What's New in Employment Law?

Ninth Circuit: Walmart Has No Obligation to Foreign Suppliers' Workers

2009-07-18T12:54:00.001-07:00

Walmart contracts with a number of companies in foreign countries to supply Walmart with the goods it sells in the U.S. Walmart's contracts with these suppliers include a code of conduct, imposing requirements that the suppliers comply with local workplace laws and standards regarding workplace law issues such as child labor, discrimination, etc. The code also permits Walmart to inspect the suppliers' operations. The suppliers' failure to adhere to the standards, including permitting inspections, could result in cancellation of the contract.

Employees of a number of foreign suppliers sued Walmart, claiming that Walmart was liable under these provisions for their employers' alleged violations of law. They claimed Walmart tells the public it is improving the workers' lives, and that Walmart's inspection program was flawed. They sought damages as third party beneficiaries of the supplier contracts, and on a variety of negligence theories, as well as unjust enrichment.

Upon dismissal of their complaint in district court, the employees appealed to the Ninth Circuit. The Ninth Circuit affirmed. The primary rationale was that the employees had no employment relationship with Walmart merely because of Walmart's right to inspect the workplace. Walmart exercised no day-to-day control over the workers.

The case is Doe v. Walmart and the opinion is here.

Ninth Circuit OKs Preemptive Decertification

2009-07-08T06:25:00.000-07:00

Remember Countrywide? They had external home loan consultants, or HLCs, whom they classified as "outside sales" exempt. A couple of HLCs filed a class action. Countrywide filed a motion to decertify the class before plaintiffs moved for certification. The trial court granted Countrywide's motion, essentially refusing to certify the class. The Ninth Circuit affirmed:

We first address Plaintiffs’ argument that a defense motion to deny class certification “brought outside the context of a plaintiff’s motion actually seeking certification is procedurally improper per se.” Although we have not previously addressed this argument directly, we conclude that Rule 23 does not preclude a defendant from bringing a “preemptive” motion to deny certification.

The court then upheld the trial court's decision not to certify the class. For the second time in one day (see my post on Wells Fargo here), the court rejected the notion that a uniform policy of classifying certain employees as exempt was enough to certify the class.

The case is Vinole v. Countrywide Home Loans and the opinion is here.

Ninth Circuit Vacates Class Certification

2009-07-08T05:54:00.000-07:00

Wells Fargo treated a class of loan specialists as exempt from overtime. The district court certified the class action. Although there were a number of factors requiring the court to make an individual inquiry regarding the employees' duties, the court decided that Wells' policy of classifying as exempt all employees performing the given job was enough to justify certification of the class.

The Ninth Circuit disagreed:

Whether a [uniform exemption] policy is in place or not, courts must still ask where the individual employees actually spent their time. As one court succinctly explained, “[t]he fact that an employer classifies all or most of a particular class of employees as exempt does not eliminate the need to make a factual determination as to whether class members are actually performing similar duties.” Campbell, 253 F.R.D. at 603. In short, Wells Fargo’s uniform exemption policy says little about the main concern in the predominance inquiry: the balance between individual and common issues. As such, we hold that the district court abused its discretion in relying on that policy to the near exclusion of other factors relevant to the predominance inquiry.

The case is Mevorah v. Wells Fargo Home Mtg. and the opinion is here.

Court of Appeal Kills Class Action Settlement

2009-07-07T05:53:00.000-07:00

The Court of Appeal was not impressed with a $2 million wage and hour class action settlement. So, it vacated the judgment and sent it back to the trial court for further evaluation.

During a wage and hour class action, the parties conducted discovery, including production of thousands of pages of documents and the depositions of the class members. Then, they attended a mediation for a full day and reached a settlement. As is typical, the parties developed a comprehensive settlement agreement, and the plaintiffs filed a motion for approval of the settlement. About 20 of 2340 class members objected to the settlement. But the trial court found the settlement was reasonable and approved the settlement. The objectors appealed.

On review, the Court of Appeal concluded:

the order approving the settlement must be vacated because the trial court lacked sufficient information to make an informed evaluation of the fairness of the settlement. This was due to the court‟s apparent reliance on counsel‟s evaluation of the class‟s overtime claim as having “absolutely no” value, without regard to the objectors‟ claim that counsel‟s evaluation was based on an allegedly “staggering mistake of law.” While the court need not determine the ultimate legal merit of a claim, it is obliged to determine, at a minimum, whether a legitimate controversy exists on a legal point, so that it has some basis for assessing whether the parties‟ evaluation of the case is within the “ballpark” of reasonableness. We further conclude that the court abused its discretion in finding that the $25,000 enhancements for Clark and Gaines were fair and reasonable, and that it erred in awarding costs greater than the maximum amount specified in the notice given to the class.

The interesting aspect of this case is that the parties appeared to have made significant efforts to detail their justification for the settlement. The opinion explains the law regarding how courts should evaluate class action settlements, and what the parties are required to do to obtain the court's approval.

