U.S. Supreme Court on FELA Liability

Most of you don't care about this, but when the U.S. Supremes decide an employment law case, I just have to post.

The Federal Employers’ Liability Act (FELA), 45 U. S. C. §51 et seq. renders railroads liable for employees’ injuries or deaths “resulting in whole or in part from [carrier] negligence.”  This is basically in lieu of workers' compensation benefits for railroad employees covered by the FELA.

Robert McBride, a locomotive engineer, injured his hand while operating a manual brake.  He brought suit against his employer, CSX.

The issue was what is the causation standard under the FELA.  Must the railroad's negligence be the "proximate" cause of the injury (i.e., the harm was the probable consequence of the risk), or does some other standard apply?  

The Court held that a much lower standard applies under FELA than under traditional negligence cases. Surveying years of precedent, the Court upheld the lower courts' jury instruction:  

defendant railroad “caused or contributed to” a railroad worker’s injury “if [the railroad's] negligence played apart—no matter how small—in bringing about the injury.” That, indeed, is the test Congress prescribed for proximate causation in FELA cases. 

Again, this decision is limited to injuries under the FELA. So, it is not applicable to most employers.  

The case is CSX Transportation, Inc.  v.  McBride and the opinion is here. 

Supreme Court Rules on Dukes v. Walmart

The U.S. Supreme Court issues its opinion in Dukes v. Walmart.  Here is the opinion.

Wal-Mart, the country's largest employer, faces the largest employment law class action ever.  We've posted about it a number of times as it made its way through the courts.  The U.S. Supreme Court decided to review the case to see if the Federal Rules of Civil Procedure authorizes a class action under the facts presented.  

The facts that give rise to the discrimination claims are as follows:

Pay and promotion decisions at Wal-Mart are generally committed to local managers’ broad discretion, which is exercised “in a largely subjective manner.” 222 F. R. D. 137, 145 (ND Cal. 2004). Local store managers may increase the wages of hourly employees (within limits) with only limited corporate oversight. As for salaried employees, such as store managers and their deputies, higher corporate authorities have discretion to set their pay within preestablished ranges. 

Promotions work in a similar fashion. Wal-Mart permits store managers to apply their own subjective criteria when selecting candidates as “support managers,” which isthe first step on the path to management. Admission to Wal-Mart’s management training program, however, does require that a candidate meet certain objective criteria,including an above-average performance rating, at least one year’s tenure in the applicant’s current position, and a willingness to relocate. But except for those requirements, regional and district managers have discretion to use their own judgment when selecting candidates for management training. Promotion to higher office—e.g., assistant manager, co-manager, or store manager—is similarly at the discretion of the employee’s superiors after prescribed objective factors are satisfied.

Thus, there is no "corporate wide" policy of intentional or even unintentional discrimination. Rather, the plaintiffs asserted the following theory regarding class-wide discrimination on behalf of hundreds of thousands of store level employees and supervisors:

local managers’ discretion over pay and promotions is exercised disproportionately in favor of men, leading to anunlawful disparate impact on female employees, see 42 U. S. C. §2000e–2(k). And, respondents say, because Wal-Mart is aware of this effect, its refusal to cabin its managers’ authority amounts to disparate treatment, see §2000e–2(a). . . . [T}the discrimination to which they have been subjected is common to all Wal-Mart’s female employees. The basic theory of their case is that a strong and uniform “corporate culture” permits bias against women to infect, perhaps subconsciously, the discretionary decisionmaking of each one of Wal-Mart’s thousands of managers—thereby making every woman at the company the victim of one common discriminatory practice.

The plaintiffs sought injunctive relief, monetary relief that is considered "equitable" such as back pay, and punitive damages. They did not seek individual compensatory damages for emotional distress or front pay, because doing so would be unauthorized by Federal Rule of Civil Procedure 23.

Federal Rule of Civil Procedure 23,  contains a number of requirements.  The plaintiff must satisfy all of the 23(a) provisions:

“(1) the class is so numerous that joinder of all members is impracticable,“(2) there are questions of law or fact common to the class, “(3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and “(4) the representative parties will fairly and adequately protect the interests of the class”

The Supreme Court held that there was insufficient common law or fact questions.  5-4, the Court explained what "common questions of law or fact" means:

Commonality requires the plaintiff to demonstrate that the class members “have suffered the same injury,” Falcon, supra, at 157. This does not mean merely that they have all suffered a violation of the same provision of law. Title VII, for example, can be violated in many ways—by intentional discrimination, or by hiring and promotion criteria that result in disparate impact, and by the use of these practices on the part of many different superiors in a single company. Quite obviously,the mere claim by employees of the same company that they have suffered a Title VII injury, or even a disparate impact Title VII injury, gives no cause to believe that all their claims can productively be litigated at once. Their claims must depend upon a common contention—for example, the assertion of discriminatory bias on the part of the same supervisor. That common contention, moreover, must be of such a nature that it is capable of classwideresolution—which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke.

The  Court, 5-4, squarely rejected that a common policy of decentralized decisions can support a class action where the standard requries proof of common issues of fact:

The only corporate policy that the plaintiffs’ evidence convincingly establishes is Wal-Mart’s “policy” of allowing discretion by local supervisors over employment matters.On its face, of course, that is just the opposite of a uniform employment practice that would provide the commonality needed for a class action; it is a policy against having uniform employment practices.

To sustain a class action under the federal rules, the plaintiff must establish one of the elements under Rule 23(b).  The plaintiffs in Dukes relied on Rule 23(b)(2):

Rule 23(b)(2) allows class treatment when “the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole.” 

Therefore, Dukes did not rely on (b)(3), which is the familiar standard permitting damages when "common issues" predominate.  This is the basis for most class actions seeking money.  Unlike (b)(2), classes under (b)(3) are entitled to "opt out," and must receive adequate notice.  Rule 23(b)(2) is more concerned with injunctive and declaratory relief.

The question was whether the monetary relief that the plaintiffs sought was authorized under  Rule 23(b)(2). The Court (9-0) held that it was not:

Rule 23(b)(2) applies only when a single injunction or declaratory judgment would provide relief to each member of the class. It does not authorize class certification when each individual class member would be entitled to a different injunction or declaratory judgment against the defendant.

The Supreme Court held that "backpay" was not authorized generally by Rule 23(b)(2), and the only monetary relief available would be when it was intertwined with a particular injunction.  In Dukes' case, the injunction would not be common to each member of the class, anyway, so there could be no common monetary relief either.

So, we'll have an article, and you'll be hearing a lot about this case in the coming days.  I hope this brief summary was helpful.  It will result in less blockbuster class actions in federal court.  However, it does not necessarily mean that smaller class actions will be limited when there is a common practice causing a common injury.

HAPPY 5TH ANNIVERSARY TO SHAW VALENZA

We made it 5 years! So, this is going to be one of those self-promoting / congratulatory posts.... 

We opened our doors 6/19/06. And we started this little blog thing of ours on 6/26/06.  Seems like it was just yesterday. And by "yesterday" I mean Saturday, 20 years ago.  

We've been so fortunate to work with great people and organizations.  We wanted to honor our clients in some way to thank them for our success. But many are not local, and many have anti-gift policies now. So,  rather than throw a party or send gifts, we made a donation to Guide Dogs for the Blind.  Yes, you can call them to make sure.

We have a terrific team of lawyers and non-lawyers in our Sacramento and San Francisco offices.  Since they are local and certainly have no non-gifting policies, we celebrated with a dinner.  We also thank our departed staff and lawyers, who helped us in our formative years.  We hope you had dinner somewhere equally wonderful.

Speaking of offices, we just moved to new space in Sacramento (980 9th St., Ste. 2300, if you are planning on, you know.....visiting.  Or visiting. 

Our "refreshed" website will roll out imminently, as will our new Facebook presence. It seems Facebook and Twitter may have replaced blogging as a medium for timely updates. But we're stubborn and committed, and somewhat retro. So, we will press on here until we are posting to an empty room.  In case you prefer Twitter, go here.  And we're putting the finishing touches on our Facebook page.  So you will be able to "like" us to your heart's content. We are nothing if not accessible.  And wordy.

So, thanks for hanging in there with us for these 5 years, loyal clients, and the other readers (yes, Dad, I mean you. And happy father's day, by the way). 

Jennifer and Greg

Upcoming Training Scheduled

PREVENTING HARASSMENT AND OTHER EEO ISSUES AT WORK: IT’S ALL ABOUT RESPECT (AB 1825 COMPLIANCE)

This interactive, engaging, and practical seminar complies with and exceeds California's sexual harassment prevention training requirements (as described in Assembly Bill 1825/Government Code section 12950.1). Through real world examples, hypothetical scenarios, practical guidance, and humor, we address the "gray" areas in equal employment opportunity compliance. We address a number of topics, including:

• Harassment, discrimination and retaliation prevention
• Supervisors' responsibilities to identify and report policy violations
• The difference between law and policy
• Principles of mutual respect and the Platinum Rule
• Responsibility for "out-of-work" conduct
• The internal complaint process, including the "15-minute rule"
• "Bad" vs. unlawful conduct

Employees love this program! Certificates are provided upon seminar completion.

