GPH Employment Law Blog

Whistleblower Lawsuits

2012-01-22T20:44:00.000-08:00

Last week, an employee whistle blower complaint was filed against individuals and organizations associated with the Lap-Band weight-loss device. Deuel v. 1 800 Get Thin, LLC, Case No. BC477064 (Jan. 17, 2012). A copy of the complaint is available here. This prompts a reminder that whistle blower, or retaliation, lawsuits pose difficult problems for employers.

There are two types of whistle blower lawsuits. In a qui tam action, the plaintiff seeks relief against the substantive wrongdoing on behalf of the government. The federal False Claims Act is an example. It allows a civil action by a private person on behalf of the government against a contractor who fraudulently bills the government. The successful plaintiff gets a portion of the recovery and attorney's fees. California has its own False Claims Act, which provides for similar relief. For an example of a successful such action, see "Quest Diagnostics settles Medi-Cal whistle-blower suit" in the L.A. Times.

The more common type of whistle blower lawsuit is where an employee calls attention to illegal activity, and then is subjected to adverse action by the employer. The anti-discrimination laws all contain provisions that prohibit retaliation against employees who complain about discrimination and harassment. See EEOC v. Go Daddy Software, Inc., 581 F.3d 951 (9th Cir. 2009) ($135,000 in lost earnings, $5,000 for emotional distress, and $250,000 in punitive damages for retaliation against employee who complained about discrimination); Wysinger v. Automobile Club of Southern California, 157 Cal.App.4th 413, 69 Cal.Rptr.3d 1 (2007) (jury awarded $204,000 in economic damages, $80,000 in noneconomic and $1 million in punitive damages for retaliation against employee who complained about age discrimination).

In some circumstances, employees may also pursue claims for retaliation based on other types of unlawful conduct by the employer. For example, the California Whistleblower Protection Act authorizes claims by state employees who are subjected to adverse action for complaining about waste, fraud, abuse of authority, violation of law, or threat to public health. The employee must first file an administrative charge with the designated state agency.

Labor Code section 1102.5 is the basis for an action by employees of private and public employers who can prove that their employer retaliated against them for providing information to a government or law enforcement agency, where the employee has reasonable cause to believe that the information discloses a violation of state or federal statute, or a violation or noncompliance with a state or federal rule or regulation. This and other whistle blower statutes establish a public policy to protect whistle blowers, which may be invoked to support a claim for wrongful termination in violation of pubic policy. See Green v. Ralee Engineering Co., 19 Cal.4th 66, 960 P.2d 1046, 78 Cal.Rptr.2d 16 (1998).

When an employee has complained about activity that is protected by one of the statutes, the employer must be prepared to prove a legitimate reason for any adverse action that it takes against that employee. That is because a complaining employee can prove a prima facie case of retaliation by establishing the protected activity, adverse action, and that the adverse action followed closely on the protected activity. The establishment of a prima facie case puts the burden on the employer to prove that it had a legitimate reason for its actions.

Accommodating Mental Disabilities

2012-01-15T10:48:00.000-08:00

A recent case from New York provides fodder for a discussion of the scope of an employer's obligation to accommodate an employee's mental disability. A law firm fired one of its attorneys after learning that he attempted to have charges for adult movies and calls to escort services to the firm's clients. The attorney sued for discrimination and failure to accommodate his bipolar disorder. The New York Division of Human Rights awarded him $600,000, but the Appellate Division of the New York Supreme Court tossed out the award. Hazen v. Hill Betts & Nash, LLP, Case No. 104781/10 (N.Y. App. Div. Jan. 5, 2012). "[A] petitioner's disability does not shield him from the consequences of workplace misconduct."

Although the court's conclusion accurately described the circumstances of that case, employers must engage in a more nuanced analysis to avoid liability. For example, employees with mental disabilities that cause them to violate workplace attendance policies may nonetheless be entitled to an accommodation. See Humphrey
v. Memorial Hospitals Association, 239 F.3d 1128 (9th Cir. 2001) (medical transcriptionist with obsessive-compulsive order that prevented her from getting to work on time might be entitled to work from home or to unpaid time off to bring her disability under control). The EEOC has opined that a schizophrenic warehouse worker who violates a company's conduct toward others and dress policies may be entitled to a pass. See
EEOC Enforcement Guidance on the Americans with Disabilities Act and Psychiatric Disabilities, No. 30, Example C.

An employer should use the following analysis to determine its responsibilities when dealing with an employee who has violated an employer's workplace conduct standards:

Does the employer have information from which it could reasonably conclude that the employee has a disability? If an employer does not know that an employee has a disability, it cannot be accused of discrimination, and has no obligation to provide a reasonable accommodation. Further, an employer may not even inquire about a possible disability unless it has a reasonable belief, based on objective evidence, that: (1) an employee's ability to perform essential job functions will be impaired by a medical condition; or (2) an employee will pose a direct threat due to a medical condition.
Is the workplace conduct standard job-related for the position in question and consistent with business necessity? The EEOC's opinion that the warehouse worker referred to in its guidelines might be entitled to a pass on the conduct and dress policies was based on its conclusion that those policies were not job-related for a warehouse worker with no customer contact.
Is there a reasonable accommodation that would allow the employee to perform the essential functions of his or her job despite the disability? The EEOC Enforcement Guidance gives the following example: A reference librarian frequently loses her temper at work, disrupting the library atmosphere by shouting at patrons and coworkers. After receiving a suspension as the second step in uniform, progressive discipline, she discloses her disability, states that it causes her behavior, and requests a leave of absence for treatment. The employer may discipline her because she violated a conduct standard -- a rule prohibiting disruptive behavior towards patrons and coworkers -- that is job-related for the position in question and consistent with business necessity. The employer, however, must grant her request for a leave of absence as a reasonable accommodation, barring undue hardship, to enable her to meet this conduct standard in the future. See No. 31, Example A.

Earlier posts on the disability laws appeared on 7/10/2011, 6/12/2011, 1/14/2009, 9/14/2008, and 7/20/2008.

Insurance Agent Is An Independent Contractor, Not An Employee

2012-01-08T10:00:00.000-08:00

The enactment by the California legislature of new penalties for willful misclassification of independent contractors should have employers paying close attention to the applicable standards. (See Labor Code section 226.8.) A recent decision from the First District Court of Appeal in San Francisco is instructive. Arnold v. Mutual of Omaha Ins. Co., Case No. A131440 (Dec. 30, 2011).

Kimbly Arnold was licensed by the Department of Insurance as an independent agent or broker. When she was appointed by Mutual of Omaha as a nonexclusive agent, she was under appointment with another insurance company to offer its products. Her contract with Mutual of Omaha stated that she was an independent contractor, and made her responsible for maintaining any required license. The evidence submitted in support of Mutual's summary judgment motion showed that she had no supervision, did not receive a performance evaluation. Training was available, but attendance was not required. Mutual's insurance agents were responsible for their own expenses, including business cards, vehicles and office equipment. If they elected to use Mutual's office, they had to pay monthly fees to cover the expenses.

Arnold brought a class action on behalf of all Mutual's licensed agent's, claiming that they were employees and should have been reimbursed for expenses under Labor Code section 2802, and were not paid the wages they were owed timely upon termination of employment, as required by Labor Code section 201 and 202. The Court of Appeal affirmed the grant of summary judgment for Mutual, because Arnold was not an employee entitled to the protections of those sections.

The Court of Appeal rejected Arnold's argument that she met the "definition" of employee in Labor Code section 2750, which provides "The contract of employment is a contract by which one, who is called the employer, engages another, who is called the employee, to do something for the benefit of the employer or a third person." Section 2750 is not a definition of "employee," but a definition of "contract of employment."