The case is Clark v. American Residential Services and the opinion is here.

FLSA - Federal Minimum Wage Going Up 7/24/09

2009-07-04T07:47:00.000-07:00

Happy July 4!
The California state minimum wage is $8.00 (even higher for some employers subject to "living wage" ordinances, and in some localities like San Francisco). So, you may not care that the federal minimum wage is going up to $7.25 per hour on July 24, 2009. U.S. DOL's minimum wage page is here. Multi-state employers, heads up!

Court of Appeal: Wrongful Termination Alone Insufficient for Punitive Damages Liability

2009-07-03T15:57:00.001-07:00

Scott sued her employer, Phoenix Schools, for wrongful termination in violation of public policy. A jury awarded her damages, including punitive damages. The Court of Appeal upheld the verdict for wrongful termination and the compensatory damages, but reversed on the punitive damages claim:

Thus, in order to sustain the punitive damages award, the evidence must leave no substantial doubt that Phoenix engaged in despicable conduct, or conduct intended to cause injury to Scott. “‘Something more than the mere commission of a tort is always required for punitive damages. There must be circumstances of aggravation or outrage, such as spite or “malice,” or a fraudulent or evil motive on the part of the defendant, or such a conscious and deliberate disregard of the interests of others that his conduct may be called wilful or wanton.’ [Citation.]” (Taylor v. Superior Court (1979) 24 Cal.3d 890, 894-895, italics omitted.) The only evidence of wrongful conduct directed toward Scott was her termination for an improper reason. This evidence was insufficient to support a finding of despicable conduct, because such action is not vile, base or contemptible.

So, a wrongful termination in violation of public policy, without additional evidence of malice, is not enough to sustain an award of punitive damages.

The case is Scott v. Phoenix Schools and the opinion is here.

Classmember's Claim of Inadequate Notice Fails

2009-07-03T15:29:00.000-07:00

One for the plaintiff's class action bar.... Ron Matorana was a class member in a wage and hour class action against Allstate. Under a settlement, he was entitled to $65,000. But he didn't file a claim form. The settlement papers were approved by the court as fair and reasonable. Matorana, though, received nothing. He claimed he was ill during the notice period and was inattentive to the deadlines in the notice of the settlement he received.

So, he sued class counsel for malpractice, as well as Allstate, for failing to remind him adequately to file a claim form. The trial court said no. Court of Appeal? No sale.

Allstate owed Matorana no duty to follow up at all, so he had no basis for suing Allstate. The malpractice claim against his lawyers was without merit too.

Matorana argued that the notice procedure was inadequate, because it did not contain a provision requiring counsel to check up on class members who did not file claims. That argument was barred because the class procedures were deemed fair and reasonable by the trial court in the class action lawsuit. As such, a challenge to that finding was barred by the doctrine of collateral estoppel.

He also claimed that class counsel had a duty to follow up when he did not submit the form, although not required under the settlement agreement. (Collective "gulp" from the plaintiff's bar).

Not to worry. The court of appeal disagreed. Although class counsel owed Matorana a duty of care, that duty did not include contacting all class members who did not file claim forms. As the court pointed out, if class counsel were required to deal with every class member individually, that would undermine the purpose of a mass-mailed settlement notice approved by the court as fair and consistent with due process. On the other hand, if counsel misrepresented the dates or interfered with filing a claim that conceivably could have given rise to some liability.

The case is Matorana v. Marlin & Saltzman and the opinion is here.

California Supreme Court Rejects Sexual Harassment and Intentional Infliction Claims

2009-07-03T13:30:00.000-07:00

The California Supreme Court decided a non-employment case that will have employment law ripple effects.

Suzan Hughes was the divorced widow of Mark Hughes, founder of Herbalife. Mark left a trust of $350 million to his son Alex. Suzan was Alex's guardian. One of the trustees was Christopher Pair, then CEO of Herbalife. The trustees and Suzan had a tumultuous relationship and much litigation. At one point, Pair apparently indicated interest in having a sexual relationship with Hughes. He made some offensive and crude remarks to her regarding his desires. He may have suggested that if she slept with him, he would approve an expenditure of $80,000 for a month's rental on a beach house in Malibu, for Alex (natch).

So, Hughes sued Pair under Civil Code section 51.9, which prohibits sexual harassment outside the employment context by certain vendors / suppliers in various professional business relationships, such as doctors, lawyers, accountants, and trustees.

The lower courts and the Supreme Court agreed that the lewd and crude conduct was not sufficient to constitute "sexual harassment" To get there, the Supreme Court expressly held that harassment under 51.9 is analyzed exactly the same as under the Fair Employment and Housing Act (and Title VII). So, this case is relevant to employment. Of note, because harassment must be "pervasive" or "severe," it will be tough to prove a violation of section 51.9 based on occasional interactions with a covered business' employees. (Normally, one will interact in the workplace more frequently than with a third party.)