Trainers:	Jennifer Brown Shaw, Esq.
Date:	June 14, 2011
Time:	8:30 a.m. - 11:30 a.m. (Registration at 8:00 a.m.)
Location:	600 I Street Commission Room Sacramento, CA 95814
Cost:	$65.00

Court of Appeal Rejects Same-sex Harassment Claim

As stated by the court of appeal,

Patrick Kelley was an apprentice ironworker employed by respondent The Conco Companies (Conco). He complained that he was subjected to a barrage of sexually demeaning comments and gestures by his male supervisor, and later to similar comments by male coworkers, and that he was also subjected to physical threats by coworkers in retaliation for his complaints about his supervisor. Kelley‘s employer changed his work site to separate him from his harassers, but Kelley was later suspended by his union from its apprenticeship program rendering him ineligible for employment. After the suspension expired, he was not rehired by Conco.

Sounds like sexual harassment? Wrong. The court of appeal decided that the supervisor's verbal abuse was not truly based on Kelley's sex. Therefore, although rude, the conduct was not actionable under the Fair Employment and Housing Act:

The sine qua non of any sexual harassment claim is that the plaintiff suffered discrimination because of sex. (Lyle, supra, 38 Cal.4th at pp. 279–280; Oncale v. Sundowner Offshore Services, Inc. (1998) 523 U.S. 75, 81 (Oncale).) ― ‗ ―The critical issue . . . is whether members of one sex are exposed to disadvantageous terms or conditions of employment to which members of the other sex are not exposed.‖ ‘ [Citations.]‖ (Lyle, at pp. 279–280, quoting Oncale, at p. 80.) A FEHA plaintiff must show ― ‗ ―that gender is a substantial factor in the discrimination, and that if the plaintiff ‗had been a man she would not have been treated in the same manner.‘ [Citation.]‘ [Citations.] Accordingly, it is the disparate treatment of an employee on the basis of sex . . . that is the essence of a sexual harassment claim.

The court then surveyed the law and held that sexual harassment is not actionable under FEHA unless there is some link to sexual desire, or treatment that occurs only because of the victim's sex.  That is, merely because Kelley's boss used vicious slurs against Kelley, calling him a number of names and using sexually suggestive language, the boss did so out of anger, and not sexual desire or motivation.

The court, however, revived Kelley's retaliation claim because even though Kelley did not have a viable harassment claim, he had a good faith claim of retaliation.

This case, if it stays on the books, may change some folks' understanding of what "harassment" is.  But it should not change employers' responses to the kind of conduct that occurred in the facts of the opinion, nor should employers rely on this opinion as a way to give a harasser a free pass.  Trust me, when you read the facts, you'll see what I mean.

The case is Kelley v. The Conco Companies, Inc. and the opinion is here.

Supreme Court Unanimously Limits Employers' Right to Attorneys' Fees in Discrimination Cases

In federal cases alleging discrimination, harassment, retaliation and violations of civil rights, when may a defendant employer recover attorneys' fees?  It is long settled that defendants may recover only when the plaintiff's claims are "frivolous, unreasonable or without foundation."  What about when just some of the claims are frivolous?  The Supreme Court answered that question, unanimously, with Justice Kagan writing the opinion:

Section 1988 allows a defendant to recover reasonable attorney’s fees incurred because of, but only because of, a frivolous claim. Or what is the same thing stated as a but-for test: Section 1988 permits the defendant to receive only the portion of his fees that he would not have paid but for the frivolous claim.

The Court then went on to hold that if the defendant spends fees on issues that deal with both frivolous and nonfrivolous claims simultaneously, the defendant may not recover fees:

But if the defendant would have incurred those fees anyway, to defend against non-frivolous claims, then a court has no basis for transferring the expense to the plaintiff. Suppose, for example, that a defendant’s attorney conducts a deposition on matters relevant to both a frivolous and a non-frivolous claim—and more, that the lawyer would have taken and committed the same time to this deposition even if the case had involved only the non-frivolous allegation. In that circumstance, the work does not implicate Congress’s reason for allowing defendants to collect fees. The defendant would have incurred the expense in any event; he has suffered no incremental harm from the frivolous claim. In short, the defendant has never shouldered the burden that Congress, in enacting §1988, wanted to relieve. The basic American Rule thus continues to operate.

Thus, the Supreme Court unanimously made sure that defendants will have a tough time recovering fees in cases including both frivolous and non-frivolous claims, just like the Ninth Circuit decided in Harris v. Maricopa County, which I discussed  here. Yes, I thought the Court of Appeals was out to lunch. I was wr-wr-wr... incorrect.  No wonder I don't have a vote on either court.  My opinion, though, remains the same. The Supreme Court joins the Ninth Circuit in making it very difficult for defendants to recover attorneys' fees in frivolous discrimination cases, unless the case is entirely frivolous. There is little incentive for the plaintiff to dismiss the frivolous component.

The Supreme Court decision is Fox v. Vice and the opinion is here.

U.S. Supreme Court: States May Require E-Verify

Arizona has a mandatory "E-verify" law. Arizona's law suspends or revokes businesses' licenses if they employ illegal aliens unauthorized to work in the U.S. It also mandates the use of "E-Verify," a federal program permitting electronic verification of an employee's authorization to work in the US.
The Chamber of Commerce and civil rights groups argued that the Arizona law is preempted by federal immigration law.  All lower courts disagreed, and so did the Supreme Court.
In a fractured opinion, the Court held that the federal Immigration Reform and Control Act does not stop Arizona from either suspending business licenses or requiring use of E-Verify. In fact, the law only requires employers to use E-Verify if they wish to rely on a "good faith" defense to proof that the employer is employing unauthorized workers. 
Justice Kagan did not participate, and only four justices concurred in parts of the opinion. However, the continued viability of the Arizona law was upheld 5-3.  So, Arizona is free to require employers to employ only authorized workers or risk losing the right to operate in Arizona.
The case is Chamber of Commerce v. Whiting and the opinion is here.

U.S. Supreme Court on ERISA Remedies

Cigna Corporation changed its pension plan back in 1998. Janice Amara, on behalf of herself and 25,000 beneficiaries sued under ERISA, claiming CIGNA's changes violated the law.  In particular, the plaintiffs challenged the notice of changes CIGNA provided.

The district court agreed CIGNA's notice provisions were improper, particularly in a newsletter that, the court found, painted too-rosy of a picture of the impending changes and ordered monetary relief based on the conclusion that the disclosures caused "likely harm." 
On review, the Supreme Court decided the district court's reasoning was wrong, but that it reached a nearly correct result.  The Court discussed the available remedies under ERISA.

The Court held that district court have broad discretion to fashion remedies as "equitable" relief.  Without a lot of legal mumbo jumbo, equitable remedies normally are injunctions, but there are some that include money.  In the CIGNA case, the district court had held that only those plaintiffs who "relied" on the erroneous information to their detriment could recover money.  The Supreme Court disagreed, saying that not all "equitable" remedies required a showing of reliance. .

A key take-away for non-ERISA people is that the courts here found that a newsletter previewing potentially detrimental changes to the plan was incomplete and misleading. So, HR practitioners, beware of informal communications regarding changes to your ERISA covered benefit plans.

The opinion is Cigna Corp. v. Amara and the opinion is here.

DGV

Another Meal / Break Class Action Dies; Everyone Waiting for Brinker

Selections from the Supreme Court mailbag re Brinker meal period case.
Dear Supreme Court. The suspense is killing us. Please send Brinker soon - Love Plaintiff's bar.
Dear Supreme Court:  Take your time. - Best wishes, Defense bar.

The letter writers wait for the Supreme Court's decision in Brinker (on what the meal period laws require).  Meanwhile, the Courts of Appeal keep cranking out decisions that consistently hold meal periods do not have to be forced, and therefore meal period class actions are properly not certified when the employer demonstrates it "provides" the opportunity to take them.

The latest opinion re meal period class actions is called Lamps Plus Overtime Cases, or Flores v. Lamps Plus. As stated, the court decided that the class certification was properly denied, and along the way held that meal periods need not be forced, but merely must be authorized and permitted. The opinion is here.

Court of Appeal Affirms Denial of Class Certification in Retail Store Exemption Case

The Court of Appeal in Mora v. Big Lots Stores held the trial court did not abuse its discretion in refusing to certify a class of hundreds of Big Lots store managers. This is another exemption class action decision, but it's interesting for a few reasons.

First, the plaintiffs went after store managers of  HUGE discount stores, where the store manager was the only exempt manager, supervising dozens of employees. They should stop doing that. (They're not going to listen).

Second, the courts are tired of the argument that larger corporations standardize their policies such that managers are necessarily non-exempt. As I just discussed in the Marlo v. UPS post, that argument does not fly. (Good news for you larger corporations).

