underlying wages.

The court of appeal agreed with the employer. It is important to remember, though, that if the employee had sued for unpaid wages AND waiting time, the limitations period for the penalties would have been the same as applicable to the unpaid wage claims.

So, this case is an incentive to settled undisputed wage claims. Doing so may save the employer a lot of potential penalties.

DGV

Recent Shaw Valenza Articles

I know you're asking yourselves, "What do those live wires at Shaw Valenza do when they're not practicing employment law?" We're writing! We write employment law columns bi-weekly in the Sacramento Daily Recorder, about every month in the San Francisco Daily Journal, and occasionally for other periodicals.
Some handy links to recent articles are below. Our California and U.S. Supreme Court roundups are included, as are articles about a new California leave, the continued assault on arbitration, and more! If you want these articles as they are published, rather than waiting for us to blog about them, sign up here.

CALIFORNIA’S NEW LEAVE FOR MILITARY SPOUSES
By Jennifer Brown Shaw and Carolyn G. Burnette
The Daily Recorder
20 November 2007

THE BREACH OF THE DUTY OF LOYALTY – WHAT EMPLOYERS CAN DO ABOUT IT
By Jennifer Brown Shaw and Becki D. Graham
The Daily Recorder
6 November 2007

USING THE STATUTORY “OFFER TO COMPROMISE” TO OBTAIN FAVORABLE SETTLEMENTS
By D. Gregory Valenza
The Daily Journal
2 November 2007

REST BREAK AND MEAL PERIOD CLAIMS AFTER MURPHY V. KENNETH COLE PRODUCTIONS
By Jennifer Brown Shaw and Matt Norfleet
The Daily Recorder
23 October 2007

OFFICE ROMANCES AND THE RISK OF LIABILITY
By Jennifer Brown Shaw
The Daily Recorder
9 October 2007

TITLE III OF THE ADA: COMPLIANCE AND LITIGATION STRATEGIES
By Jennifer Brown Shaw
The Daily Recorder
27 September 2007

UNDERMINING ARBITRATION
By D. Gregory Valenza
The Daily Journal
21 September 2007

CALIFORNIA SUPREME COURT EMPLOYMENT LAW DECISIONS 2006-2007
By Jennifer Brown Shaw
The Daily Recorder
5 September 2007

EMPLOYER-SPONSORED WELLNESS PROGRAMS AND EMPLOYMENT LAW
By Jennifer Brown Shaw and Becki Graham
The Daily Recorder
14 August 2007

WAGE AND HOUR LAWS REDUX
By D. Gregory Valenza
The Daily Journal
10 August 2007

EMPLOYMENT LAWSUITS AGAINST INDIVIDUALS
By Jennifer Brown Shaw and Carolyn Burnette
The Daily Recorder
31 July 2007

AVOIDING WAGE-AND-HOUR RISKS
By D. Gregory Valenza
The Daily Journal
27 July 2007

UNITED STATES SUPREME COURT EMPLOYMENT LAW DECISIONS 2006-2007
By Jennifer Brown Shaw
The Daily Recorder
18 July 2007

FREE SPEECH AND ENGLISH-ONLY POLICIES IN THE WORKPLACE
By Jennifer Brown Shaw and Matthew J. Norfleet
The Daily Recorder
2 July 2007

DGV

Shaw Valenza's Annual Legal Update 12/3 and 4

Come see us in person at our annual employment law update. The presentations are on December 3 in Sacramento and December 4 in San Francisco. See the new statutes. Hear about recent case law developments. Touch and actually consume a continental breakfast.

You'll laugh. You'll cry. It's better than Cats! OK, it's more informative than Cats.

Sign up here.

Greg

New I-9 Form

The U.S. Department of Homeland Security has issued a new I-9 Form.
The form itself is largely unchanged. The main revision is to the list of acceptable employment authorization documents. The old form, which was issued in 1991, did not contain all of the acceptable documents.
Don't make too many copies. This form is set to expire in 2008, when the Department may issue an even newer version.

Greg

California Supreme Court on Reimbursement of Expenses under Labor Code section 2802

In California, employers must reimburse employees for "reasonably incurred" business expenses. Labor Code section 2802 so provides.

Typically, employers reimburse employees for actual expenses on a dollar for dollar basis: a business meal, a hotel stay, air fare, etc. When an expense is hard to measure (such as business use of an automobile), employers can approximate the expense by paying the employee an amount per mile driven on business. The IRS mileage reimbursement rate, currently $0.485, is one way of estimating the cost / mile. Of note, the DLSE likes the IRS rate, but no law requires employers to follow it. Conversely, employees may claim automobile expenses above the IRS rate if they can prove they are entitled to them.