The Court also held that Hughes' claim for intentional infliction of emotional distress was barred because the alleged conduct was not sufficient extreme and outrageous, and because Hughes and not proved she suffered "severe" emotional distress.

The opinion is Hughes v. Pair and the opinion is here.

Supreme Court: Fear of Disparate Impact Litigation Does Not Justify Disparate Treatment

2009-06-29T08:13:00.001-07:00

Ricci v. DeStefano may be the most eagerly anticipated decision this Term. But that doesn't have anything to do with the case itself. It's because the opinion under review was written by Sonia Sotomayor, nominated for a seat on the High Court. he Sotomayor fans / foes did not get a decisive victory from the Supremes.

The Court decided that New Haven, Connecticut violated Title VII by throwing out a firefighter's promotion examination on the ground that White firefighters passed the test far more frequently than Black firefighters. The city feared a disparate impact lawsuit from unsuccessful minority applicants because the test results were skewed along racial lines. The Second Circuit had upheld the city's action.

The Supreme Court (5-4) held that refusing to certify the test on the basis of the successful examinees' race constituted disparate treatment discrimination under Title VII. The Court then considered whether avoiding disparate impact litigation was a valid defense. Mere fear of a lawsuit is not sufficient. Rather, to justify the action, the city would have to have a "strong basis in evidence" that "the test was deficient and that discarding the results is necessary to avoid violating the disparate-impact provision."

The Court also addressed the probability that the Black firefighters would sue for disparate impact discrimination. The Court noted that the test appeared to be "job-related and consistent with business necessity," a defense to the claim. In addition, the Court suggested that its decision would insulate the city from liability because throwing the test results out would constitute disparate treatment.

Justice Scalia concurred to point out there is tension between disparate impact claims under Title VII and equal protection law, the resolution of which would have to wait for a later date. Justice Alito also concurred with the majority opinion. He pointed out that the city's decision not to certify the test results may have had more to do with "racial politics" - pressure from activists - than a fear of disparate impact litigation.

Justice Ginsburg's dissent focused on the long history of minority exclusion from the New Haven ranks of firefighters, particularly in senior positions. The dissent held that it is permissible to make a race-based decision to remedy a disparate impact where, as in the case before it, there was "good cause" to find the test flawed.

The case is Ricci v. DeStefano and the opinion is here.

Court of Appeal Upholds Attorney's Fees Award in Bad Faith Trade Secrets Litigation

2009-06-20T14:27:00.000-07:00

If you sue a former employee for violating the Trade Secrets Act, you have to have a case. That means you have, at minimum, (1) a bona fide trade secret and (2) evidence of actual or threatened "misappropriation" of the trade secret. If you are missing evidence of one or more elements, and you're just suing a competitor, it can be an expensive mistake. That's what FLIR Systems, Inc. found out when it sued former employees who were trying to set up a competing business.

Here are the facts from the opinion:

Indigo manufactures and sells microbolometers. A microbolometer is a device used in connection with infrared cameras, night vision, and thermal imaging. A significant portion of Indigo's technology was created by respondent William Parrish. FLIR manufactures and sells infrared cameras, night vision, and thermal imaging systems that use microbolometers. In 2004, FLIR purchased Indigo for approximately $185 million, acquiring Indigo's patents, technology, and intellectual property. Parish and Fitzgibbons were shareholders and officers of Indigo before the company was sold.
After the sale, they continued working at Indigo.

In 2005, respondents decided to start a new company to mass produce bolometers
and gave notice that they would quit Indigo on or about January 6, 2006. The new company was based on a business plan (Thermicon) developed by Fitzgibbons in 1998 and 1999 when he was self-employed.
Before leaving Indigo, respondents discussed allowing appellants to participate in
Thermicon. Respondents proposed outsourcing bolometer production to a third party. The production startup time would be quick, assuming respondents could acquire technology licenses and intellectual property from a third party. Respondents offered FLIR a non-controlling interest in Thermicon. FLIR rejected the offer and wished respondents success in the new endeavor.
In early 2006, respondents entered into negotiations with Raytheon Company to acquire licensing, technology, and manufacturing facilities for Thermicon. Respondents assured appellants they would not misappropriate Indigo's trade secrets and that the new company would use an intellectual property filter similar to the one used at Indigo to prevent the misuse of trade secrets.
Fearful that the new business would undermine FLIR's market, appellants sued for
injunctive relief and damages on June 15, 2006. The action was premised on the theory that respondents could not mass produce low-cost microbolometers based on the Thermicon time line without misappropriating trade secrets.
Upon learning of the lawsuit, Raytheon Company terminated business discussions with respondents. On August 15, 2006, respondents advised appellants that they
were not going forward with the new business.

But FLIR sought an injunction against its former employees precluding them from setting up a new business in which they would engage in the same business as FLIR. The trial court found, and the Court of Appeal agreed, the injunction claim at least implicitly was based on the theory that former employees would "inevitably" use or disclose trade secrets in setting up a new venture. Unfortunately for FLIR, the inevitable disclosure doctrine is not recognized in California.