Third, the trial court credited the employer's detailed and individualized declarations of its managers over the boiler-plate declarations submitted by the plaintiffs. Winning a class certification motion may well turn on the quality of the declarations and other evidence submitted.

Finally, the court's opinion is a good example of how the Supreme Court's decision inSav-On Drug Stores, Inc. v. Superior Court  (2004) 34 Cal.4th 319 has affected class action law in California. The Court of Appeal does not disturb class certification decisions if (1) there is substantial evidence to support the trial court's finding (either way) and (2) the trial court applies the right legal standards. This of course can cut in favor of either the employees or the employer, depending on who won in the trial court. Needless to say, it's important to win there.


The case is Mora v. Big Lots Stores and the opinion is here.

Court of Appeal Rejects Employment Application Class Action

Several years ago, the wage and hour "flavor of the month" was the employment application. (Lately, it's been "suitable seating" and paycheck stubs). Plaintiffs filed a series of class actions usually attacking employment applications' conviction inquiries. In California, an applicant is not required to disclose misdemeanor marijuana possession convictions more than two years old, you know.

Starbucks was sued under this theory some years ago. But the Court of Appeal held in 2008 that the plaintiffs lacked standing to sue because they did not have marijuana convictions that would have had to have been disclosed.

In Starbucks I, supra, 168 Cal.App.4th 1436, we held that neither plaintiffs nor the tens of thousands of job applicants they purported to represent were entitled to recover statutory penalties where they did not have any marijuana convictions to disclose. We stated, "Only an individual with a marijuana-related conviction falls within the class of people the Legislature sought to protect." (Id. Id. at p. 1451.)

After the appeal, the trial court dismissed the named plaintiffs as lacking "standing" to sue. The plaintiffs' lawyers, though, attempted to substitute new plainitffs to continue the class action. They also limited the complaint and class to those applicants with applicable convictions.  Then, they asked the trial court to compel Starbucks to review its own applications and identify to the plaintiffs' counsel anyone who filled out an application more than two years after incurring a marijuana-related conviction. (I don't know how Starbucks would know this).  Starbucks appealed this discovery order, too.

The court of appeal held that the plaintiffs were not entitled to the discovery. The court noted that California law protects the privacy of individuals with stale marijuana convictions. The plaintiffs wanted to invade that privacy to find a new plaintiff. But the court noted that there did not seem to be any interest in pursuing this class action among the potential 135,000 applicants to Starbucks during the relevant period, despite the prior published opinion.  So, the court denied discovery and let the superior court take the next step, to dismiss the class action (most likely).

The case is Starbucks v. Superior Court and the opinion is here.

 

Ninth Circuit Upholds De-Certification of Exemption Class Action

Michael Marlo was a supervisor for UPS.  He filed a class action alleging violation of California wage and hour laws, based on alleged mis-classification of his position as "exempt."  The district court initially certified a class, but later "de-certified" it, holding that common issues did not predominate over individual issues.
Marlo's individual claim went to trial. A jury found in his favor on some of the claims (that he was mis-classified in certain roles), but that he was exempt when he held an "on-road" supervisor position.  After judgment, Marlo appealed the district court's de-certification of the class.

On appeal, the Ninth Circuit affirmed the district court.  The court found that the plaintiff failed to establish that common issues predominate. First, the court of appeals rejected the plaintiff's argument that UPS's "blanket" classification of a group of employees established common issues:

Marlo contends that he satisfied his burden of establishing predominance by submitting evidence of UPS’s centralized control, and uniform policies and procedures. But a blanket exemption policy “ ‘does not eliminate the need to make a factual determination as to whether class members are actually performing similar duties.’ ” In re Wells Fargo Home Mortg. Overtime Pay Litig., 571 F.3d 953, 959 (9th Cir. 2009) (citation omitted). Specifically, the existence of a policy classifying FTS as exempt from overtime-pay requirements does not necessarily establish that FTS were misclassified, because the policy may have accurately classified some employees and misclassified others.

Of special significance, the court of appeals found that individual issues predominated because the employees' exempt status must be measured on a work-week by work-week basis:

Nor, contrary to Marlo’s assertion, did the district court err in requiring a week-by-week determination of exempt status. IWC Wage Order No. 9 states that in determining whether an employee is “primarily engaged” in exempt work, “[t]he work actually performed by the employee during the course of the workweek must, first and foremost, be examined and the amount of time the employee spends on such work . . .shall be considered.” Cal. Code Regs. tit. 8, § 11090(1)(A)(1)(e). California courts have construed this requirement to mean that “[u]nder California law, the Court must determine whether any given class members (or all the class members) spend more than 51% of their time on managerial tasks in any given workweek.” Dunbar v. Albertson’s, Inc., 47 Cal. Rptr.3d 83, 86 (Cal. Ct. App. 2006) (emphasis added). Therefore, the district court did not incorrectly apply California law by requiring a week-by-week showing of work the FTS actually performed.

The case is Marlo v. UPS, Inc. and the opinion is here.

Welcome Back, Arbitration?

I think the rumors of the demise of employment arbitration might have been exaggerated. I for one am guilty of presuming arbitration was dead. And who can blame me, what with the California courts and the 9th Circuit?

Well, today, the U.S. Supreme Court breathed new life into employment arbitration. The Court held that the Federal Arbitration Act preempts California case law prohibiting arbitration agreements that exclude class actions.

So, if arbitration agreements can require only individual arbitration, that means that employers may avoid those expensive California wage and hour class actions by properly implementing arbitration agreements.

The interesting question that the Supreme Court did not decide today is what about California case law imposing lots of other conditions and burdens on employment arbitration. The "Armendariz" line of cases impose special burdens on arbitration that do not apply equally to other kinds of contracts. If you read Concepcion a certain way, Armendariz will not be around long. For example consider this statement in the opinion:


Parties could agree to arbitrate pursuant to the Federal Rules of Civil Procedure, or pursuant to a discovery process rivaling that in litigation. Arbitration is a matter of contract, and the FAA requires courts to honor parties’ expectations. Rent-A-Center, West, 561 U. S., at ___ (slip op., at 3). But what the parties in the aforementioned examples would have agreed to is not arbitration as envisioned by the FAA, lacks its benefits, and therefore may not be required by state law.

Of course, I've been wrong before. Like when I thought arbitration was dead.

The case is AT&T Mobility LLC v. Concepcion and the opinion is here.

Court of Appeal Clarifies "Alter Ego" Liability for Employment Claims

Cooper was the sole shareholder and day to day operator of Auburn Honda, a corporation. A group of former employees sued Auburn Honda and Cooper for age discrimination and other things.  Cooper moved for summary judgment on the ground he could not be held liable, since only the employer is liable for employment discrimination. The plaintiffs argued Cooper indeed was the employer as an "alter ego" of the corporation.

The court did not permit the plaintiffs to claim Cooper was the alter ego of Auburn in opposition to the motion for summary judgment. So, small business owners, here is the discussion of application of the alter ego doctrine to a shareholder:

To succeed on their alter ego claim, plaintiffs must be able to show: (1) such a unity of interest and ownership between the corporation and its equitable owner that no separation actually exists, and (2) an inequitable result if the acts in question are treated as those of the corporation alone. (Sonora Diamond, supra, 83 Cal.App.4th at p. 538.)


Several factors are to be considered in applying the doctrine, among them are: “„[c]ommingling of funds and other assets, failure to segregate funds of the separate entities, and the unauthorized diversion of corporate funds or assets to other than corporate uses; . . . the treatment by an individual of the assets of the corporation as his own; . . . the failure to obtain authority to issue stock or to subscribe to or issue the same; . . . the holding out by an individual that he is personally liable for the debts of the corporation; . . . the failure to maintain minutes or adequate corporate records . . .; sole ownership of all of the stock in a corporation by one individual or the members of a family; . . . the failure to adequately capitalize a corporation; the total absence of corporate assets, and undercapitalization; . . . the use of a corporation as a mere shell, instrumentality or conduit for a single venture or the business of an individual or another corporation; . . . the concealment and misrepresentation of the identity of the responsible ownership, management and financial interest, or concealment of personal business activities; . . . the disregard of legal formalities and the failure to maintain arm's length relationships among related entities; . . . the use of the corporate entity to procure labor, services or merchandise for another person or entity; . . . the diversion of assets from a corporation by or to a stockholder or other person or entity, to the detriment of creditors, or the manipulation of assets and liabilities between entities so as to concentrate the assets in one and the liabilities in another; . . . the contracting with another with intent to avoid performance by use of a corporate entity as a shield against personal liability, or the use of a corporation as a subterfuge of illegal transactions; . . . and the formation and use of a corporation to transfer to it the existing liability of another person or entity.‟ . . . [¶] This long list of factors is not exhaustive. The enumerated factors may be considered „[a]mong‟ others „under the particular circumstances of each case.‟" (Morrison Knudsen Corp. v. Hancock, Rothert & Bunshoft, LLP (1999) 69 Cal.App.4th 223, 249-250, quoting Associated Vendors, Inc. v. Oakland Meat Co. (1962) 210 Cal.App.2d 825, 838-840.)