Harte-Hanks Shopper, Inc. chose another method. Harte-Hanks would pay employees a higher rate of pay that was intended to "cover" expenses. Frank Gattuso brought a class action challenging that policy.

The Supreme Court decided that employers may pay extra wages to employees to cover reimbursable expenses, but they must be accounted for so the employee can determine whether he or she is receiving full reimbursement, and so that taxing authorities can distinguish between reimbursed expenses and wages.

Caution: This opinion is not a license to under pay employees a lump sum that does not fully compensate them for expenses. The employee may challenge the reimbursement amount as insufficient before the Labor Commissioner or in court. Instead, the opinion is helpful because it does not bind the employer to a specific method of reimbursement.

The case is Gattuso v. Harte-Hank Shopper, Inc. The opinion is here.

Instant Leave of Absence Notes (dot.com)?

Here's something you know: employees sometimes take time off when they are not sick, or at jury duty, etc.

Here's something you may not know: There's a new website that actually sells pre-printed, official looking forms authorizing leaves of absence. Sort of like a fake note a kid gives to his or her school. The concept is not new, but the availability of excuse forms on the internet may be. The url is "my excused absence dot com" I'm not linking to it.

What will happen when an employee is caught using a fake note? What if a real doctor signs a fake note? Will a business sue the website for unfair business practices? Oh, the mind boggles.

Anyway, if you did not have enough to worry about, be on the look out for doctors' notes and jury duty excuses that may not be genuine.

DGV

California Court: No Preemption of State Law Claims for Bank

Banks have a special weapon in employment litigation (including wrongful termination and even discrimination claims). The National Bank Act preempts these state law claims, at least as they relate to bank "officers."

So, may a bank subject to the National Bank Act designate "officers" at will to come within the preemption provisions? No, said the court of appeal in Ramanathan v. Bank of America. Quoting from an earlier California Supreme Court case, the court reviewed the criteria for evaluating whether a bank employee is an "officer" and covered by the National Bank Act's discharge provisions:

a bank ‘officer’ within the meaning of section 24 possesses the following attributes: First, he or she holds an office created by the board of directors and listed in the bank’s bylaws. (Citation.) Second, he or she is appointed by the board of directors, either directly or pursuant to a delegation of board authority set forth in the bylaws. (Citations.) Third, he or she has the express legal authority to bind the bank in its transactions with borrowers, depositors, customers, or other third parties by executing contracts or other legal instruments on the bank’s behalf. (Citation.)
Fourth, his or her decision-making authority, however it might be limited by
bank rule or policy, relates to fundamental banking operations in such a manner
as to affect potentially the public’s trust in the banking institution. (Citation.) If a particular bank employee holds a position possessing these features, he or she may be viewed as the bank itself in the eyes of third parties. Such an employee is an ‘officer’ and serves at the pleasure of the board of directors.”

The court then applied these criteria and found that Ramanathan, a "vice president," raised a triable issue of fact as to whether he was an officer under the National Bank Act. Therefore, the court vacated summary judgment and remanded for trial on Ramanathan's claims for discrimination, harassment and wrongful termination brought under California law.

Thanks to Connecticut Employment Law Blog for reminding me to post about this case.

Governor Vetos Two More Bills

Our recap of new California legislation affecting employers is here.

Governor Schwarzenegger vetoed two more bills in the final hours of the session:

AB 1707 - New requirements for personnel files.

http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_1701-1750/ab_1707_bill_20070910_enrolled.html

SB 180 - "Card checks" for agricultural employees seeking union representation.

http://www.leginfo.ca.gov/pub/07-08/bill/sen/sb_0151-0200/sb_180_bill_20070828_enrolled.html

That wraps up this year's legislative session. I think you will see most of the vetoed bills introduced again in the coming year.

DGV

Court of Appeal Explains Attorney-Client Privilege Applicable to Corporations

The attorney-client privilege may apply to communications between lower-level corporate employees even when an attorney is not a party to the particular communication. That's what the Court of Appeal held in Zurich American Ins. Co. v. Superior Court. "If legal advice is discussed or contained in the communication between Zurich employees, then to that extent, it is presumptively privileged. A communication reflecting a discussion of litigation strategy which expresses that the strategy is in response to advice of counsel would come within the privilege."

The Court framed the issue as follows:

The fundamental issue in this case is whether corporate communications not directly involving an attorney, but which discuss legal advice, come within this privilege. As we have seen, the discovery referee and trial court adopted a definition of the attorney-client privilege limited to "items in the claim file that contain actual copies of letters or e-mail communications from outside counsel, or documents that have been created by counsel, or received by counsel, or that contain direct communications from counsel, as indicated in the comment section of the attached listing of documents,... " This definition is inadequate because it fails to take into account language of section 952 expressly contemplating that confidential communications include information transmitted to persons "to whom disclosure is reasonably necessary for the transmission of the information," and those to whom disclosure is reasonably necessary for "the accomplishment of the purpose for which the lawyer is consulted." Section 952 expressly includes legal opinions and advice given by a lawyer within the definition of confidential communication.