Because it found no statutory definition, the court turned to the common law principles articulated by the California Supreme Court in S.G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal.3d 341 (1989). That decision identified the "principal" factor of the test to be whether the person receiving the services has the right to control the manner and means of accomplishing the result. It identified the following additional factors: whether the principal has the right to discharge at will, without cause; whether the one
performing services is engaged in a distinct occupation or business; the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision; the skill required in the particular occupation; whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work; the length of time for which
the services are to be performed; the method of payment, whether by the time or by the job; whether or not the work is a part of the regular business of the principal; and, whether or not the parties believe they are creating the relationship of employer-employee.

In this case, all the factors pointed to an independent contractor arrangement.

For a post about another case in which the employer did not fare so well, see $14.4 Million To FedEx Drivers Misclassified As Independent Contractors.

California Supreme Court Punts On Clarifying Exemption Rules

2012-01-01T11:13:00.000-08:00

California Supreme Court

The California Supreme Court has passed on an opportunity to provide California employers with clear guidelines for applying the exemptions from the state's wage and hour rules. In Harris v. Superior Court, Case No. S156555 (Dec. 29, 2011), the Court chastised the Court of Appeal for applying an "administrative/production worker dichotomy" as a dispositive test for the administrative exemption, but declined to provide any usable tests of its own.

The case was a class action on behalf of claims adjusters for Liberty Mutual and Golden Eagle. Guided by two decisions in another claims adjuster class action against Farmers Insurance (Bell II and Bell III), the Court of Appeal ordered the employers' exemption defense stricken. For the Court of Appeal, the dispositive question was whether the claims adjusters were administrative workers or production workers. Although there was evidence that the adjusters' work in Harris was not routine and unimportant, they fell on the production side because their work -- investigating claims, determining coverage and setting reserves -- was not carried on at the level of policy or general operations.

The Supreme Court ruled that the lower court should have paid closer attention to changes in wage and hour law after the Bell litigation had gotten under way. In 1999, the California Legislature amended the Labor Code to reinstitute daily overtime, and directed the Industrial Welfare Commission to review the duties that met the test of the administrative, executive and professional exemptions. In 2001, the IWC adopted new wage orders that provided a more detailed explanation of what constituted administrative work than the previous wage orders. The wage orders are available at the IWC's website. The new wage orders stated that the activities constituting exempt work "shall be construed in the same manner as such terms are construed in the following regulations under the Fair Labor Standards Act effect as of the date of this order: 29 C.F.R. Sections 541.201-205, 541.207-208, 541.210 and 541.215."

The text of the new wage orders combined with the language of the cited federal regulations led the Supreme Court to conclude that there are two components to the part of the definition requiring that administrative work be directly related to management policies or general business operations. The work must be qualitatively administrative, and quantitatively of substantial importance to the management or operations of the business. Administrative work includes work done by white collar employees engaged in servicing a business, which may include advising management, planning, negotiating and representing the company. In light of those principles, it was inappropriate to adopt the administrative/production dichotomy as a dispositive test.

In the end, the Court declined to adopt any bright line rules. "The essence of our holding is that, in resolving whether work qualifies as administrative, courts must consider the particular facts before them and apply the language of the statutes and wage orders at issue." It also declined to rule whether the claims adjusters in the case before it were exempt. "We express no opinion on the strength of the parties' relative positions. We merely hold that the Court of Appeal majority erred in its analysis."

Reporting Time Pay and Split Shifts

2011-12-25T09:05:00.000-08:00

A recent decision from the Second District Court of Appeal in Los Angeles discusses two requirements found in the the California wage orders -- minimum pay for those who show up to work but are sent home early, and extra pay for those who work a split shift. Aleman v. Airtouch Cellular, Case No. B231142 (Dec. 21, 2011).

The reporting time pay provision of the wage orders states: "(A) 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. (B) If an employee is required to report for work a second time in any one workday and is furnished less than two (2) hours of work on the second reporting, said employee shall be paid for two (2) hours at the employee’s regular rate of pay, which shall not be less than the minimum wage. (C) The foregoing reporting time pay provisions are not applicable when: (1) Operations cannot commence or continue due to threats to employees or property; or when recommended by civil authorities; or (2) Public utilities fail to supply electricity, water, or gas, or there is a failure in the public utilities, or sewer system; or (3) The interruption of work is caused by an Act of God or other cause not within the employer’s control. (D) This section shall not apply to an employee on paid standby status who is called to perform assigned work at a time other than the employee’s scheduled reporting time." 2001 Wage Order, Section 7.

One of the plaintiffs in Aleman sought reporting time pay when he was required to attend regularly scheduled weekend "store meetings" once or twice a month, each of which lasted less than two hours. The Court of Appeal ruled that he was not entitled to two hours' of pay because the meetings were "scheduled." and he worked more than half the scheduled time. "There is only one reasonable interpretation of subdivision 5(A) as it pertains to scheduled work—when an employee is scheduled to work, the minimum two-hour pay requirement applies only if the employee is furnished work for less than half the scheduled time." It distinguished an earlier case where an employee was called into work for a talk that lasted 45 seconds, and then fired. Price v. Starbucks Corp., 192 Cal.App.4th 1136 (2011). Because that talk was not "scheduled," the employee was entitled to two hours of pay.

The wage orders define split shift as "a work schedule, which is interrupted by non-paid non-working periods established by the employer, other than bona fide rest or meal periods." 2001 Wage Order, Section 2(Q). Under Section 4(C), "[w]hen an employee works a split shift, one (1) hour’s pay at the minimum wage shall be paid in addition to the minimum wage for that workday, except when the employee resides at the place of employment." The Court of Appeal ruled that an employee was only entitled to a split shift premium of the total compensation for the work periods plus an hour was less than the minimum wage. A federal district court had earlier come to the same conclusion. Galvez v. Federal Express, Inc. (N.D. Cal. Apr. 28, 2011).

Religious Institutions and Anti-Discrimination Laws

2011-12-18T10:00:00.000-08:00

A recent decision from the Santa Ana division of the Fourth District Court of Appeal prompts a look at how the anti-discrimination laws apply to religious institutions. In Henry v. Red Hill Evangelical Lutheran Church of Tustin, No. G044556 (Dec. 9, 2011), the Court of Appeal affirmed the dismissal of a discrimination claim by a teacher at a church school who had been fired for living with her boyfriend and raising their child together without being married.The application of federal anti-discrimination laws to religious institutions is before the United States Supreme Court in Hosanna-Tabor Evangelical Lutheran Church and School v. EEOC, No. 10-553.

The applicable state law is the California Fair Employment and Housing Act. The applicable federal laws are Title VII of the Civil Rights Act of 1964 and the Americans with Disabilities Act. They deal with the issue in different ways.

The FEHA by its express terms does not apply to religious organizations at all. Under California Government Code section 12926(d), "'Employer' does not include a religious association or corporation not organized for private profit." Section 12926.2 contains exceptions to the exclusion for those employed in religious health care facilities that do not limit their care to those of a particular religion (but not including those in executive or pastoral care positions) and those employed by a nonprofit public benefit corporations affiliated with a particular religion that operates an educational institution as its sole or primary activity. Otherwise, a church or other religious institution cannot be held liable under the FEHA no matter what the employee's duties or what the basis for alleged discrimination. See, for example, Kelly v. Methodist Hospital of Southern California, 22 Cal.4th 1108, 997 P.2d 1169, 95 Cal.Rptr.2d 514 (2000) (age discrimination).