So, the court held that Cooper did not qualify as an alter ego under this list of factors because the Plaintiffs did not bring forth sufficient evidence.

The case is Leek v. Cooper and the opinion is here.

Court of Appeal Reconsiders, but then Re-Affirms Case re Work Week

We previously wrote about Seymore v. Metson Marine here.  Then we wrote an article covering it and other new wage-hour cases here.  This was the case in which the court held that the employer could not set a workweek to start on a day when the employees did not begin the week.

I am not so presumptuous to think the employer's lawyers or the court read my article, but maybe the they heard the other HOWLS from the employment bar about how bad a case this was.  So, the employer filed a petition for re-hearing, and the Court actually granted re-hearing and issued a new opinion.

The employer's lawyers submitted copious new case law, regulations, and new facts to support its argument that the employer can set the workweek for Monday when the employees start their 14-day hitches on Tuesday.  (That was the issue the Court of Appeal addressed in the initial opinion).

The Court on re-hearing remarked how much new information the employer's lawyers provided in support.  I think the Court was a bit miffed that the initial briefing was not as thorough as it might have been. Nevertheless, the Court affirmed its decision to reverse summary judgment. This time, however, the Court allowed more flexibility for employers to start the work-week on a different day than the employees' actual work begins, as long as there is a sufficient business reason for doing so (other than avoiding payment of overtime). The court hinted that Metson set up its work week for the purpose of avoiding certain wage-hour obligations.

So, the new opinion in Seymore v. Metson Marine is here.  It is now going to be up to the Supreme Court to de-publish or review this case.  On the bright side, the current version of the opinion is less dangerous for employers than the original one was.

DGV

Court of Appeal Says No Acommodation for Violent Threats

Disagreeing with the Ninth Circuit's ridiculous  insaneoutlier opinion  in Gambini v. Total Renal Care (in which the court of appeals said that a bi-polar employee who threw papers at her boss was immune from discharge), the Court of Appeal held that the Orange County Superior Court lawfully fired an employee who made violent threats against co-workers.  The Court of Appeal decided that a "bi-polar" employee does not have the right to threaten co-workers, even if that conduct is caused by the disability. Chalk one up for reasonable.
Oh the court also held that checkig the box for "denial of family care leave" on an administrative charge is NOT sufficient to exhaust administrative remedies on disability discrimination.
I've written about Gambini here. And here.
This decision is Wills v. Superior Court and the opinion is here.

Ninth Circuit Allows FEHA National Origin Claim

Raytheon Company is a defense contractor. The federal government required Raytheon to require security clearances.

Raytheon hired Hossein Zeinali for an enginerring position requiring a Secret security classification. While he was waiting for the security clearance, Raytheon let him perform other duties not requiring the Secret authorization.  Ultimately, the Department of Defense denied the security clearance. So, Raytheon fired him.  Zeinali sued for national origin discrimination.

The Ninth Circuit first held that it had jurisdiction, rejecting Raytheon's contention that there was none because federal courts cannot second-guess denials of security clearances.  Although federal courts indeed cannot overturn determinations about security clearances, that is not what Zeinali was suing about. He did not contest that he was rejected. Rather, he argued that Raytheon's decision to fire him because he did not meet the job qualification - obtaining the clearance - was pretextual.

The court agreed with Zeinali. He produced evidence that although Raytheon consistently said he would have to have a security clearance to retain his job, and although Raytheon imposed this requirement on many employee positions, Raytheon did not always enforce the requirement:

In light of the fact that Raytheon retained multiple non-Iranian engineers after their security clearances were revoked, Zeinali has raised triable disputes regarding (1)whether security clearances were a bona fide requirement for Raytheon engineers, and (2) whether Raytheon’s central purported reason for terminating him (his lack of a security clearance) was pretextual. The Supreme Court’s McDonnell Douglas opinion contains a salient observation about pretext:

“Especially relevant to such a showing [of pretext] would be evidence that white employees involved in acts against [the employer] of comparable seriousness to the [plaintiff’s disruptive protesting activities] were nevertheless retained or rehired. [An employer] may justifiably refuse to rehire one who was engaged in unlawful, disruptive acts against it, but only if this criterion is applied alike to members of all races.” McDonnell Douglas, 411 U.S. at 804.

Analogously, in the present case, Raytheon would certainly be justified in firing employees who lack security clearances, “but only if this criterion is applied alike to members of all races.” Id.; see also Godwin v. Hunt Wesson, Inc., 150 F.3d 1217, 1220 (9th Cir. 1998) (holding that pretext is shown if other employees with similar qualifications are treated more favorably).

So, here's a message you may have heard from an employment lawyer.  Consistency. There, no charge.

The case is Zeinali v. Raytheon Company and the opinion is here.

U.S. Supreme Court on FLSA Retaliation

The U.S. Supreme Court held that the Fair Labor Standards Act's anti-retaliation provision covers oral and written complaints, whether internal or to the government.  So, here's some invaluable and insightful advice: don't retaliate against employees who complain about alleged wage and hour violations. Try not to decide whether to retaliate based on if a complaint is oral or written, mmmkay?

In a nutshell, Kasten claimed he complained to management and other employees about the location of the time clocks at the St. Gobain factory. Because of the time clock's placement, he did not get paid for "donning and doffing" time.  The company allegedly fired Kasten for not keeping his time card correct. Kasten claimed it was retaliation for his complaints. The district court dismissed the case because Kasten had not "filed" a written complaint with the government and, therefore, was not covered by the anti-retaliation provision in the FLSA.  The Supreme Court took time out of its busy day to resolve a dispute among the lower circuit courts over whether a written complaint was required.

The case is Kasten v. St. Gobain Performance Plastics, Inc., and the opinion is here.

Ninth Circuit Defines FMLA Interference Claim

Hello, it's been a while. I've missed you.  You never write. You never tweet. Alas. But I press on to write about the FMLA.

Diane Sanders worked for Newport, Oregon. She took an FMLA leave. Her doctor believed the air quality at work was poor and she suffered from certain chemical sensitivities. The Oregon OSHA and the city's own experts found the air to be within legal standards. After receiving an extended FMLA, her doctor released her to return to work provided the City stop using "low grade" paper, which the City apparently agreed to do.

The City refused to reinstate Sanders from her leave. The City took the position that it could not provide her with a safe workplace because it was not clear what caused her medical issues.

A jury found that the City acted lawfully. But the trial court found in Sanders' favor on a state law claim under Oregon's family leave law.  Oregon claims are tried to the court rather than a jury.

The Ninth Circuit explained there are two types of FMLA claims: discrimination/retaliation and interference.  Sanders pursued an interference claim at trial.  The court explained the applicable legal analysis:

The Sixth and Seventh Circuits have ably summarized the elements of an employee’s prima facie case where the employer fails to reinstate the employee:“the employee must establish that: (1) he was eligible for the FMLA’s protections, (2) his employer was covered by the FMLA, (3) he was entitled to leave under the FMLA, (4) he provided sufficient notice of his intent to take leave, and (5) his employer denied him FMLA benefits to which he was entitled.”  [citations] We agree with this approach. In interference claims, the employer’s intent is irrelevant to a determination of liability.. . .

The court then went on to hold that if the employee makes out a prima facie case, the employer bears the burden of establishing that the employee was not entitled to reinstatement. That is, the employer must prove that the employee was denied reinstatement for one of the reasons authorized by the FMLA, such as that the employee would not have remained employed if she had not taken leave.  Because the district court's jury instructions required the plaintiff to prove she was denied reinstatement "without reasonable cause," the court vacated the judgment in the City's favor.

The case is Sanders v. City of Newport and the opinion is here.

Ninth Circuit: Ban on Applicants Who Test Positive for Drugs Not ADA Violation

The Pacific Maritime Association has a "one-strike" rule. If you fail a drug or alcohol test during the applicant screening process, you are barred from consideration for employment. Forever.

Santiago Lopez applied for a longshoreman's job, but he tested positive for marijuana. He claims that when he applied, he was addicted. But once he become a recovering addict, he was entitled to reapply with the protections of the ADA.

The Ninth Circuit disagreed, upholding summary judgment. The court said that the one-strike rule applies to anyone who fails a drug/alcohol test, not just addicts or recovering addicts. The employer also had no knowledge that Lopez was a recovering addict, only that he previously had failed the test.

A dissenting judge in this 2-1 opinion would have given Lopez a chance to save his disparate impact claim. Lopez argued that a rule barring all persons from re-applying could have a "disparate impact" on recovering alcoholics/drug abusers. But Lopez did not support that argument with statistical proof and, therefore, the court did not allow the claim to proceed.

The case is Lopez v. Pacific Maritime Association and the opinion is here.