The court of appeal reversed a trial court's determination that several communications were not privileged. Here is the test for privilege the court developed:

The first relevant inquiry is whether the document contains a discussion of legal advice or strategy of counsel for Zurich. Section 952 provides that a "confidential communication" "includes a legal opinion formed and the advice given by the lawyer in the course of that relationship."

If it is determined that the document reflects legal advice or opinions and is thus privileged, the court must determine whether Zurich waived the privilege by distributing the advice within the corporation. Section 952 extends the privilege to confidential communications shared with "those who are present to further the interest of the client in the consultation or those to whom disclosure is reasonably necessary for the transmission of the information or the accomplishment of the purpose for which the lawyer is consulted,... " The disputed documents must be reviewed to determine whether the Zurich employees to whom legal advice was relayed come within this broad definition.
[citations] . . . .

The key concept here is need to know. While involvement of an unnecessary third person in attorney-client communications destroys confidentiality, involvement of third persons to whom disclosure is reasonably necessary to further the purpose of the legal consultation preserves confidentiality of communication." [citation]

The relay of legal advice to corporate personnel not present at the attorney-client consultation was addressed by the INA court. "[D]isclosure may be made to persons not present at the attorney-client consultation, i.e., the third persons need not necessarily participate in the legal consultation." (Id. at p. 766.)
. . .

The Court also noted a couple of additional issues that arise in litigation over privilege (bullets are mine for ease of reading):

- otherwise routine, non-privileged communications between corporate officers or employees transacting the general business of the company do not attain privileged status solely because in-house or outside counsel is "copied in" on correspondence or memoranda. [citations]
- In addition, Zurich may not shield facts, as opposed to communications, from discovery. Any relevant fact may not be withheld merely because it was incorporated into a communication involving an attorney.
- In addition, "It is settled that the attorney-client privilege is inapplicable where the attorney merely acts as a negotiator for the client, gives business advice or otherwise acts as a business agent. . . . [citations]

Governor Takes Action on Pending California Employment Bills

We covered pending bills here. Governor Schwarzenegger vetoed nearly all of the burdensome proposed measures. As of this writing, two remain pending. If he does not sign them by midnight tonight, they become law automatically.

So, here is what we believe to be a comprehensive list of 2007 employment law bills that were signed, vetoed, and the two that remain pending.

We will provide more detailed summaries of the new laws in future posts.

DGV

Signed:

SB 812 - Alternative workweeks for pharmacists
http://www.leginfo.ca.gov/pub/07-08/bill/sen/sb_0801-0850/sb_812_bill_20071011_chaptered.html

AB 392 - Military leave for spouses
http://www.leginfo.ca.gov/cgi-bin/postquery?bill_number=ab_392&sess=CUR

SB 929 - Prevailing wage and lowers the hourly wage applicable to the "computer exemption" from over $49 to $36 per hour.
http://www.leginfo.ca.gov/pub/07-08/bill/sen/sb_0901-0950/sb_929_bill_20071011_chaptered.html

SB 14: - California National Guard qualify for membership in the Public Employees Retirement System (PERS), and can purchase additional PERS service credit.
http://www.leginfo.ca.gov/pub/07-08/bill/sen/sb_0001-0050/sb_14_bill_20071009_chaptered.pdf

AB 338 - Increases availability of workers' compensation temporary disability benefits
http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_0301-0350/ab_338_bill_20070924_enrolled.html

Vetoed:

AB 504 - Lockouts - fines for employers.
http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_0501-0550/ab_504_bill_20070910_enrolled.html

AB 622 - Independent Contractors.
http://www.leginfo.ca.gov/pub/07-08/bill/sen/sb_0601-0650/sb_622_bill_20070906_amended_asm_v95.html

SB 936 - Workers' Compensation benefits.
http://www.leginfo.ca.gov/pub/07-08/bill/sen/sb_0901-0950/sb_936_bill_20070913_enrolled.html

SB 942 - (More) Workers' Compensation benefits.
http://www.leginfo.ca.gov/pub/07-08/bill/sen/sb_0901-0950/sb_942_bill_20070906_amended_asm_v94.html

AB 8 - Health care tax on employers to fund universal health care.
http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_0001-0050/ab_8_bill_20070910_enrolled.html