So, this case is about whether attorney's fees should be awarded in favor of the former employees. The fees were over $1 million, with over $200k more in costs.

In trade secret cases, the defendant can recover fees if the court in its discretion finds the plaintiff prosecuted a claim in bad faith. The standard for bad faith requires proof of two elements: "(1) objective speciousness of the claim, and (2) subjective bad faith in bringing or maintaining the action, i.e., for an improper purpose. "

Here, the "objective speciousness" was premising the action on the inevitable disclosure doctrine. the "subjective bad faith" was established by evidence that FLIR brought the claim to stop a potential competitor from opening up shop. The court of appeal discussed a number of additional factors that supported bad faith, including a settlement demand with irrelevant conditions, the failure to dismiss the claim once it was obvious it lacked merit, and a number of other facts that should be guidance for the bar.

The case is FLIR Systems, Inc. v. Parrish and the opinion is here.

U.S. Supreme Court: Plaintiffs Must Prove "But-For" Causation in Federal Age Discrimination Claims

2009-06-20T13:10:00.000-07:00

So, the federal Age Discrimination in Employment Act does not permit "mixed motive" jury instructions. That is because the plaintiff's burden of proof is to always show that age was THE cause of a challenged adverse action. Unlike Title VII and California's FEHA, the ADEA does not permit the plaintiff to merely prove that a discriminatory motive was just one of many. Big case under the ADEA, but it will have no real effect on California age discrimination litigation under FEHA.

Here are the facts from the opinion:

Jack Gross began working for respondent FBL Financial Group, Inc. (FBL), in 1971. As of 2001, Gross held the position of claims administration director. But in 2003, when he was 54 years old, Gross was reassigned to the position of claims project coordinator. At that same time, FBL transferred many of Gross’ job responsibilities to a newly created position—claims administration manager. That position was given to Lisa Kneeskern, who had previously been supervised by Gross and who was then in her early forties. Although Gross (in his new position) and Kneeskern received the same compensation, Gross considered the reassignment a demotion because of FBL’s reallocation of his former job responsibilities to Kneeskern.

Gross filed suit . . . alleging that his reassignment to the position of claims project coordinator violated the ADEA, which makes it unlawful for an employer to take adverse action against an employee "because of such individual’s age." 29 U. S. C. §623(a). The case proceeded to trial, where Gross introduced evidence suggesting that his reassignment was based at least in part on his age. FBL defended its decision on the grounds that Gross’ reassignment was part of a corporate restructuring and that Gross’ new position was better suited to his skills. . . .

The courts below wrestled with the proper standard of proof, assuming that Title VII's frameworks and analyses equally applied to the ADEA. The Supreme Court, which accepted review of the case to determine the proper time to give a "mixed motive" instruction in an ADEA case, answered: Never.

The Court's 5-4 majority reasoned that the ADEA statute is worded differently from Title VII, and that Congress passed a law amending Title VII to allow "mixed motive" cases, but did not simultaneously amend the ADEA. So, to sum up:

We hold that a plaintiff bringing a disparate-treatment claim pursuant to the ADEA must prove, by a preponderance of the evidence, that age was the "but-for" cause of the challenged adverse employment action. The burden of persuasion does not shift to the employer to show that it would have taken the action regardless of age, even when a plaintiff has produced some evidence that age was one motivating factor in that decision.

The dissent argued strenuously that the Court should not have reached the question that it decided because it was not presented for review. Then the dissenters, in two opinions, would have held that the language in the ADEA did not require "but-for" causation, and that courts had used Title VII precedent to interpret the ADEA's causation standards.

Congress can overturn this decision by simply incorporating Title VII's causation standards into the ADEA, or by simply adding "age" to Title VII and ending the separate statutory schemes. The majority pointed out Congress has taken up Title VII and ADEA amendments before without harmonizing the causation standards. I guess we'll find out soon enough if Congress omitted that amendment intentionally.

The case is Gross v. FBL Fin. Servs. and the opinion is here.

HAPPY 3D BIRTHDAY TO US!

2009-06-19T10:35:00.000-07:00

Yep, it's that time of year when we issue a self-congratulatory Happy Birthday! As the venerable and respected advocates for less fortunate wine coolers, Bartles & Jaymes (LLP) once said, "Thanks for your support. "

And this means that next week will be the third anniversary of this blog! (Unsubscribe now -before the obligatory "Happy Anniversary to WNIEL" post).

Oh, and if that weren't enough, we just won a 3 year old trade secrets case! If you haven't sent us an appropriately lavish gift by now...

Thanks again everybody. Oh and I'll be posting on cases and employment law and stuff this weekend.