U.S. Supreme Court Grabs Cat's Paw

There goes Justice Scalia again, ruling for... employees!  Writing for a 6-2 majority, Justice Scalia says:

When the company official who makes the decision to take an adverse employment action is personally acting out of hostility to the employee’s membership in or obligation to a uniformed service, a motivating factor obviously exists. The problem we confront arises when that official has nodiscriminatory animus but is influenced by previous company action that is the product of a like animus in someone else.

Basically, two lower level supervisors were hostile towards Vincent Staub, an xray tech at a hospital. they were annoyed at his reserve duty, which caused absences that had to be covered.  As a reservist, Staub was entitled to job protection under USERRA.  USERRA protects against discrimination against members of the military, basically under the same standards as Title VII.  Thus, if anti-military bias is a "motivating factor" in a negative employment decision, the plaitniff can win.

Here, a non-biased manager fired Staub, but based on a report by the biased supervisors.  The hospital argued that discrimination was therefore not a motivating reason.   This presented a "cat's paw" theory, where the employer claims that the innocent supervisor's decision is independent from the biased supervisor's motivations.

The Supreme Court held:

that if a supervisor performs an act motivated by anti military animus that is intended by the supervisor to cause an adverse employment action,3 and if that act is a proximate cause of the ultimate employment action, then the employer is liable under USERRA

The court did say that the biased supervisor has to have some causation for the negative employment decision or the "motivating reason" standard fails.

Bonus: Those of us unfamiliar with Aesop now know the meaning of the "Cat's Paw" theory.

1The term “cat’s paw” derives from a fable conceived by Aesop, put into verse by La Fontaine in 1679, and injected into United States employment discrimination law by Posner in 1990. See Shager v. Upjohn Co., 913 F. 2d 398, 405 (CA7). In the fable, a monkey induces a cat by flattery to extract roasting chestnuts from the fire. After the cat has done so, burning its paws in the process, the monkey makes offwith the chestnuts and leaves the cat with nothing. A coda to the fable (relevant only marginally, if at all, to employment law) observes that the cat is similar to princes who, flattered by the king, perform serviceson the king’s behalf and receive no reward.

Although this is a USERRA case, given the similiarities with anti-discrimination laws, look for this theory to be applied in Title VII cases as well

The case is Staub v. Proctor Hosp. and the opinion is here.

Court of Appeal Limits' Employers' Discretion to Set the Workweek/Workday

The employees at Metson Marine, Inc. worked 14-day straight "hitches," during which they slept on their ships and had to remain within 30-45 minutes of the ship during downtime. These 14-day hitches started on Tuesdays. But the workweek was set as Monday at 12:01 a.m. through Sunday at 11:59 p.m.  As a result, Metson claimed that employees worked a six-day week, followed by a 7 day workweek, and then a two day workweek. 

The plaintiffs challenged the employer's designation of the workweek because it resulted in a less favorable calculation of overtime and of seventh day pay.  The employer relied on certain rulings by the Division of Labor Standards Enforcement, which basically say that the employer can designate any workweek or workday that it wants to, as long as it's consistent.

Surprise, Metson! The Court of Appeal, reversing summary judgment, held that the DLSE's interpretations are entitled to no respect. Rather, a workweek must coincide with the beginning of the work period actually worked:

Plaintiffs contend that premium pay must be calculated based on the "fixed and regular" schedule actually worked and that Metson should not be allowed to subvert the employee protections of section 510 by designating an artificial workweek that does not correspond with the period actually worked. Asserting that their workweek actually began and ended on Tuesday, plaintiffs argue that Metson was required to pay overtime wages for work performed on the seventh and 14th day of each hitch. We agree.

Relying on a federal district court opinion, the Court of Appeal held that the employer cannot set a workweek that differs from the workweek that employees actually work.

Much like the case before this court, the employer in In re Wal-Mart Stores, Inc. relied on the DLSE‟s interpretation of section 500 that " „[t]he beginning of an employee‟s workday need not coincide with the beginning of that employee‟s shift, and an employer may establish different workdays for different shifts.‟ " (In re Wal-Mart Stores, Inc., supra, 505 F.Supp.2d at p. 617.) The court rejected the DLSE interpretation, noting that "the California Supreme Court has held that interpretations contained in the DLSE Manual are non-binding and are entitled to no deference. (Tidewater Marine Western, Inc. v. Bradshaw, supra, 14 Cal.4th at p. 568.) Therefore, to the extent that the DLSE‟s opinion . . . is inconsistent with the Labor Code‟s goal of promoting employee protection, this opinion should be ignored." (In re Wal-Mart Stores, Inc., at p. 617.)

But it's unclear whether the Court of Appeal intends its holding to apply to worksites where employees work from week to week and have different work different days off every week. If an employer sets the workweek from 12:01 a.m Monday to 12:00 p.m. Sunday for all employees, what happens when some employees have Mondays off? What if employees sometimes have Mondays off, and sometimes Tuesdays? Does the employer have to set a different workweek for each employee each week? Also, what happens when employees report to work at different times? When does the workday start? What if the employee is late to work on the first day? Must the workday begin late just to ensure that the employee receives the maximum potential overtime pay? Hopefully, the court will re-consider the breadth of its holding in a petition for re-hearing, or maybe will be depublished..


The court also dealt with "on call" pay. The employees were on for 12 hours and off for 12 hours during the hitches. They rarely were called back to work for emergencies. However, they had to remain within 30-45 minutes of the ship, and could not drink. They also were required to sleep on the ship. On those facts, the court decided that the requirement of sleep on the shift turned all of the down time (less an 8-hour period for sleeping) into hours worked. The court excluded the 8 hours of sleep time on the basis of an agreement between the employer and employees. Unless your business requires employees to sleep on premises, this case probably won't result in a change in the law on this point. However, if you want to exclude sleep time from hours worked when employees are required to sleep on premises, have an agreement. 
 The case is Seymore v. Metson Marine, Inc. and the opinion is here.

California Supreme Court Holds No Arbitration in Lieu of Labor Commissioner Hearing

The California Supreme Court decided that an employer cannot require an employee to go to arbitration instead of a "Berman" hearing before the Labor Commissioner.  Rather, the employee must be permitted to go to the labor commissioner and then the arbitration agreement can be used for the "appeal" de novo.
This 4-3 decision involves lengthy discussions of preemption and unconscionability. 

The majority, led by retiring Justice Moreno, finds that the waiver of the labor commissioner hearing deprives the employee of so many benefits that the arbitration agreement violates public policy.  The U.S. Supreme Court may take a look at this one under the Federal Arbitration Act.  Until then, though, employees get to see the Labor Commissioner, even if they have arbitration agreements.

The case is Sonic-Calabasas A, Inc. v. Moreno and the opinion is here.

Court of Appeal: Meals and Breaks are Penalties for Attorneys Fees Law

Did you know the Labor Code permits employers to recover attorney's fees when the employer wins certain wage claims?  It's true.

Labor Code section 218.5 contains a reciprocal fee recovery provision in favor of the "prevailing party" in certain wage disputes. Section 218.5 states, in relevant part: "In any action brought for the nonpayment of wages, fringe benefits, or health and welfare or pension fund contributions, the court shall award reasonable attorney‟s fees and costs to the prevailing party if any party to the action requests attorney‟s fees and costs upon the initiation of the action. . . . [¶] This section does not apply to any action for which attorney’s fees are recoverable under Section 1194."

 In light of the last sentence, claims involving "overtime" are not subject to this fee statute, but rather section 1194.  That is a "one way" fee provision that precludes employers from recovering fees even when they win claims for unpaid overtime.  Thus, the Court of Appeal decided that UPS could not recover attorney's fees when it won a lawsuit by a single plaintiff challenging his exemption.

But what if the complaint alleges unpaid overtime AND other wage claims.  The Court of Appeal decided that fees MAY be recovered by employers relating to the non-overtime-related claims.  But then things got weird.

In United Parcel Service Wage and Hour Cases, the court dealt with Thomas McGann's individual claim, which not only involved overtime, but also meals and breaks.  UPS sought its fees when it prevailed on the meal and break portion of the case. 

Section 218.5 applies only to "wage" claims.  Rather than award UPS the fees, the Court of Appeal held that meal and rest period penalties are penalties for purposes of the attorneys' fees statute permitting employers to recover attorney's fees for unsuccessful suits to recover wages.  But wait. I thought the California Supreme Court said that meal period penalties were wages for the purposes of the statute of limitations.  You're right.  The Supreme Court did so in the Murphy v. Kenneth Cole case, discussed here.

But the Court of Appeal decided that Murphy does not apply because it did not address attorney's fees, but rather which statute of limitations should apply.

UPS contends Murphy establishes that an action for recovery of the statutory remedies for missed meal and rest breaks is a claim for “nonpayment of wages” within the meaning of Labor Code section 218.5. UPS offers no analysis to support its contention that Murphy, which decided a statute of limitations question under the Code of Civil Procedure, should control or guide our analysis of the Labor Code attorney fees provisions. We are not persuaded that extending the holding in Murphy to the discreet fee issue presented here is appropriate or in keeping with our duty to construe statutes regulating the conditions of employment liberally, “with an eye to protecting employees.” (Murphy, supra, 40 Cal.4th at p. 1111; accord, Ramirez v. Yosemite Water Co. (1999) 20 Cal.4th 785, 794.)