In contrast, the federal statutes allow religious organizations to give employment preference to members of their own religion, but otherwise prohibit employment discrimination. Thus, a Roman Catholic school may limit its hiring those of the Roman Catholic faith, but may not refuse to hire a Roman Catholic because of race, national origin, sex, or disability. The federal Courts of Appeals have also recognized a ministerial exception to application of the anti-discrimination laws based on the First Amendment. The EEOC has explained both principles in Questions and Answers: Religious Discrimination in the Workplace. In the Hosanna-Tabor Evangelical Lutheran Church and School case, the Supreme Court recognized the ministerial exception and applied it to bar a claim under the Americans with Disabilities Act.

Public Entities and Implied Employment Contracts

2011-12-11T10:00:00.000-08:00

The California Supreme Court recently provided an answer to the Ninth Circuit that may affect litigation between local governments and their employees. On the appeal from dismissal of a claim against Orange County for changing retired employee health benefits, the Ninth Circuit wanted to know whether a county could form an implied contract. In Retired Employees Association of Orange County, Inc. v. County of Orange, No. S184059 (Nov. 21, 2011), the Supreme Court concluded that it could so long as there was no legislative prohibition against such an arrangement.

From 1985 until 2007, the County of Orange combined active and retired employees into a single unified pool for purposes of calculating health insurance premiums. If there had been separate pools, the premiums for active employees would have been lower than those for retired. The County paid a large portion of the premiums for active employees, but retired employees paid the majority of their own premiums. To save money, the county passed an ordinance in 2007 that split the groups into separate pools. That resulted in the retired employees' having to pay higher premiums. The retired employees' retirement association sued, claiming that the long-standing practice of combining retired and active employees into a single pool had created an implied contractual right to continuation of the single unified pool.

A long line of cases have established that public employment is not held by contract, but by statute. See Miller v. State of California, 18 Cal.3d 808, 557 P.2d 970, 135 Cal.Rptr. 386 (1977); Jenkins v. County of Riverside, 138 Cal.App.4th 593, 41 Cal.Rptr.3d 686 (2006). That principle has been invoked in a wide variety of circumstances to bar claims by public employees who sought to enforce rights that were not found in the express language of a statute. See, e.g., Shoemaker v. Myers, 52 Cal.3d 1, 801 P.2d 1054, 276 Cal. Rptr. 303 (1990) (public employee has no claim for breach of an implied covenant of good faith and fair dealing).

Here, the Supreme Court pointed to another line of cases, which hold that, where a public entity has authority to enter into a contract, normal contract rules apply, unless a statute provides otherwise. M.F. Kemper Const. Co. v. City of Los Angeles, 37 Cal.2d 696 (1951). In the public employment context, the Supreme Court had previously acknowledged that public entities may be bound by implied contracts in the absence of a statutory prohibition. Youngman v. Nevada Irrigation Dist., 70 Cal.2d 240 (1969). In addition, the Meyers-Milias-Brown Act (Cal. Gov. Code sections 3500-3511) authorizes agreements with public employee bargaining representatives through the memorandum of understanding process.

The Retired Employees Association based its claim on the history of provisions in the memorandums of understanding between the county and the employees' organizations. Because there is no statute that would prohibit implied contractual obligations, the association had a legal basis on which to pursue the claim. The Supreme Court did not opine on whether the facts made out a claim, but just answered the question of law posed by the Ninth Circuit.

If the application of the case is restricted to memorandums of understanding, it will not have a significant effect on public employee lawsuits. But, the court said that implied obligations may be created out of an ordinance or resolution in appropriate circumstances, and did not limit its statement to the adoption of a memorandum of understanding.

The Customer Is Not Always Right

2011-11-13T09:06:00.001-08:00

Businesses succeed by satisfying their customers. In a phrase coined by either Marshall Field or Harry Gordon Selfridge: "The customer is always right." But, where a customer's wishes collide with an employee's legal rights, the employer may have to ignore the customer's wishes.

A 2010 case from the United States Court of Appeals for the Seventh Circuit illustrates the dangers of acceding to customer preferences. In Chaney v. Plainfield Healthcare Center, 612 F.3d 908 (7th Cir. 2010), a white patient said that he only wanted to receive care from white health care providers. The facility complied by issuing written instructions that no Black providers were to enter the patient's room. That was consistent with its policy of honoring patients' racial preferences. The Court of Appeals found that the policy contributed to an unlawful hostile environment. The EEOC Compliance Manual similarly states that "customer preference is not a defense to race discrimination."

The Cheney court distinguished cases that had recognized gender as a bona fide occupational qualification in the health care and prison fields, where the customers had privacy concerns. See Jennings v. New York State Office of Mental Health, 786 F. Supp. 376 (S.D.N.Y. 1992). A recent case from the Southern District of New York acknowledged the need to accommodate privacy concerns, but ruled that there were means for accommodating that interest other than a flat ban on appointing female correctional officers to a particular position. See White v. Department of Correctional Services, Case No. 08-0993 (S.D.N.Y. Sep. 30, 2011).

A 2002 California Court of Appeal case recognized another limited exception to the usual rule. In West v. Bechtel Corp., 96 Cal.App.4th 966, 117 Cal.Rptr.2d 647 (2002), the court reversed a $100,000 judgment based on age discrimination allegations. The Saudi Arabian government entity that Bechtel had a contract with vetoed the hiring of a 62-year old employee for a key position because of his age. Because there was no evidence that the decision-maker at Bechtel had a discriminatory motive, the employee had no case. Bechtel had made a neutral business decision based on the direction of the Saudi government entity.

Although there are limited circumstances where an employer' accession to customer preference may be a defense to a discrimination claim, those are exceptions to the firmly established rule to the contrary.

In addition, failure to take corrective action when informed of a customer's harassing behavior may expose the employer to hostile environment liability. In Salazar v. Diversified Paratransit, Inc.,117 Cal.App.4th 318, 11 Cal.Rptr.3d 630 (2004), the court ruled that a female driver had a viable hostile environment claim if her employer had failed to take action after she reported that a client had harassed her.

Does It Matter Whether Your Employees Are At-Will?

2011-11-06T10:00:00.000-08:00

Some private employers worry whether they have done enough to preserve their at-will employment relationship with their employees. Others make risky decisions based on the unjustified belief that the at-will employment doctrine will protect them from liability. (Public employers do not face these issues, because their employees enjoy statutory and constitutional rights to their jobs. In unionized workplaces, collective bargaining contracts typically require just cause for discharge of union workers.)

In California, employment is presumed to be at-will, under Labor Code section 2922. That means that the employment relationship may be terminated at any time by either the employer or the employee. Even if the employer does not expressly agree to some other relationship, it may create an implied agreement not to discharge excerpt for good cause based on its actions, as explained in Foley v. Interactive Data Corp., 765 P. 2d 373 (1988).

In the absence of an express or implied agreement not to discharge except for good cause, the employer may discharge for any reason or for no reason, so long as it is not an illegal reason. That is a substantial limitation on the employer's discretion to end the employment relationship, because of the great number of illegal reasons under federal and California law. You cannot fire someone because of a protected characteristic, such as race, sex, disability, ethnicity, national origin, religious belief, age, or sexual orientation. You cannot fire someone in retaliation for complaining unlawful discrimination or harassment. You cannot fire someone in violation of public policy, such as whistle-blowing. And so on.

The way that the burdens of proof are allocated in employment lawsuit further diminishes the value of the at-will doctrine. Under the McDonnell-Douglas burden-shifting rule, the plaintiff bears the minimal burden of showing that he or she has a protected status (such as race, having complained about discrimination, or whistle-blowing), was subjected to adverse employment action, and some other minimal evidence that the protected status has a causal connection with the adverse action. For example, in a retaliation case, it is enough for the plaintiff to show that he or she complained and was fired, and that the firing came closely on the heels of the complaint. See Arteaga v. Brink's, Inc., 163 Cal. App. 4th 327 (2008). Once the plaintiff satisfies that minimal burden, the burden shifts to the employer to provide a legitimate reason for its action.