Greg

California Supreme Court LOVES litigation

2009-06-11T17:11:00.000-07:00

The California Supreme Court continued its streak of pro-litigation decisions today. What am I talking about? The recent "Tobacco Cases," - expanding the availability of unfair business practice class actions, the anti-arbitration decisions, the pro-class action certification opinions, the Court's common theme lately seems to be - lawsuits good! Too bad the courts are struggling for funds to hear all these cases, there are few disincentives to bring frivolous litigation, and businesses already on shaky financial ground can't afford to be in court. OK, down off the soapbox.

Anyway, in this most recent installment, the California high court considered certified questions from the Ninth Circuit Court of Appeals, including whether proof of intentional discrimination is a required element of claims brought under the Unruh Civil Rights Act. The Unruh Act is the civil rights law that protects the public from discrimination in places of public accommodation. It's the principal state law used in disability access cases. Money damages are available for violations, making the Unruh Act more interesting than laws permitting only injunctions.

This is not an employment law case per se. But many employers operate businesses that are subject to the Unruh Act (retail, restaurants hospitals, etc.) . So, I thought I would mention this case.

The Unruh Act says that a violation of Title III of the ADA (prohibiting discriminating in public accommodations by failure to make facilities accessible) is also a violation of the Unruh Act. The Court decided that because the ADA does not require intentional discrimination in access cases, neither did the Unruh Act. (The rest of the Unruh Act, prohibiting discrimination on a variety of bases, does require intentional discrimination, though, which is why the Supreme Court had to decide the case).

So, disability access litigation is alive and well! The case is Munson v. Del Taco, and the opinion is here.

Court of Appeal: No Post Termination Commissions for You

2009-06-03T18:23:00.000-07:00

Here are the facts as stated by the court:

Defendant hired plaintiff as a sales representative on October 4, 1999. On that date, the parties entered a written employment agreement, which provided (among other things) that: (1) plaintiff was responsible for web-hosting sales; (2) plaintiff‟s starting salary was $24,000 per year, plus commissions of 4 percent "on all direct initial sales"; (3) defendant "will be eligible for commission pay as set forth in this [document], so long as [plaintiff] remains employed with the Company as a Sales Representative"; and (4) the employment agreement "may be amended only by a written agreement executed by each of the parties hereto."

In April 2001, defendant promoted plaintiff to "Channel Manager." The parties entered a new oral agreement that provided (among other things) that: (1) plaintiff‟s salary was increased to $75,000 per year, and (2) plaintiff would receive commissions of "„20% of the up front costs‟ revenues on all accounts brought in by [plaintiff] or through [plaintiff‟s] contacts or efforts."

So, the plaintiff was later fired and sought commissions for a transaction that occurred after he left, but which was (at least according to him) was "through plaintiff's contacts or efforts."

The court made short work of the plaintiff's argument that he was entitled to post-termination commissions. On plaintiff's breach of contract claim, the court held:

We agree with defendant that, on its face, the italicized language is reasonably susceptible to only one interpretation—that once plaintiff ceased to be employed by defendant, he would no longer be eligible for commission pay. While plaintiff could have relied on extrinsic evidence (if there were such evidence) to suggest an alternative meaning of this provision, he did not do so. (Compare Wolf v. Superior Court (2004) 114 Cal.App.4th 1343, 1358 ["[T]his extrinsic evidence of trade usage exposed a latent ambiguity in the contract language and presented an alter[n]-ative interpretation to which the term „gross receipts‟ was reasonably susceptible in the circumstances."].) Accordingly, we conclude as a matter of law that the written employment agreement precludes plaintiff from collecting additional commissions post-termination.

On the plaintiff's claim under the Labor Code, the court said that although commissions are wages:

for purposes of enforcing the provisions of the Labor Code, "[t]he right of a salesperson or any other person to a commission depends on the terms of the contract for compensation." (Koehl v. Verio, Inc. (2006) 142 Cal.App.4th 1313, 1330; see also Steinhebel, at p. 705 ["contractual terms must be met before an employee is entitled to a commission"].) Accordingly, plaintiff‟s right to commissions "must be governed by the provisions of the [employment agreement]." (Steinhebel, at p. 705.) We have already concluded that, pursuant to the plain language of the written employment agreement, plaintiff was not entitled to any further commissions after he was terminated. Accordingly, defendant‟s failure to pay such commissions cannot constitute a violation of the Labor Code.

The court did not consider whether the commission contract was "unconscionable" because it was not pleaded. So, that door remains open in commission cases. However, the court also did not consider the question of whether commissions were "earned" before termination and therefore should have been paid. Presumably, that issue was not argued by the plaintiff. If your plaintiff makes this argument, this case could be distinguishable.

Finally, there is the argument that the employer fired the employee to avoid paying unpaid commissions. But the plaintiff waived that argument too. So, because this case was not as vigorously litigated as it might have been, be careful before you rely on it too heavily. On the other hand, the courts will enforce straightforward commission plans that contain contingencies on the right to payment, such as continued employment.

The case is Nein v. Hostpro, Inc. and the opinion is here.