Recognizing that the statutory remedy for denial of breaks -- payment of one additional hour of regular pay for each day a break is denied -- was susceptible to an interpretation as a wage and also as a penalty, the Supreme Court in Murphy found the remedy provided in Labor Code section 226.7 was primarily intended “to compensate employees for their injuries” occasioned by missed breaks and was, therefore, akin to a wage for purposes of assigning the appropriate statute of limitations. (Murphy, supra, 40 Cal.4th at p. 1111.) The court therefore gave employees the benefit of the three-year statute of limitations. However, nothing in the Murphy opinion suggests the court intended its decision to permit a prevailing employer-defendant in a section 226.7 action to recover attorney fees from the unsuccessful employee. To so find would undermine the Supreme Court‟s heavy reliance in its analysis on the principle that statutes governing working conditions must be liberally construed in favor of employees.

So, the court instead decided that section 218.5 permits employers to recover attorney's fees when wage claims are based on contractual wages, such as unpaid bonuses, rather than wages - such as meal period penalties- that are required by statute. I guess vacation pay disputes won't result in awards of attorneys' fees either now?
 
Sorry - but if Murphy held that meal periods are subject to the limitations period applicable to wages not penalties, then Murphy said that meal and break penalties are wages. Since 218.5 applies to "wages" and not just "contractual-based wages" the court giveth something to the statute, and taketh away from employers.
 
The case is United Parcel Services Wage and Hour Cases, and the opinion is here.

Court of Appeal: Union Representing County Employees Entitled to Contact Information of Non-Union Members

To facilitate union organizing and collective bargaining, the union representing LA county employees wanted the county to disclose the names and addresses of employees who opted not to be represented by the union. These employees paid an "agency" fee, lower than union dues, but were not full fledged members.

Reviewing the case, the court of appeal decided that the county must disclose the information, but first must give the employees the right to "opt out" of the disclosure, similar to the law that applies in class action discovery:

Pioneer Electronics because there is no underlying presumption these non-member County employees would want their personal information disclosed, as might be the case in class-action litigation in which the disclosure might lead to affirmative relief or the vindication of statutory rights. Rather, the opposite is true. As in Valley Bank, employees would assume the personal information they provided to their employer as a condition of employment would not be further disseminated. While there may be a parallel between union representation and class representation, we cannot assume these non-member County employees would perceive a benefit to having their personal information disclosed to the Union. These County employees, whether by inaction or action, are not Union members, and they have a right not to join the Union. The non-members‟ failure to voluntarily provide their personal information to the Union might indicate their desire not to join the Union, indifference, or simply a desire not to be bothered at home by unwanted mail and telephone calls.

we hold non-member County employees are entitled to notice and an opportunity to object to the disclosure of their personal information. The privacy concerns here are more significant than in

The court rejected the union's argument it was entitled to the information regardless of the employees' objection.

The case is County of LA v. LA County Employee Relations Commission and the opinion is here.

Court of Appeal: Reporting Time Pay and Discharge

The Court of Appeal addressed California's "reporting time" pay requirement in the context of discharge. 
First it explained "reporting time" pay in the Wage Orders.

Section 5(A) of Wage Order Number 5-2001 states: “Each workday an employee is required to report for work and does report, but is not put to work or is furnished less than half said employee‟s usual or scheduled day‟s work, the employee shall be paid for half the usual or scheduled day‟s work, but in no event for less than two (2) hours nor more than four (4) hours, at the employee‟s regular rate of pay, which shall not be less than the minimum wage.” (Cal. Code Regs., tit. 8, § 11050, subd. 5(A).)

The employee was called in for an unscheduled day to be fired. The company paid the employee 2 hours, but the employee wanted four hours' pay.  The Court of Appeal held that only two hours of reporting time pay was due.  In explaining why, the court will help employers in the case of meetings that are scheduled on employees' days off.

If an employee is required to work, reports to work, and is not put to work or does not work half of the employees‟ usual or scheduled day‟s work, the employee is paid a half-shift reporting wage not to exceed four hours. (Cal. Code Regs., tit. 8, § 11050, subd. 5(A).) If an employee is not scheduled to work or does not expect to work his usual shift, but must report to work for a meeting, the employee falls into the regulatory category of those employees called to work on their day off for a scheduled meeting. Price was entitled to the minimum payment, which is what he received.10

* * *

We do not agree with Price that he is entitled to receive more than the two-hour minimum; he did not report to work with the expectation that he would work a scheduled shift, but rather was scheduled to attend a meeting for an unspecified number of hours. Nor do we agree with Price that the term "usual" in the statute means the average of his previously scheduled days‟ worked during his employment at Starbucks. Rather, the term "usual" refers to the employee‟s expectation of the hours in the customary workday, just as, in the alternative, a scheduled work day formalizes the expectation of the hours worked. During his employment, Price's expectations of hours worked was solely based upon his scheduled hours. Price was not scheduled to work on November 16, and his expectation was he had been called to work for a meeting on his day off. He did not lose any pay because of a scheduling error. He was paid for reporting to the meeting consistent with the reporting time pay regulation.

This case also is very good because it, once again, says you have to have an actual injury to recover on a wage statement claim.  No injury, no money.  And a missing piece of information is not an injury.

The case is Price v. Starbucks Corp. and the opinion is here.

Court of Appeal: Up to 2 Meal / Rest Period Penalties Per Day

The Court of Appeal in UPS v. Superior Court decided that when an employee claims to have been denied both meal AND rest periods in a single day, s/he may recover two of the one-hour penalties made available under Labor Code Section 227.6.  So, one penalty is available for however many meal periods are denied in a day, and a separate penalty is available for however many rest periods are denied.
The case is UPS v. Superior Court and the opinion is here.

Court of Appeal Upholds the Denial of Meal Period Class Action

While the world waits for the California Supreme Court to issue the fabled Brinker decision on meal periods, the courts of appeal continue to find that employers need only make available meal periods, and not force them. 

The latest opinion involves a class action over meal and rest breaks and wage statements. The trial court found that the company took great measures to provide meal breaks and that, therefore, it would be impossible to have a class claim over denial of same. The court also held that wage statement claims require proof of actual injury, which is another subject that the California Supreme Court is considering.

I don't see anything new here for HR to be concerned with. There is a heady discussion of when courts can rely on precedent that is subsequently "de-published," but that's only good for procedure geeks like moi.

This opinion is in Tien v. Tenet Healthcare and it is available here.

Ninth Circuit: Pharmaceutical Sales Representatives are Exempt under FLSA

The plaintiffs in Christopher v. SmithKline Beecham Corp. were pharmaceutical sales representatives. They visit doctors on behalf of the company and attempt to persuade the doctors to prescribe their particular drugs to patients.  The company argued that these employees were exempt as "outside sales." The employees argued they were not sales persons, primarily because the patients themselves were the buyers, not the doctors.

The Ninth Circuit disagreed, holding that pharmaceutical sales reps obtain "sales" by convincing a doctor to agree to prescribe the product (a non-binding commitment).

The case is interesting for two reasons. First, the court explains what kinds of activities the outside sales exemption covers, and there is not much case law on this in the Ninth Circuit. In particular, there is a lengthy discussion about the difference between "selling" and "promoting."  The former is exempt and the latter is not. Second, the court refused to follow the US Department of Labor's current position on the exemption, which carried the day in another case in the Second Circuit.  In re Novartis Wage & Hour Litig., 611 F.3d 141 (2d Cir. 2010).

California law should follow the FLSA outside sales exemption. So this case may be helpful in California cases as well.  But, as the Novartis case shows, the US DOL and some courts do not agree that pharmaceutical salespersons are exempt, so keep that in mind.

The case is Christopher v. SmithKline Beecham and the opinion is here.

Medical Pot at Work - It's Back!

The California state senate apparently is taking up another attempt to stop "discrimination" against the stoned at work.  (Yes, there are some exceptions, e.g., they can't be too stoned - impaired - or work at a safety sensitive job). Just read the bill....The text of SB 129 is here.

Like the failed Prop 19, which the voters rejected last year, this bill is too vague and makes it harder for employers to fire people who come to work buzzed than it is to fire people who come to work drunk.  There, I said it.  Unlike Prop. 19, this bill allegedly applies only to "medical marijuana" users, not recreational users.

For the record, I have nothing against pot, medical marijuana, caring cannabis, or wacky weed.  I don't care if pot is legal or illegal.  But I care if people are stoned when making my dinner, caring for my relative in the hospital, fixing my car, or doing my books, etc. The new bill is too solicitous of pot smokers.  Sorry to harsh your mellow.


DGV

Follow us on Twitter.