Because it is so easy for employees to challenge discharges in court, it is not safe to rely on the at-will doctrine to avoid liability in a lawsuit. Employers must make sure that there is a documented, legitimate basis for every discharge decision.

Mandated Leaves in California

2011-10-30T10:00:00.000-07:00

Employers in California must comply with three overlapping statutes that require them to give their employees time off -- the federal Family and Medical Leave Act (FMLA), the California Family Rights Act (CFRA), and the pregnancy disability leave provisions of the Fair Employment and Housing Act (PDL). This post will give you the basics. If you would like training on the details of these statutes, please contact us at calvin.house@gphlawyers.com.

FMLA

Under this statute, employers with 50 or more employees must grant eligible employees up to 12 weeks off per year in the following circumstances -- (1) for the employee's own serious health condition, (2) when needed to care for a spouse, child or parent with a serious health condition, (3) in connection with the birth of a child or placement of a child for adoption or foster care (sometimes called baby bonding leave), (4) for exigencies created by the call up of a family member from the reserves or National Guard, and (5) when needed to care for a family member in the military who has been injured in the line of duty (this entitlement is up to 26 weeks). An employee is eligible for leave under the FMLA if he or she has been on the payroll for a year, and has actually worked 1250 hours within the 12 months immediately preceding the leave. Employers must maintain group health benefits during FMLA leave. The text of the statute is available here. The Department of Labor's FMLA regulations are available here.

CFRA

The CFRA has the same coverage and eligibility requirements as the FMLA. It differs in two important respects -- (1) the definition of serious health condition excludes pregnancy related conditions, and (2) by operation of the Registered Domestic Partners Rights and Responsibilities Act, the word "spouse" is interpreted to include registered domestic partners. The text of the statute is available here (Government Code section 12945.2). The Department of Fair Employment and Housing's regulations are available here (sections 7297.0 - 7297.11).

PDL

Employers with five or more employees must allow any female employee (no matter how long she has been an employee) to take up to four months of leave when she is disabled by pregnancy. Disabled by pregnancy means unable to perform the essential functions of her job without undue risk to herself, to others, or to her unborn child. Because the CFRA excludes pregnancy related conditions from its coverage, a woman will have up to 12 weeks of baby bonding time under the CFRA after she has exhausted her pregnancy leave. Her FMLA time runs concurrently with her PDL time. A new law that is effective January 1, 2012, requires employers to maintain group health benefits during pregnancy leave. The text of the statute is available here (Government Code section 12945). The DFEH's regulations are available here (sections 7291.2 - 7291.16).

Using California's Anti-SLAPP Statute in Employment Litigation

2011-10-23T10:00:00.000-07:00

California has a statute that is designed to discourage Strategic Lawsuits Against Public Participation. It is written broadly enough to permit its use in some employment lawsuits. The advantage to defendants in cases where the anti-SLAPP statute applies is that it puts the burden on the plaintiffs early in their lawsuits to provide some evidence to support their claims. This post will discuss the types of cases and the procedure to be followed where the statute applies.

The defendant may invoke the anti-SLAPP statute (Cal. Civ. Proc. Code section 425.16) if the lawsuit includes a cause of action arising from any act of that person in furtherance of the person's right of petition or free speech under the United States Constitution or the California Constitution in connection with a public issue. An "act" is defined very broadly, and the statute has been applied to a wide variety of claims, including defamation, invasion of privacy, infliction of emotional distress, malicious prosecution, trade secrets, and whistle-blowing. For an example of successful use of the statute to defeat a former employee's defamation cause of action, see Neville v. Chudacoff, 160 Cal.App.4th 1255, 73 Cal.Rptr.3d 383 (2008).

If the plaintiff's complaint includes a cause of action within the scope of the statute, the defendant has 60 days within which to file the anti-SLAPP motion. Filing the motion stays all discovery unless the court allows it for good cause shown. If the defendant's moving papers establish that a claim is subject to the statute, the burden shifts to the plaintiff to provide admissible evidence to establish a probability that he or she will prevail. It is in the nature of a reverse summary judgment motion. Defendants may invoke the procedure in federal court against claims based on state law. Thomas v. Fry's Electronics, Inc. (9th Cir. 2005) 400 F3d 1206. If the defendant prevails, it may recover its fees and costs.

The employer must be careful to avoid invoking the statute without good grounds. Upon denial of a frivolous anti-SLAPP motion, the court may award fees and costs against the moving party.

New California Employment Laws

2011-10-16T10:00:00.000-07:00

California State Capitol

It has been a busy few weeks on the legislative front in California. After a closing flurry of activity from the legislature, Governor Brown this week finished signing and vetoing the various bills that made their way to his desk. Here are some new laws that will impact employers, beginning January 1, 2012:

SB 299: This bill prohibits an employer from refusing to maintain and pay for coverage under a group health plan for an employee who takes up to four months of leave because of pregnancy disability. This applies to all employers with five or more employees.

AB 22: This bill prohibits an employer or prospective employer, with the exception of certain financial institutions, from obtaining a consumer credit report, as defined, for employment purposes unless the position of the person for whom the report is sought is (1) a position in the state Department of Justice, (2) a managerial position, as defined, (3) that of a sworn peace officer or other law enforcement position, (4) a position for which the information contained in the report is required by law to be disclosed or obtained, (5) a position that involves regular access to specified personal information for any purpose other than the routine solicitation and processing of credit card applications in a retail establishment, (6) a position in which the person is or would be a named signatory on the employer’s bank or credit card account, or authorized to transfer money or enter into financial contracts on the employer’s behalf, (7) a position that involves access to confidential or proprietary information, as specified, or (8) a position that involves regular access to $10,000 or more of cash, as specified.

AB 592: This bill would makes it an unlawful employment practice for an employer to interfere with, restrain, or deny the exercise of, or the attempt to exercise, any right to leave under the California Family Rights Act or for pregnancy disability. The statute states that it is declaratory of existing law.

SB 459: This bill adds section 226.8 to the Labor Code. The new section makes it unlawful (1) to willfully misclassify an individual as an independent contractor, and (2) to charge misclassified independent contractors fees or make deductions from their compensation for items such as goods, materials, maintenance, licenses, or repairs. An employer who willfully misclassifies an independent contractor may be subject to a penalty of $5,000 to $15,000 for each violation, and, if the employer is found to have engaged in a "pattern and practice" of misclassifying employees as independent contractors, $10,000 to $25,000 for each violation.

AB 1396: This bill requires any employer who enters into a contract of employment involving commissions as a method of payment with an employee for services to be rendered within the state to put the contract in writing and to set forth the method by which the commissions are required to be computed and paid. The enactment was prompted by a federal court decision that invalidated Labor Code section 2751 because it only applied to out-of-state companies. Lett v. Paymentech, Inc., 81 F.Supp.2d 992 (N.D. Cal. 1999).

SB 272: Existing law requires an employer to grant a leave of absence to an employee who is an organ donor or a bone marrow donor. The leave of absence to an organ donor is up to 30 days in a one-year period. The leave of absence for a bone marrow donor is up to 5 days in a one-year period. The leave of absence for either donor is not a break in his or her continuous service for the purpose of his or her right to salary adjustments, sick leave, vacation, annual leave, or seniority. As a condition of an employee’s initial receipt of the leave of absence, an employer may require the employee to take a specified number of days of earned but unused sick or vacation leave, unless that would violate provisions of an applicable collective bargaining agreement. This bill would provide that the days of leave are business days rather than calendar days, and that the one-year period is measured from the date the employee’s leave begins and consists of 12 consecutive months. This bill would also provide that the leave of absence is not a break in the employee’s continuous service for the purpose of his or her right to paid time off. This bill would further provide that the employer may condition the initial receipt of leave upon the employee’s use of a specified number of earned but unused days for paid time off.