DGV

Court of Appeal: Labor Code Provisions Don't Apply to Public Entities Unless They Expressly Are Made Applicable

2009-06-03T18:09:00.001-07:00

The court of appeal held that Labor Code sections 510 (overtime) and 512 (meal periods) do not apply to government entities because the Legislature did not expressly say they were applicable. AB 60, the bill codified in the 500's of the Lab. Code, has a provision applying some of its provisions to a narrow class of government entities. But not these provisions, and not against this agency. Therefore, the Arvin-Edison Water Storage District's demurrer to a wage and hour class action was upheld on appeal.

The most interesting argument was that Wage Order 17, applicable to "Miscellaneous" employees, brought a water district within the scope of the wage orders, daily overtime, and meal periods. Nope. The intent of Wage Order 17, the court reasoned, was to include employees within some new industry or occupation not contemplated before. But water districts have been around for a long time.

The court also held that sections 201-203, addressing timing of final pay and waiting time penalties, did not apply to a water district. That's because section 220 exempts government entities, including "other municipal corporations." Water districts are "other municipal corporations" under prior case law.

This means that water districts, like other government entities, are subject only to the federal FLSA, unless a state wage and hour law expressly applies. Perhaps our state and local governments will save some money defending against these class actions now, and slightly shrink their incredible deficits. ::::Off soapbox::::

This case is Johnson v. Arvin-Edison Water Storage Dist. and the opinion is here.

DGV

Court of Appeal Stiffs Baristas

2009-06-02T15:51:00.001-07:00

Remember that time when the Starbucks Baristas won $86,000,000 because the shift supervisors took their tips? That was awesome.

[Sorry, I like Chris Farley. Sue me. I'll SLAPP you.]

Anyway, some time ago, we wrote about that huge Starbucks verdict over this tip pooling issue here. Then came the flood of tip pooling cases this winter and spring, discussed here and here. The Supreme Court is working on at least one of the cases here.

And now, the court of appeal just made real the Starbucks plaintiffs' worst nightmare: they reversed the monster $86,000,000.00-ish judgment quicker than as you can say tall no-whip-mocha with foam. As if I would ever say that.

The court held that the tips were placed in a community box for all service-related employees to share. Therefore, the court reasoned, the tip pooling statute did not even apply and the company was free to share tips with the service leads. The managers and assistant managers did not share in the tips.

So, easy come, easy go. We will see if the Supreme Court agrees to take up this case as well.

The case is Chau v. Starbucks and the opinion is here.

DGV

Small Employers Alert: AB 23 - Cal COBRA Amendment

2009-05-31T17:48:00.000-07:00

Small employers - take note! Governor Schwarzenegger signed AB 23, which implements the federal COBRA amendments contained in the "stimulus" bill (ARRA) and applies it to small employers covered by Cal-COBRA. This is an "urgency statute" that took effect on May 12, when it was signed into law.

Is your head spinning? Mine too. We're a small employer, too.

Well, the good news is most small employers rely on their health plans to distribute Cal-COBRA notices. So, just check with your insurers and brokers about this, mmmkay? I hope they will have this covered.

In case they don't - The new law will require notices to be sent to anyone having a qualifying event between 9/1/08 and May 12, 2009 ASAP (May 26, even). The notices explain eligibility for premium discounts under ARRA and give those who did not elect Cal-COBRA a second chance to do so.

The premium discounts offered to Cal-COBRA-eligible employees will result in tax deductions taken by the insurance companies in the case of Cal-COBRA. There will be verification of Cal-COBRA qualifying events to ensure those electing Cal-COBRA and seeking premium discounts are eligible under ARRA.

Incidentally, if you've missed all the hullabaloo about ARRA and the COBRA amendments, you can catch up here.

Court of Appeal: Arbitrate DLSE Wage Claim

2009-05-30T08:28:00.000-07:00

So, can an employer require employees to bring wage claims in arbitration instead of at the Division of Labor Standards Enforcement? If the arbitration agreement is otherwise drafted properly, Yes.

As explained by the court,

Frank Moreno is a former employee of Sonic, which owns and operates an automobile dealership. As a condition of his employment with Sonic, Moreno signed a predispute agreement that required both parties to submit their employment disputes to "binding arbitration under the Federal Arbitration Act, in conformity with the procedures of the California Arbitration Act (Cal. Code Civ. Proc. sec. 1280 et seq. . . .)." By its terms, the arbitration agreement applied to "all disputes that may arise out of the employment context . . . that either [party] may have against the other which would otherwise require or allow resort to any court or other governmental dispute resolution forum[,] . . . whether based on tort, contract, statutory, or equitable law, or otherwise." At some point, Moreno left his position with Sonic. In December 2006, Moreno filed an administrative wage claim with the Labor Commissioner for unpaid
vacation pay pursuant to section 98 et seq. Moreno alleged that he was entitled
to unpaid "[v]acation wages for 63 days earned 7/15/02 to 7/15/06 at the rate of
$441.29 per day."