And that's an order. Ok, not really.  Anyway, I'm not sure why an employment lawyer needs to be on Twitter.  I guess it's a way for me to "blog" in fewer than 200 characters, without the guilt. Or the grammar.  And then there's the really significant reason. It justifies an iPad 2.0 when it comes out. One cannot tweet effectively without a sleek, shiny Apple product.

Anyway, I'm going to try to tweet about employment law-related articles, announcements by other tweeting employment law-related government agencies, new cases, etc.  And of course I'll "retweet" everything by Justin Bieber, whoever he is.  Who says I'm old and out of touch?  Oh. Right. I do.

We'll still blog about more in-depth analyses of employment law cases, too.  So, please do not despair if you're not part of the twittering horde. 

But if you ARE in our super cool club of twittering employment law-lovers, please follow us on Twitter and do your bit to make us the 3,000,000th most popular member.  OK, it's a stretch goal.  You can sign up here: 

Greg

Court of Appeal: Sexual Harassment Claim Untimely

You have to file an administrative charge with the Department of Fair Employment and Housing within a year of the last act about which you claim is harassment, discrimination, or retaliation. So, when Irene Trovato testified at her deposition that the last time Michael Allyn harassed or retaliated against her was January 31, 2007, the charge she filed on May 8, 2008, was untimely.

In opposition to her employer's and Allyn's summary judgment motion, she submitted a declaration under penalty of perjury in which she said that the harassment continued until she left her employment in May 2007 (which would have rendered her charge timely fled). But, she contradicted her clear deposition testimony, which you cannot do.
Then, Trovato claimed the "continuing violation doctrine," which has gutted the statute of limitations in these types of cases, rendered her claim timely.  But the court of appeal said the doctrine did not apply:

 The case is Trovato v. Becton Coulter, Inc. and the opinion is here.

Trovato also argues that she still reported to Allyn after January 31, 2007, until she resigned in May 2007, and that this assignment alone—without any other evidence—was sufficient to constitute harassment or retaliation. There is no authority for this argument, and its acceptance would extend the statute of limitations indefinitely.

The conclusory statements in Trovato’s declaration are not sufficient to raise a triable issue of material fact on the statute of limitations issue, and she cannot defeat the grant of summary judgment by contradicting her sworn deposition testimony on material points in a later-filed declaration. (Shin v. Ahn (2007) 42 Cal.4th 482, 500, fn. 12; D’Amico v. Board of Medical Examiners (1974) 11 Cal.3d 1, 22; Whitmire v. Ingersoll-Rand Co. (2010) 184 Cal.App.4th 1078, 1087.)

California Court Again Holds California Pro-Picketing Law is Unconstitutional

The Third District Court of Appeal previously held that California's statutes prohibiting courts from enjoining most union picketing are unconstitutional. See my earlier post here.  The California Supreme Court granted review in that case.

Now the Fifth District Court of Appeal has held the same thing, and involving the same employer, Ralphs Grocery, albeit at a different location.  Money quote:

Laws which prohibit speech based on its content — or, in this case, based on the failure of the speech to address a "labor dispute" — are presumptively invalid. (Simon & Shuster, Inc. v. Members of N.Y. State Crime Victims Bd. (1991) 502 U.S. 105, 116.) Such laws are permitted only if they serve a compelling state interest and are narrowly drawn to accomplish that interest. (Mosley, supra, 408 U.S. 92, 95.) The desire to provide the broadest forum for expression in labor disputes is not a compelling state interest. (Carey v. Brown, supra, 447 U.S. 455, 466.)
We conclude the state may not act to selectively create a free speech right applicable only to the few, while excluding all others, in the absence of a compelling state interest. As a result, we hold that the Moscone Act and Labor Code section 1138.1 contravene the free speech provisions of California Constitution article I, section 2, by discriminatorily conferring speech rights on some, but not all, Californians without a compelling state interest.

Read this one quickly because the Supremes likely will take it up along with the earlier Ralphs case.
The case is Ralphs Grocery Co. v. UFCW Union Local 8 and the opinion is here.

Ninth Circuit: WARN Act Opinion

The WARN Act requires companies to give at least 60 days' notice of shutdowns and mass layoffs that affect a certain number of people.  For example, to be covered, a "mass layoff" must involve an "employment loss" for a group comprised of at least 50 employees who constitute at least 1/3  of the workforce. 

The thing is, the law and regulations contain a number of exceptions and special definitions regarding who is an employee, who counts as a layoff, etc. There are so many moving definitions and exceptions, it is impossible (or maybe just dumb) to give WARN advice "off the cuff."

One of the key definitions is "employment loss" because that's how you tell how many employees are affected by a layoff or shutdown.  If < 50 employees have suffered an "employment loss" then federal WARN is not triggered.

So, in Collins v. Gee West, the employer was looking for a buyer and gave less than 60 days' notice of a shutdown.  Collins and other sued for the WARN damages due for failure to give 60 days' notice.
But the Company's notice was that the shutdown would occur on October 7. By that date, all the employees had quit for other employment.  The Company argued that these employees voluntarily departed before the October 7 shutdown date. Having voluntarily departed, they did not suffer an employment loss.

The district court bought that argument and granted the employer's motion for summary judgment. On appeal, not so much. The Ninth Circuit held that when folks leave employment after being told the business is going to shut down, that is not a "voluntary departure" exception to the "employment loss" definition. As the court pointed out, if that were the case, then the only way to tell whether a WARN notice was due would be after the fact.  So, the employer must reasonably calculate how many employees are anticipated to be affected by the employer's layoff or shutdown decision. The fact that an employee does not wait to the last day to leave does not eliminate the requirement of counting that employee as part of the layoff.

I figured there would be a discussion of the defenses to inadequate notice like the "faltering company" exception. Maybe next time.

The case is Collins v. Gee West and the opinion is here.


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Court of Appeal Upholds Wage Statement Penalties

So, several employees of Heritage Residential Care, Inc. "lacked social security numbers."  Naturally, the employer immediately fired them. 

No, silly, the employer re-classified them as independent contractors!   Because, after all, without social security numbers, the employer could not withhold taxes. And you have to withhold an employee's taxes.  But you don't have to withhold an independent contractors!  Brilliant! 

As you can imagine, since this has come to my attention over here, the employer's deft maneuver did not end well. Employees sued for penalties, among other things, because the employer did not provide adequate "wage statements" per Labor Code section 226. 

After losing before the Labor Commissioner, they sought review on whether the failure to issue compliant wage statements was "inadvertent."  If so, Section 226.3 permits the Labor Commissioner to take that into consideration in deciding whether to assess the penalties.

No sale. After a painstakingly thorough analysis of the meaning of "inadvertence," the court of appeal decided it simply means that it was unintentional.  Here, the employer intentionally chose to issue 1099 forms to these employees, because they lacked social security numbers. 

Therefore, employers who intentionally issue defective wage statements, or who skip issuing them on purpose, will not qualify for the statutory leniency built into Labor Code section 226.3. 

The case is Heritage Residential Care, Inc. v. DLSE and the opinion is here.

U.S. Supreme Court Recognizes Third-Party Retaliation Claims

Justice Scalia for a unanimous Supreme Court wrote that employees may claim retaliation when they are associated with someone ELSE who engaged in protected activity.  What?

Miriam Regalado was engaged to Eric Thompson. They both worked for North American Stainless.  So, Miriam filed a charge with the EEOC alleging sex discrimination. NAS fired Thompson three weeks later. 

Thompson then filed a retaliation charge. But Thompson did not actually engage in protected activity. Regalado was the one who filed with the EEOC. 

So, was it retaliation under Title VII to fire Thompson?  The Supreme Court said yes. Relying on the Court's expansive definition of retaliation set forth in Burlington N. & S. F. R. Co. v. White, 548 U. S. 53 (2006),the court said:

“the antiretaliation provision, unlike the substantive provision, is not limited to discriminatory actions that affect the terms and conditions of employment.” Id., at 64. Rather, Title VII’s antiretaliation provision prohibits any employer action that “well might havedissuaded a reasonable worker from making or supporting a charge of discrimination.” Id., at 68 (internal quotation marks omitted).

And of course, they found that firing a fiance "well might have dissuaded" the complainant from making or supporting a charge: NAS argued, where do you draw the line?  Trusted co-worker? Girlfriend? What third parties are close enough to the complainant.  The Court could not find any language in Title VII to support setting down a blanket rule.
 

We must also decline to identify a fixed class of relationships for which third-party reprisals are unlawful. We expect that firing a close family member will almost always meet the Burlington standard, and inflicting a milder reprisal on a mere acquaintance will almost never do so, but beyond that we are reluctant to generalize.

The court next decided that Thompson had standing to sue under Title VII because he was a "person aggrieved."  The Court knew it was opening a can of worms to let third parties sue. So, it limited Title VII standing to those covered by the "zone of interests" Title VII seeks to protect.  Thompson was an employee at the same company as his fiance, and, most importantly, according to the complaint, the company fired him for the purpose of hiring the fiance who filed the charge.
 