Employment Cases on the Supreme Court's Calendar

2011-10-09T10:00:00.000-07:00

U.S. Supreme Court Building

The U.S. Supreme Court's new term got under way on October 3, the first Monday in October. Here are the employment cases for which the Court has so far granted review. We will update this posting with developments in these cases and any other employment cases for which review is granted.

Coleman v. Court of Appeals of Maryland, No. 10-1016. The Court will decide whether Congress abrogated the States' Eleventh Amendment immunity when it passed the Family and Medical Leave Act. The Fourth Circuit ruled that the Eleventh Amendment barred an FMLA claim against the Maryland Court of Appeals. Argument is scheduled for January 11, 2012. The briefs filed in the case are available at the ABA's Supreme Court Preview site.

Hosanna-Tabor Evangelical Lutheran Church and School v. EEOC, No. 10-553. On January 12, 2012, the Court ruled that the First Amendment requires a "ministerial" exception to employment discrimination laws, and that the exception barred the claims in the case before it. The Sixth Circuit had ruled that the exception did not bar the teacher's claims under the Americans with Disabilities Act. The case was argued on October 5, 2011. The briefs filed in the case are available at the ABA's Supreme Court Preview site. A transcript of the oral argument is available here.

Knox v. SEIU Local 1000, No. 10-1121. The Court may provide clarification of a union's obligations to nonunion public employees who are compelled to pay fair share fees for union representation, under the principles laid down in Chicago Teachers Union, Local No. 1 v. Hudson, 475 U.S. 292 (1986). The Ninth Circuit decision under review is available here. Argument is scheduled for January 10, 2012.

Pacific Operators Offshore, LLP v. Valladolid, No. 10-507. The case concerns compensation for workers injured as a result of operations conducted on the outer continental shelf. On January 12, 2012, the Court affirmed the decision under review, adopting the "substantial nexus" text for determining whether the operative statute applies. The Ninth Circuit decision under review is available here. The case was argued on October 11, 2011. The briefs filed in the case are available at the ABA's Supreme Court Preview site. A transcript of the oral argument is available here.

Roberts v. Sea-Land Services, Inc., No. 10-1399. The case concerns compensation for injured workers under the Longshore and Harbor Workers Compensation Act. The Ninth Circuit decision under review is available here. Argument is scheduled for January 11, 2012. The briefs filed in the case are available at the ABA's Supreme Court Preview site.

UPDATE [10/19/2011]

Elgin v. Department of the Treasury, No. 11-45. The Court will decide whether federal district courts have jurisdiction over constitutional claims for equitable relief brought by federal employees, as the Third and D.C. Circuits have held, or whether the Civil Service Reform Act impliedly precludes that jurisdiction, as the First, Second, and Tenth Circuits have held. The First Circuit decision under review is reported at 641 F.3d 6 (1st Cir. 2011). Argument is scheduled for February 27, 2012.

UPDATE [11/17/2011]

NFIB v. Sebelius, No. 11-393; Florida v. Department of Health and Human Services, No. 11-400. The Court will determine whether the health care reform law is constitutional. The Eleventh Circuit decision under review is reported at 648 F.3d 1235 (11th Cir. 2011). For information about the law's anticipated effect on employers, see this analysis from the Rand Corporation and this one from The New England Journal of Medicine. Arguments will be held over three days: March 26, 27 and 28.

Is "Unpaid Intern" An Oxymoron?

2011-10-02T10:00:00.000-07:00

A recent lawsuit by two interns who worked on the movie "Black Swan" challenges what is reportedly a widespread practice in the film industry -- using unpaid interns to do work that ordinary employees also do. The New York Times website has an article on the lawsuit here. The complaint in Glatt v. Fox Searchlight Pictures, Inc., Case No. 11-CV-6784 (Sep. 28, 2011) alleges violations of the minimum wage and overtime provisions of the Fair Labor Standards Act.

The issue is important, because the practice extends outside the movie industry, and poses substantial liability risks for employers. An April 2010 New York Times article reported on the widespread use of unpaid interns and enforcement efforts by wage and hour agencies. An OregonLive.com article around the same time described some enforcement actions in Oregon.

The U.S. Labor Department uses the following six factors to determine whether a worker is an employee or an intern:

The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
The internship experience is for the benefit of the intern;
The intern does not displace regular employees, but works under close supervision of existing staff;
The employer that provides the training derives no immediate advantage from the activities of the intern, and on occasion its operations may actually be impeded;
The intern is not necessarily entitled to a job at the conclusion of the internship; and
The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

The Department explains the factors in a fact sheet available on its website.

The six-factor test has had a mixed reception in the courts. Recently, the Sixth Circuit Court of Appeals labeled it a "poor method for determining employee status in a training or educational setting," in upholding the dismissal of a Department child labor enforcement action against a non-profit that required students in its school to work in its nursing home as part of their practical training. Solis v. Laurelbrook Sanitarium and School, Inc., 642 F.3d 518 (6th Cir. 2011). That court adopted the more popular "primary benefit" test, which looks at whether the trainees receive the primary benefit of the work they perform. Other courts have been more receptive. Harris v. Vector Marketing Corp., 716 F.Supp.2d 835 (N.D. Cal. 2010).

We previously discussed this issue in an April 2010 post, which contains links to other resources, including the California standards for determining whether an intern is subject to the wage and hour laws (which are similar the the Department of Labor standards). Since that post, the California Division of Labor Standards Enforcement has issued an opinion letter finding that interns enrolled in a structured 11-month educational and training program were not employees.

Although not all courts follow the Department of Labor's six-factor test, employers would be well advised to use it when determining whether to treat interns as employees. This is particularly so in light of the increased attention that the issue has received from regulators over the past couple of years.

UPDATE: NPR ran a story on the lawsuit by the Black Swan interns on November 16, 2011.

Retaliation Claims Based On Co-Worker Harassment

2011-09-25T10:00:00.000-07:00

Employers may not retaliate against employees who complain in good faith about conduct that they believe is unlawful. There are many cases where courts or juries have found conduct not harassing or discriminatory, but went on to find that an employee who complained about the conduct had been subjected to retaliation. Employers must be alert to this possibility so that they can take steps to limit liability for retaliation. There were previous posts to this blog about retaliation on 7/13/2008, 8/17/2008, 10/13/2008, 11/2/2008, 11/16/2008 and 2/1/2009.

One of the elements of a retaliation claim is proof that the employee was subjected to adverse employment action. When the employee has been fired, demoted or suspended, the element is easily proved. But, the federal and state courts have ruled that sufficiently severe and pervasive retaliatory harassment may also constitute adverse action. The concept involves two inquiries: (1) whether the conduct is sufficiently severe to constitute adverse action, and (2) whether the conduct may be imputed to the employer.

Ostracism (or a cold shoulder) is not enough to satisfy the severity element. Here are some examples of what may be enough:

After he complained about harassment, a male employee's co-workers called him "snitch" and other offensive names, and told him he would be lucky if he did not get his ass beat after work. Kelley v. Conco Cos., 196 Cal.App.4th 191, 126 Cal.Rptr.3d 651 (2011).
After she complained about harassment, a female employee was subjected to a steady stream of abuse, including false accusations of misconduct, taunting and false statements about how she was to conduct herself. Noviello v. City of Boston, 398 F.3d 76 (1st Cir. 2005).

For the employer to be responsible for retaliatory harassment, a supervisor or manager must either engage in the conduct or be aware of it and fail to take prompt and effective action.