AB 124 - Applying meal period laws to certain government employees.
http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_0101-0150/ab_124_bill_20070821_amended_sen_v94.html

SB 549 - Mandated bereavement leave.
http://www.leginfo.ca.gov/pub/07-08/bill/sen/sb_0501-0550/sb_549_bill_20070907_enrolled.html

SB 836 - Familial status discrimination.
http://www.leginfo.ca.gov/pub/07-08/bill/sen/sb_0801-0850/sb_836_bill_20070910_enrolled.html

AB 377 - Labor contractors and pay records.
http://www.leginfo.ca.gov/cgi-bin/postquery?bill_number=ab_377&sess=CUR&house=B&search_type=email

SB 727 - Expansion of Paid Family Leave.
http://www.leginfo.ca.gov/pub/07-08/bill/sen/sb_0701-0750/sb_727_bill_20070906_enrolled.html

AB 435- Extending statute of limitations for equal pay claims.
http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_0401-0450/ab_435_bill_20070910_enrolled.html

AB 1043 - Voiding forum selection and choice of law clauses in employment contracts.
http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_1001-1050/ab_1043_bill_20070907_enrolled.html


Still Pending as of this Writing:

AB 1707 - New requirements for personnel files.
http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_1701-1750/ab_1707_bill_20070910_enrolled.html

SB 180 - "Card checks" for agricultural employees seeking union representation.
http://www.leginfo.ca.gov/pub/07-08/bill/sen/sb_0151-0200/sb_180_bill_20070828_enrolled.html


Finally, here are a bunch of public sector-related bills that the Governor signed last week (thank you, o thank you, state bar labor and employment law section email):

AB 1307 Public employee benefits: supplemental contribution program. http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_1301-1350/ab_1307_bill_20071011_chaptered.pdf

AB 1432 – State teachers' retirement.
http://leginfo.ca.gov/pub/07-08/bill/asm/ab_1401-1450/ab_1432_bill_20071011_chaptered.pdf

SB 901 - State teachers' retirement: postretirement earnings. http://www.leginfo.ca.gov/pub/07-08/bill/sen/sb_0901-0950/sb_901_bill_20070906_enrolled.pdf

AB 246 - County employees' retirement: retirement boards. http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_0201-0250/ab_246_bill_20070904_enrolled.pdf

AB 554 – Public employees: benefits.
http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_0551-0600/ab_554_bill_20070914_enrolled.pdf

AB 754 - Public employees.
http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_0751-0800/ab_754_bill_20070917_enrolled.pdf

AB 756 - Memoranda of understanding: addenda.
http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_0751-0800/ab_756_bill_20070917_enrolled.pdf

AB 757 - Teachers: retirement and employment.
http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_0751-0800/ab_757_bill_20070910_enrolled.pdf

AB 1124 - County employees' retirement.
http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_1101-1150/ab_1124_bill_20070907_enrolled.pdf

AB 1288 - County employees: vision care. http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_1301-1350/ab_1316_bill_20070910_enrolled.pdf

AB 1316 – State teachers' retirement: disability.
http://www.leginfo.ca.gov/cgi-bin/postquery?bill_number=ab_1316&sess=CUR&house=B&author=bass

AB 1317 - Public employees' retirement: executive compensation.
http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_1301-1350/ab_1317_bill_20070918_enrolled.pdf

California Legislature's Season of Autumn Leaves

It's Fall, and the California Legislature's thoughts turn to.... leaves. Not the pretty yellow, orange and rust-colored leaves one finds during fall foliage drives along idyllic country roads, as the cold weather paints a rosy hue on the cheeks of children :::cue the banjo:::
Sorry. A little too much cider.

Anyway, the Vermont legislature thinks of foliage. The California Legislature's thoughts turn to new leaves of absence. The first one signed by Governor Schwarzenegger this year is AB 392. This law is an "urgency" statute, which means it takes effect immediately because of soldiers in Iraq and Afghanistan who will be taking leave.

Under the new law, employers must grant up to 10 days of job-protected, unpaid leave to employees seeking time off when a "spouse" (which under AB 205 includes registered domestic partner) obtains a qualified leave from military conflict. Here is a summary of the provisions:

- The law applies to employers with 25 or more employees;
- The employee seeking leave must inform the employer within 2 days of receiving notice that the soldier will be on leave
- Leave is available only to employees working 20 or more hours per week.
- Qualified leave is limited to employees with spouses who have been deployed to military conflict as defined in the statute. The statute is unclear as to whether guardsmen/women and reservists have to be deployed to the area of conflict like members of the armed services.

This law will be codified at Section 395.10 of the Military and Veterans Code, rather than in the Labor Code where several other leaves appear.

Greg