The case is Thompson v. North American Stainless Inc. and the opinion is here.
DGV

U.S. Supreme Court Upholds Background Check Questions

The U.S. Supreme Court ducked deciding whether the U.S. Constitution protects individuals' right to privacy in personal information.  Instead, they "assumed" that there was such a protection and then decided that NASA's background questions were constitutional no matter what.  This provoked a concurrence in the judgment only from Justice Scalia (and another, short one from Justice Thomas), as both of them wanted the court to decide the constitution contains no such right.

The employment law issue here is whether NASA's questions were appropriate issues to ask applicants and employees. Most federal government employees are subjected to a standard background check. But contract employees were only recently added, following the 9/11 attacks.  NASA employed a number of contract employees at its Jet Propulsion Lab, and had to implement the checks for current employees, some of whom were employed for many years.

The questions included standard background information, but then asked about drug use, sales, etc., and asked for explanations if the employee admitted to involvement with illegal drugs.  After the employee answered the questions, the agency sent out questionnaires to landlords and references on a standard form. That standard form contains a number of questions to which plaintiffs objected:

the form asks if the reference has "any reason to question" the employee’s "honesty or trustworthiness." Id., at 97. It also asks if the reference knows of any "adverse information" concerning the employ. If "yes" is checked for any of these categories, the form calls for an explanation in the space below. ... That space is also available for providing "additional information" ("derogatory" or "favorable") that may bear on "suitability for government employment or a security clearance." Ibid.

The Ninth Circuit held that the request for an explanation by the employee about drug treatment or counseling did not serve a legitimate interest sufficient to overcome the employee's privacy rights. The court of appeals also decided that the reference forms contained open ended questions that infringed on privacy rights without sufficient linkage to the job.

On review, the Supreme Court decided that these questions do not infringe upon privacy rights even if they were protected by the Constitution:

The questions challenged by respondents are part of a standard employment background check of thesort used by millions of private employers. See Brief for Consumer Data Indus. Assn. et al. as
*** [W]e conclude that the chal-lenged portions of both SF–85 and Form 42 consist of reasonable, employment-related inquiries that further the Government’s interests in managing its internal opera-tions. See Engquist, 553 U. S., at 598–599; Whalen, 429 U. S., at 597–598. As to SF–85, the only part of the formchallenged here is its request for information about “any treatment or counseling received” for illegal-drug use within the previous year. The “treatment or counseling”question, however, must be considered in context. It is a followup to SF–85’s inquiry into whether the employee has“used, possessed, supplied, or manufactured illegal drugs” during the past year. The Government has good reason toask employees about their recent illegal-drug use. Like any employer, the Government is entitled to have itsprojects staffed by reliable, law-abiding persons who will“‘efficiently and effectively’” discharge their duties. See Engquist, supra, at 598–599. Questions about illegal-drug use are a useful way of figuring out which persons havethese characteristics.Amici Curiae 2 (hereinafter CDIA Brief) ("[M]ore than 88% of U. S.companies . . . perform background checks on their employees"). The Government itself has been conducting employment investigations since the earliest days of the Republic.

The court's decision is important to private sector employers looking to justify personal questions and investigative consumer reports. The court recognized the legitimacy of these issues, including questions about drug use.  That should help private-sector and public employers with invasion of privacy claims related to drug testing and background investigations.

Of course the court did not deal with the issue of "adverse impact" discrimination claims here. But the defense to adverse impact is "job related and consistent with business necessity." Language in this opinion should help estasblish this defense.

The opinion is NASA v. Nelson and it is here.
 DGV

Ninth Circuit Pretty Much Kills Most Attorneys' Fees Awards to Employers

In a case where the court readily acknowledged that the plaintiff's claims were frivolous, the court invented a whole new standard for awarding attorney's fees.  The fees statute says the "prevailing party" is entitled to "reasonable attorney's fees."  Then the courts said that employers can recover fees only if the plaintiff's claims are frivolous. 

In this case, Harris v. Maricopa County Superior Court, the court of appeals decided if the plaintiff asserts multiple claims, the defendant can recover fees only on the amount of time spent exclusively on frivolous claims.  So, let's say  the defense counsel spends time that overlaps on frivolous and non-frivolous claims - the attorneys' fees cannot be recovered at all.

In essence, they might as well have said, "if there are multiple claims, unless they are all 100% frivolous, the defendant shouldn't even bother trying for attorney's fees."  Instead, the court hides its true intention by setting a new standard ensuring it's impossible to recover fees, without really saying so. Judge Stephen Reinhardt, who has never met a plaintiff he didn't like, laughed at employers like this:

Although the court may not have erred in determining that the claim was frivolous, it nonetheless erred in awarding substantial fees to defendants on this claim. Almost every time entry in defendants’ fee petition for work related to the hostile work environment claim was also listed as related to some or all of Harris’s nonfrivolous discrimination claims. As we have already explained, in a civil rights action with multiple claims, only some of which are groundless, a defendant is entitled only to those fees attributable exclusively to defending against plaintiff’s frivolous claims. If the work is performed in whole or in part in connection with defending against any of plaintiff’s claims for which fees may not be awarded, such work may not be included in calculating a fee award. Accordingly, the fees properly attributable to this claim, if any, would be quite minimal.

The court's rationale is that the law is "solicitous" of plaintiffs' complaints in civil rights cases.  The court more accurately is "solicitous" of bad faith lawsuits with no chance of succeeding.  It is not mutually exclusive to allow plaintiffs with bona fide claims to have a day in court, while still enforcing some minimal standards.  If a case is frivolous, that means it never should have been brought. It is only fair to defray some of the employers' costs in defending against a lawsuit that never should have been filed in the first place.

Oh, I'm not the only one who smacked his forehead after reading the opinion in this case. There was a dissent that pretty much calls bull on the majority.  Perhaps the full en banc court will take up this issue.

The opinion is Harris v. Maricopa County Superior Court and the opinion is here.

DGV

Court of Appeal: No Attorney-Client Privilege for Employee's Emails to Lawyer

Gina Holmes worked for Petrovich Development Co. LLC as assistant to the CEO, Paul Petrovich.  She was pregnant early in her employment and got into a discussion with her boss about the length of her leave and their respective feelings about her pregnancy. Although it appeared that they had cleared the air, Holmes simultaneously attempted to hire a lawyer, via email at work. Apparently, Holmes became upset that Petrovich forwarded her emails to others in the organization and quit, claiming constructive discharge, discrimination, harassment, etc.

The trial court summarily dismissed the harassment, discrimination and retaliation claims. The court of appeal affirmed - holding that the harassment evidence was limited to email correspondence that was neither severe nor pervasive.

The court of appeal also affirmed dismissal of the claim that Holmes was forced to resign. The court noted that when a plaintiff cannot establish a hostile work environment, a constructive discharge claim is a higher standard and must also fail.  Holmes' retaliation claim failed too, because of the lack of an adverse action.

That left claims for intentional infliction of emotional distress and invasion of privacy, which were tried to a jury. The jury found for the defendants. On appeal, Holmes claimed the trial court should not have allowed Petrovich to use the emails she sent to a lawyer seeking a referral, in which she explained her situation.  The trial court held that Holmes waived the privilege because she used company email, and there were clear policies explaining the company's right to monitor email.

The court of appeal agreed that Holmes waived the privilege Here is the money quote:

Although a communication between persons in an attorney-client relationship "does not lose its privileged character for the sole reason that it is communicated by electronic means or because persons involved in the delivery, facilitation, or storage of electronic communication may have access to the content of the communication" (§ 917, subd. (b)), this does not mean that an electronic communication is privileged (1) when the electronic means used belongs to the defendant; (2) the defendant has advised the plaintiff that communications using electronic means are not private, may be monitored, and may be used only for business purposes; and (3) the plaintiff is aware of and agrees to these conditions. A communication under these circumstances is not a “„confidential communication between client and lawyer‟” within the meaning of section 952 because it is not transmitted “by a means which, so far as the client is aware, discloses the information to no third persons other than those who are present to further the interest of the client in the consultation . . . .” (Ibid.)


When Holmes e-mailed her attorney, she did not use her home computer to which some unknown persons involved in the delivery, facilitation, or storage may have access. Had she done so, that would have been a privileged communication unless Holmes allowed others to have access to her e-mails and disclosed their content. Instead, she used defendants‟ computer, after being expressly advised this was a means that was not private and was accessible by Petrovich, the very person about whom Holmes contacted her lawyer and whom Holmes sued. This is akin to consulting her attorney in one of defendants‟ conference rooms, in a loud voice, with the door open, yet unreasonably expecting that the conversation overheard by Petrovich would be privileged.

Lawyers for employees obviously should take note and advise employees not to use monitored email systems. Employers should ensure their email policies are comprehensive and clear regarding employees' expectations of privacy.

The case is Holmes v. Petrovich Development Company LLC and the opinion is here.