In light of these principles, employers should take the following steps to limit the risk of liability for retaliatory harassment by co-workers:

Provide training to all employees at least annually on prevention of harassment in the workplace, including the requirement to refrain from retaliatory conduct.
When a complaint is received, separate the subject of the complaint from the complainant, and instruct the subject to have no contact with the complainant.
Monitor the complainant's work environment to assure that co-workers are not engaging in retaliatory harassment.

Think Twice About A Lawsuit Against An Employee

2011-09-18T10:00:00.000-07:00

A recent high profile trial illustrates the dangers employers face when they assert claims against their employees. On Friday, September 16, a Los Angeles Superior Court jury awarded bond trader Jeffrey Gundlach $67 million in a lawsuit that was started by the company that fired him -- Trust Company of the West. Claiming that it feared he was going to abandon the company and set up a rival business, TCW fired Gundlach and then sued him for breach of trust and theft of trade secrets. Gundlach cross-complained for money he claimed TCW should have paid him. The jury agreed with TCW that Gundlach had acted inappropriately, but declined to award any damages for loss of business because TCW caused that loss itself by letting Gundlach go. After further proceedings, Judge Carl West will determine if TCW is entitled to all or any part of the $89 million in damages it claims to have suffered from the loss of trade secrets.

There are other types of claims that might tempt an employer when an employee leaves. The Family and Medical Leave Act gives an employer the right to recover group health premiums if an employee is able to return from leave but does not. An employer may try to recoup overpayment of compensation, as illustrated by Koehl v. Verio, Inc., 142 Cal.App.4th 1313, 48 Cal.Rptr.3d 749 (2006). Some employers give loans to employees, and then sue if they are not repaid by the time employment terminates, as illustrated by Maggio, Inc. v. Neal, 196 Cal.App.3d 745, 241 Cal.Rptr. 883 (1987). Filing those claims or any others risks a countersuit by the employee for such claims as wrongful termination, discrimination, harassment, and failure to pay overtime. Even if the employer's lawsuit does not draw a countersuit, it may end badly. In FLIR Systems, Inc. v. Parrish, 174 Cal. App. 4th 1270 (2009), the employer was found to have proceeded in bad faith under the Uniform Trade Secrets Act (Cal. Civ. Code section 3426.4) and wound up on the hook for $1.6 million in fees and costs.

Bottom line: Don't sue an employee unless you have suffered substantial damage, and then only if you have a rock solid case.

Social Workers and the Learned Professional Exemption

2011-09-11T10:00:00.000-07:00

Both the Fair Labor Standards Act (FLSA) and the California Labor Code require employers to pay overtime to all employees who do not qualify for one of the exemptions to those statutes. One of the exemptions that both statutory schemes recognize is that for learned professionals. In this post, we consider whether a social worker meets the requirements for that exemption.

The FLSA states in section 213(a)(1) that the overtime rules do not apply to those employed in a "professional capacity." The Department of Labor has defined professional capacity in 29 CFR section 541.301 to include learned professionals whose "primary duty must be the performance of work requiring advanced knowledge in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction."

California Labor Code section 515 provides an exemption for "professional employees," as defined in wage orders issued by the Industrial Welfare Commission. The wage orders include in their definitions of professional employees those who are "primarily engaged in an occupation commonly recognized as a learned or artistic profession." The learned profession exemption requires that the employee be primarily engaged in work "requiring knowledge of an advanced type in a field or science or learning customarily acquired by a prolonged course of specialized intellectual instruction and study." A glossary on the California Labor Commissioner's website states "an advanced academic degree (above the bachelor level) is a standard prerequisite" for the learned professional exemption.

In Opinion Letter FLSA2005-50, the U.S. Department of Labor stated that social workers who were required to have a master's degree in social work, drug and alcohol, education, counseling, psychology or criminal justice were exempt under the FLSA, while caseworkers who only needed a bachelor's degree in social sciences were not. The work for the bachelor's degree was not "specialized" academic training.

In Chatfield v. Children's Services, Inc., 555 F. Supp. 2d 532 (E.D. Penn. 2008), a federal judge in Pennsylvania concluded that social workers who worked as truancy prevention case managers were exempt, where they were required to have a bachelor's degree in social work, human services, or a related field, plus three years of work experience.

Most recently, in Solis v. State of Washington Dept. of Social & Health Services, Case No. 10-35590 (9th Cir. Sep. 9, 2011), the Ninth Circuit ruled that social workers who were only required to have a bachelor's degree in social services, human services, behavioral sciences, or an allied field were not exempt, because their jobs did not require "specialized" learning.

In light of all the foregoing, in California (where both the FLSA and the California wage order requirements apply), social workers will probably not be considered exempt unless the particular jobs for which they are hired required an advanced (at least a masters) degree in a specialized field that directly relates to the job.

We're Applying For Listing at Technorati

2011-09-08T09:36:00.000-07:00

Technorati is a blog directory service and much, much more. The site has become the definitive source for the top stories, opinions, photos and videos emerging across news, entertainment, technology, lifestyle, sports, politics and business. It tracks not only the authority and influence of blogs, but also the most comprehensive and current index of who and what is most popular in the Blogosphere. We hope to be added to the directory service soon. [PAKBRTUY9DJG]

After-Acquired Evidence of Wrongdoing May Defeat Wrongful Termination Claim

2011-09-04T10:00:00.000-07:00

Even after you get sued for wrongful termination, it is not too late to come up with a reason for firing an employee. In appropriate circumstances, an employer may invoke the doctrine of after-acquired evidence as a complete or partial defense. The question in such cases is whether the evidence establishes that the employee would have been fired upon discovery of the wrongdoing that the employer learned about after the termination. Here are some examples of application of the doctrine:

Salas v. Sierra Chemical Co., Case No. C064627 (Aug. 9, 2011): A laid off employee had provided a social security number that was not his own when he was hired. The employer was entitled to summary judgment on his disability discrimination claim for failure to rehire. The employer had a long-standing policy that precluded hiring any applicant who submitted false information to establish his eligibility to work in the United States, although the employer did not discover this until after it refused to rehire him. Federal law prohibits applicants from using false documents to establish eligibility to work, and requires employers to make accurate reports. Because his wrongdoing made him ineligible for rehire, the employee could not sue for discrimination.

Murillo v. Rite Stuff Foods, Inc., 77 Cal.Rptr.2d 12, 65 Cal.App.4th 833 (1998): An undocumented worker obtained employment through use of forged documents, but summary judgment dismissing her sexual harassment claim was not appropriate. She was damaged during her employment by the harassment, and there was evidence that the employer knowingly employed those who were not eligible to work in the United States.

McKennon v. Nashville Banner Publishing Co., 513 U.S. 352 (1995): Post-discharge discovery that the plaintiff had wrongfully made copies of confidential documents was not a complete defense to her age discrimination claim. But, she was not entitled to reinstatement or front pay, and any back pay award would be limited to the period from the discharge to when the wrongful conduct would have been discovered.

Camp v. Jeffer, Mangels, Butler & Marmaro, 35 Cal.App.4th 620, 41 Cal. Rptr.2d 329 (1995): A husband and wife who worked as legal secretaries at a law firm lied on their applications when they said that they had not been convicted of felonies. In fact, they had both been convicted of bank fraud. As a condition of representing federal agency, the law firm had to certify periodically that none of its employees had been convicted of a felony. After the wife reported alleged insider training by one of its lawyers, the law firm discharged the couple. The law firm was entitled to summary judgment dismissing their retaliation claims, because they misrepresented a job qualification imposed by the federal government, such that they were not lawfully qualified for their jobs.