So, why was the agreement enforceable even against the Labor Commissioner? The court of appeal decided that there was nothing precluding the substitution of the arbitrator for the deputy labor commissioner. The plaintiff argued that arbitration would not include the special stautory provisions regarding the de novo appeal to superior court after the hearing. But the court was unpersuaded. The court also found that the agreement complied with the protections of the California Supreme Court's decision in Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83. The court did not analyze the agreement's provisions, though. So, we have to assume that this agreement was sufficiently "mutual," provided for the employer to bear the unique costs of arbitration, etc.

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

California Court of Appeal: "Me Too" Declarations Admissible

2009-05-23T19:04:00.000-07:00

"Me too" evidence is when a plaintiff attempts to prove discrimination by showing that other employees have suffered discrimination. It can come in the form of live testimony at trial, or declarations in opposition to a motion for summary judgment.

Back in 2008, the Supreme Court of the U.S. held that "me too" evidence was neither categorically admissible nor inadmissible. We posted about that here.

California's Evidence Code is similar to the Federal Rules of Evidence in a number of respects. The Court of Appeal recently decided that co-employees' declarations claiming similar discrimination was admissible to defeat a motion for summary judgment.

Basically, the plaintiff, Dewandra Johnson, claimed discrimination against her because of her pregnancy. The employer, United Cerebral Palsy / Spastic Children's Foundation etc., claimed it fired her because she falsified time records. The Court of Appeal, reversing summary judgment in favor of the employer, found several issues from which the jury could determine that the real reason was discrimination. These evidentiary submissions included declarations from co-workers that claimed the same managers who fired the plaintiff had trumped up reasons for discharging them on the basis of pregnancy. Here's what the court said:

5. Declarations from Other Employees Also Constitute Substantial Evidence That
Requires Reversal of the Summary Judgment
The challenged "me to[o]" declarations that plaintiff included in her opposition to defendant‟s motion for summary judgment constitute substantial evidence requiring reversal of the judgment. Former employees of defendant stated in their declarations that (1) they too were fired by defendant after they became pregnant, (2) they know of someone who was fired by defendant because she was pregnant, (3) they resigned
because Jimenez made their work stressful after they notified her they were trying to become pregnant, or (4) they know of occasions when employees who were
dishonest or cited for dishonesty, were not fired by defendant. These employees
worked at the same facility where plaintiff worked, they were supervised by the
same people that supervised plaintiff (Jimenez and Sandgren), and their supervisors were, in turn, supervised by Jones. This is substantial evidence sufficient to raise a triable issue of material fact as to why defendant fired plaintiff.

The Court of Appeal then surveyed the case law supporting admission of this evidence to show pretext, concluding:

The evidence sets out factual scenarios related by former employees of the defendant that are sufficiently similar to the one presented by the plaintiff
concerning her own discharge by defendant, and the probative value of the
evidence clearly outweighs any prejudice that would be suffered by defendant by
its admission. Dissimilarities between the facts related in the other employees‟ declarations and the facts asserted by plaintiff with regard to her own case go to the weight of the evidence, not its admissibility.

So, the case turns on the similarity between the plaintiff's claims and her co-workers'. Had the co-workers' evidence been less similar, the court might have decided their admissibility a different way.

The case is JOHNSON v. UNITED CEREBRAL PALSY/SPASTIC CHILDREN‟S FOUNDATION OF LOS ANGELES AND VENTURA COUNTIES, and the opinion is here.

DFEH Issues 2008 Annual Report

2009-05-23T12:36:00.000-07:00

The California Department of Fair Employment and Housing enforces California's Fair Employment and Housing Act, the anti-discrimination and medical leave law. The agency just issued its annual report for 2008, which you can find here. It's graphic-heavy and mercifully short!

Of note, the DFEH noted discrimination complaints were up nearly 20% over 2007. The agency took in about 20,000 discrimination charges, almost 19,000 of which alleged employment (rather than housing) discrimination.

How does that break down? The most common form of discrimination alleged? Disability (about a third of the charges filed). Retaliation was right behind disability. Race, sexual harassment, and age discrimination constituted about 20% each of the total.

DFEH settled about 960 cases, for about $9.5 million in payments from employers and landlords to complainants.

Finally, the report highlighted the new automated charge filing system, and the new automated right to sue system. They're also working on intake filing by telephone, which should result in a lot more charges.

The best way to avoid a charge is prevention. Besides a solid policy and training, communication with employees and an effective system for complaints are the best way to prevent claims to third parties like the DFEH.

DGV

U.S. Supreme Court: Preganancy Discrimination Act Not Retroactive

2009-05-18T20:30:00.000-07:00

AT&T's old pension plan used to provide that employees on pregnancy disability leave did not receive the same service credit as employees on leave for other disabilities. Just before Congress enacted the Preganancy Discrimination Act, in 1978, AT&T modified its service credit calculations prospectively, but still calculated pre-PDA service under its pre-PDA rules. Before the PDA, AT&T's calculations were legal under Supreme Court precedent interpreting Title VII.