"Me Too" Evidence in Discrimination and Harassment Cases

2011-08-28T10:00:00.000-07:00

"Me too" evidence is testimony from a plaintiff's co-workers that they were subjected to inappropriate conduct similar to that experienced by the plaintiff. Such evidence can provide powerful support for a plaintiff's case by taking it out of the realm of he said, she said. On the other hand, the use of such evidence can consume trial time on side issues and unduly prejudice the jury. The possibility that such evidence might be introduced at a trial should convince employers to put a stop to any inappropriate conduct even if the victim of the conduct does not complaint.

A recent decision from the Fifth District Court of Appeal in Fresno illustrates the use of "me too" evidence. Lorraine Pantoja complained that she was harassed and discriminated against on the basis of sex and race by the lawyer she worked for. She claimed that he used profanity constantly, referred to her as a b__, and used the term "Mexicans" in a derogatory way. Her employer denied her claims, testified that he never called anybody b__, and never used "Mexicans" in a derogatory way. He presented testimony from other employees who said that he used profanity but never directed it at individuals. The trial court refused to allow Pantoja have other employees testify that the employer frequently used b__ to refer to female employees, that he used "Mexicans" in a derogatory way, and directed profanity at individuals, because they would not be testifying to things that he said in front of Pantoja. The Court of Appeal reversed, ruling that the evidence should have been allowed because it tended to prove that the lawyer had a bias. See Pantoja v. Anton, Case No. F058414 (5th Dist. Ct. App. aug. 9, 2011).

There are two other notable California cases dealing with "me too" evidence:

Beyda v. City of Los Angeles, 76 Cal.Rptr.2d 547, 65 Cal.App.4th 511 (1998): The Court of Appeal affirmed a trial court ruling that barred "me too" evidence of sexual harassment not committed in the plaintiff's presence. It was improper to use such evidence to show that the defendant had a propensity to harass.
Johnson v. United Cerebral Palsy/Spastic Children's Foundation, 93 Cal. Rptr. 3d 198, 173 Cal. App. 4th 740 (2009): The Court of Appeal reversed a summary judgment for the employer in a pregnancy discrimination case, because declarations from five former employees who claimed they were discriminated against after they disclosed that they were pregnant created a triable issue of material fact.

Among the federal courts, the Supreme Court has yet to give a definitive ruling, but the Ninth Circuit has ruled that "me too" evidence is permissible.

Sprint/United Management Co. v. Mendelsohn, 128 S. Ct. 1140 (2008): The Supreme Court found that the Tenth Circuit had misinterpreted the district court's ruling about "me too" evidence and remanded for further analysis without ruling on admissibility. At the end of his majority opinion, Justice Thomas wrote: "The question whether evidence of discrimination by other supervisors is relevant in an individual ADEA case is fact based and depends on many factors, including how closely related the evidence is to the plaintiff's circumstances and theory of the case. Applying Rule 403 to determine if evidence is prejudicial also requires a fact-intensive, context-specific inquiry."
Obrey v. Johnson, 400 F. 3d 691 (9th Cir. 2005): Discriminatory treatment of other employees was admissible to help prove the plaintiff's pattern and practice case.
Heyne v. Caruso, 69 F.3d 1475 (9th Cir. 1995): The district court should have allowed testimony by the plainitiff's co-workers that they were sexually harassed by the same individual whom the plaintiff claimed had harassed her. Their testimony tended to prove the individual's motive.

Social Media In The Workplace

2011-08-21T08:03:00.002-07:00

Social media (Facebook, Twitter, LinkIn, the new Google+ and many other similar services) can provide welcome exposure for businesses and their employees (, but also pose risks. While the owner of a number of vacation cottages in Nova Scotia was able to book all her cottages with the help of Facebook, Domino's Pizza faced a public relations disaster in 2009 when two of its employees posted a YouTube video of employees violating health standards. A New Jersey appellate court ruled that an employer could be held liable for the damage caused by an employee who uploaded pornographic pictures of his wife's 10-year old daughter from an earlier marriage. Doe v. XYZ Corp., 887 A.2d 1156 (2005). As discussed in an earlier post, the National Labor Relations Board has ruled it an unfair labor practice for employers to discipline employees for communicating their unhappiness with their working conditions on Facebook.

What should an employer do to navigate successfully between the Scylla of a large award to someone damaged by employee use of social media and the Charybdis of an equally large award for invading employee privacy? Here are some suggestions:

Develop a written social media policy. This is a must. Take the time to think through what uses of social media at your workplace are appropriate, and have all employees acknowledge the policy in writing. For a list of over 100 examples, visit this page, at socialmediatoday.com
Consider banning all access to social media at your workplace. In addition to the liability risks mentioned above, social media are a significant drain on productivity. A 2010 survey found that employees spend more than an hour a day on social media, primarily for personal reasons.
If you permit use of social media from the workplace, make sure that the social media policy explains that inappropriate content may not be posted, and that use of the company's equipment to access social media may be subject to monitoring by the company.
Do not use searches of social media sites to make hiring decisions. Such searches may well turn up personal characteristics (such as religion, national origin or sexual orientation) that should not be part of the hiring process. The information may also be unreliable. If you need to look into a potential employee's background, use an established provider to do so.
Be careful when monitoring social media postings by employees. Using surreptitious means to access a private site can subject the employer to invasion of privacy of liability as the owner of the Houston's Restaurant chain found out in federal court in New Jersey. California prohibits making adverse employment decisions based on political activities (Labor Code sections 1101 and 1102) or lawful conduct while off-duty (Labor Code sections 96 and 98.6).

Contractor Liability for Subcontractor Wage and Hour Violations

2011-08-14T10:00:00.001-07:00

A 2003 statute makes those who contract with another for certain services liable for the other's wage and hour violations if they know or should know that the contract did not include funds sufficient to allow the other to comply with wage and hour laws. As explained in a State Assembly Report, Labor Code section 2810 was enacted after hearings into the effects of the underground economy. Those hearings established that the failure of some employers in the janitorial, garment and agricultural industries to comply with wage and hour rules gave them an unfair advantage over law-abiding employers, and deprived employees of millions of dollars in wages.

Section 2810 applies to those who contract for labor or services with construction, farm labor, garment, janitorial or security guard contractors. An aggrieved employee of the contractor who suffers actual damages as a result of the insufficiency of the funds provided for under the contract may sue for whichever is greater of the actual damages or a statutory penalty. If the aggrieved employee prevails, he or she may recover costs and reasonable attorney's fees.

A recent decision by the First District Court of Appeal in San Francisco addresses four issues about the application of section 2810:

Determining sufficiency. Whether the funds are sufficient should be determined by whether the contract provides sufficient funds to pay the minimum wage. Although the plaintiffs argued that the determination should be based on the contracting party's understanding of the wages actually paid by the contractor, the court could find no support for the argument in the language of the statute or the legislative history.
Knows or should know. Whether the contracting party has constructive knowledge sufficient to trigger application of the statute should be determined by estimating the likely cost of performance based on knowledge typical in the industry about cost.
NLRA Preemption. Although the statute exempts those contracting parties who have collective bargaining agreements with the workers employed under the contract, there was no preemption under Machinists v. Emp. Rel. Comm'n, 427 U.S. 132 (1976), because that provision did not have a sufficiently substantial effect on collective bargaining. Although the statute required sufficient funds to comply with all applicable federal laws , there was no preemption under San Diego Building Trades Council v. Garmon, 359 U.S. 236 (1959), because the plaintiffs were not attempting to enforce the NLRA in the action.
Causation. The plaintiffs do not have to prove that the contractual insufficiency actually caused the direct employers to violate the wage and hour laws. It is enough to show that the funds were insufficient.

Castillo v. Toll Bros., Inc., Case No. A128605 (Cal.Ct.App. Jul. 28, 2011).

Vacation or Sabbatical?

2011-08-07T10:00:00.000-07:00

In most jurisdictions, it would not matter whether an employee's paid absence from work was considered vacation or a sabbatical. But, in California, if an employer's policy establishes vacation, the right to paid leave accrues day by day and is never lost. If the policy establishes a sabbatical, the employer can impose conditions and impose a forfeiture if the employee does not use it before employment terminates.

A recent case from the Sixth District Court of Appeal in San Jose explains the difference. See Paton v. Advanced Micro Devices, Inc., Case No. H034618 (Aug. 5, 2011). California Labor Code section 227.3 provides that, if an employee is terminated without having taken his vested vacation time, “all vested vacation shall be paid to him as wages at his final rate” and the employer's policy “shall not provide for forfeiture of vested vacation time upon termination.” In Suastez v. Plastic Dress-Up Co., 31 Cal.3d 774, 647 P.2d 122 (1982), the California Supreme Court explained what "vested vacation" means. Paid vacation is part of an employee's wages. The consideration for the vacations days is the employee's year long labor. Although the time for receiving those wages is postponed until the employee takes vacation, the right to them vests as they are earned. The employer's imposition of a condition subsequent, such as that the employee remain employed for a year in order to take advantage of the accrued vacation, did not prevent the benefit from vesting.

By contrast, a sabbatical is extended paid leave granted infrequently to allow employees to recharge their batteries and devote themselves to self-improvement. In the academic world where the concept originated, a faculty member would engage in a project intended to promote his or her professional development and, in turn, enhance the institution's status as an institute of higher learning.

Because sabbaticals in the business world can serve similar purposes to vacations, the California Labor Commissioner was concerned that employers would label their policies sabbaticals in order to avoid the vesting of vacation pay. In three opinion letters, the Labor Commissioner laid down principles to be used for determining whether paid time off amounted to a true sabbatical. See Opinion Letter Nos. 1986.12.13, 1987.07.13 and 1987.10.06. From those letters and its own analysis, the Court of Appeal in Paton distilled the following factors to be utilized in determining whether paid time off qualifies as a sabbatical: (1) a sabbatical can only be granted infrequently, presumptively no earlier than after seven years of service, although shorter periods may be appropriate in particular situation, (2) the duration of a sabbatical must extend beyond what is normally offered as vacation, (3) the employer must offer regular vacation in addition to sabbaticals, and (4) there must be a feature that demonstrates that the employee taking the sabbatical is expected to return to work for the employer after the leave is over.

The Paton opinion reversed the summary judgment that the trial court had granted to the employer, because a reasonable jury could have concluded that the employer's policy did not establish a true sabbatical. The Court of Appeal was concerned about the true purpose of the program, noting: "It would not be unreasonable for a jury to decide that a four-week sabbatical is not 'normally' longer than vacation of four-weeks, or that an eight-week sabbatical is not longer than that 'normally' allowed for vacation where eight-weeks equals the length of time an employee could be gone on vacation if he took the maximum amount he could accrue all at once. And, although we know that defendant also offered a vacation policy, we do not know how defendant's vacation policy compared to vacation benefits offered by defendant‟s competitors."

Further information about the Labor Commissioner's views appear in the Division of Labor Standards Enforcement, Enforcement Policies and Standards Manual, at page 15.4.

Employee Privacy

2011-07-31T10:00:00.000-07:00

A recent decision by the First District Court of Appeal in San Francisco reminds that employers must be sure to protect employee privacy. In Life Technologies Corp. v. Superior Court, Case No. A131120 (Jul. 14, 2011), the court reversed an order granting discovery of individually-identifying personnel information in an age discrimination and retaliation lawsuit. The question in such cases is whether there is a "serious invasion" of an employee's "reasonable expectation of privacy," as explained in Pioneer Electronics (USA), Inc. v. Superior Court, 40 Cal.4th 360, 53 Cal.Rptr.3d 513 (2007).

The Court of Appeal identified the following principles for determining the discoverability of personnel records of non-witness third parties: (1) The public interest in preserving confidential personnel information generally outweighs a private litigant's interest in obtaining that information. (2) A private litigant may tilt the balance in his or favor only by showing a compelling need for particular information that cannot reasonably be obtained through depositions or from nonconfidential sources. (3) Even where the balance tilts in the private litigant's favor, the scope of disclosure must be narrowly circumscribed. In the case before the Court of Appeal, the trial court had failed to balance the interests correctly, and had failed to provide sufficient safeguards for the disclosures that it ordered. It should have required notice to the affected employees, and then sealed or severely limited the use and dissemination of the disclosed information.

Here are some additional examples of restrictions on acquiring and disseminating employee information:

(1) Applicants for employment may be subjected to drug screening, but once they become employed, may only be required to undergo drug screening where there is reasonable suspicion of improper activity. Loder v. City of Glendale, 14 Cal. 4th 846 (1997).

(2) Targeting a private office for video surveillance constitutes an intrusion into an area as to which the employee has a reasonable expectation of privacy, but the intrusion is not actionable unless the surveillance captures the employee's image. Hernandez v. Hillsides, Inc., 47 Cal. 4th 272 (2009).

(3) Employees may have a privacy interest in their work email and Internet use, but it can be overcome by a warning from the employer that email and Internet use is subject to monitoring and that employees should not expect to have any privacy when using the employer's systems. TBG Ins. Services Corp. v. Superior Court, 117 Cal. Rptr. 2d 155 (2002).

(4) Employers must not access employees' confidential medical information without consent, and must not retaliate against employees for standing on their right confidentiality of their medical information. Pettus v. Cole, 49 Cal. App. 4th 402 (1996).

Private Attorney General and Class Action Waivers

2011-07-17T10:00:00.000-07:00

A recent case alleging Labor Code violations by Ralphs Grocery Co. discusses the current state of the law regarding waivers of the right to pursue class actions and private attorney general claims. The arbitration policy at issue in Brown v. Ralphs Grocery Co., Case No. B222689 (2nd Dist. Ct. App. Jul. 12, 2011) provided for arbitration of all employment-related disputes. It also stated that there was no right for such disputes "to be heard or arbitrated on a class action basis, as a private attorney general, or on bases involving claims or disputes brought in a representative capacity on behalf of the general public, of other Ralphs employees (or any of them), or of other persons alleged to be similarly situated. . . . [T]here are no judge or jury trials and there are no class actions or Representative Actions permitted under this Arbitration Policy."

The California Supreme Court has frequently refused to enforce arbitration clauses that are invoked to interfere with rights for the benefit of individual citizens. See, e.g., Armendariz v. Foundation Health Psychcare, 24 Cal.4th 83 99 Cal.Rptr.2d 745, 6 P. 3d 669 (2000) (refusing to require arbitration of FEHA claims because arbitration procedure interfered with public interest). Just about as frequently, the United States Supreme Court has overturned such decisions for violating the Federal Arbitration Act. See Southland Corp. v. Keating, 465 U.S. 1 (1984) (California could not bar arbitration of claims under the Franchise Investment Law); Perry v. Thomas, 482 U.S. 483 (1987) (California could not refuse to enforce arbitration of wage disputes); Preston v. Ferrer, 552 U.S. 346 (2008) (California Labor Commissioner's authority could not supplant that of the arbitrator). Most recently, in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), the Court overturned the Discover Bank rule, which had called class action waivers in consumer arbitration agreements into question.

In Brown, the Second District Court of Appeal enforced the class action waiver, but ruled that the attempted private attorney general waiver was invalid. The plaintiff had asserted a claim under the Private Attorney General Act of 2004, which allows actions to recover civil penalties brought by employees on his or her own behalf and on behalf of current or former employees. According to the Court of Appeal, AT&T Mobility did not apply because an employee brings a PAGA action as a proxy for the state.

In dissent, Justice Kriegler opined that AT&T Mobility required the court to uphold the entirety of the arbitration agreement.