Four AT&T employees sued AT&T, claiming that perpetuating the calculation of service credit violated the PDA because their pension benefits were reduced as a result of the pre-PDA calculation. The EEOC joined in, as did the Communication Workers' Union. The district court and Ninth Circuit agreed with the Plaintiffs.

However, the Supreme Court, on a 7-2 vote, reversed. The Court's decision, penned by soon-retiring Justice Souter, turned on a number of reasons, the most significant of which are:
- the prior calculation was a "seniority system" exempt from Title VII (pre-PDA);
- the calculation was considered lawful under Supreme Court precent, General Elec. Co. v. Gilbert, 429 U. S. 125 (1976); therefore, AT&T could not have intentionally discriminated by adopting the old system;
- the PDA was not retroactive;
- the Lilly Ledbetter Fair Pay Act did not save her claim because the underlying pre-PDA decision was not itself discriminatory.

Justice Stevens joined the majority, but also wrote a concurrence noting he was bound by the pre-PDA Supreme Court opinion, General Elec. Co. v. Gilbert, 429 U. S. 125 (1976), although he dissented in that case.

Justices Ginsburg and Breyer dissented. The dissent traced a history of discrimination against pregnancy in the workplace. Acknowleding that the PDA was not retroactive, the dissent in essence argued that because Gilbert was SO wrongly decided, it should not affect the decision in the present case. Here's the essence of the dissent:

The PDA does not require redress for past discrimination. It does not
oblige employers to make women whole for the compensation denied them when,
prior to the Act,they were placed on pregnancy leave, often while still ready, willing, and able to work, and with no secure right to return to their jobs after childbirth.[fn] But the PDA does protect women, from and after April 1979, when the Act became fully effective, against repetition or continuation of pregnancy-based disadvantageous treatment. Congress interred Gilbert more than 30 years ago, but the Court today allows that wrong decision still to hold sway. The plaintiffs (now respondents) in this action will receive, for the rest of their lives, lower pension benefits than colleagues who worked for AT&T no longer than they did. They will experience this discrimination not simply because of the adverse action to which they were subjected pre-PDA. Rather, they are harmed today because AT&T has refused fully to heed the PDA’s core command: Hereafter, for "all employment-related purposes," disadvantageous treatment "on the basis of pregnancy, childbirth, or related medical conditions" must cease. 42 U. S. C. §2000e(k) (emphasis added). I would hold that AT&T committed a current violation of Title VII when, post-PDA, it did not totally discontinue reliance
upon a pension calculation premised on the notion that pregnancy-based
classifications display no gender bias.

The case is AT&T Corp. v. Hulteen, and the opinion is here.

Court of Appeal: Employee's Obligations re Reasonable Accommodation

2009-05-10T09:52:00.000-07:00

Carmine Scotch worked as an instructor for The Art Institute of California - Orange County. He had HIV. The institute's accreditation standards require instructors to have certain certification and education credentials / degrees. They allow some instructors to work towards those credentials after hire.

In 2004, the institute's management prepared for accreditation audits by identifying instructors lacking the education credentials required to maintain accreditation, including Scotch. By the end of 2005, Scotch had still not enrolled in a master's program. The institute even agreed to pay for degrees obtained at a local university.

Scotch received a poor performance review in early 2006. He disputed it, claiming it was retaliation for a leave he took during the previous winter. He also disclosed to HR that he had HIV.

By mid-2006, there was a decline in enrollment. Some instructors were laid off; others were reduced to part-time. Because the institute had more instructors than work, it decided to assign only instructors with masters degrees to upper-level courses. Therefore, Scotch's hours were reduced (along with other instructors'). Ultimately, Scotch resigned.

Scotch sued for refusal to accommodate, disability discrimination, failure to engage in the interactive process and wrongful termination. The Court of Appeal affirmed the Superior Court's grant of summary judgment on all causes of action.

Most of the opinion is not new law. The court found that the course load was reduced for legitimate reasons, and that Scotch did not demonstrate pretext. But this opinion is interesting because of the court's analysis of the accommodation claim. Scotch argued that he should have been assigned a full course load despite his failure to achieve the masters degree as a reasonable accommodation. The court found:

His proposed accommodation is not reasonable under the definition we have adopted because it is not a “modification or adjustment to the workplace” necessary to enable him to perform the essential functions of his position. Unlike the employee in Jensen, Scotch was not requesting assignment from a position he could not manage to one he could. Instead, Scotch explained the limitations created by his disability were that he needed to avoid stress and he could not pursue a master‟s degree while teaching full time and fulfilling other professional development requirements—limitations addressed by AIC‟s accommodation. Scotch‟s request of priority in assignment of lower division courses does not accommodate those limitations and was unnecessary to enable him to perform the essential functions of his position.

The opinion also addresses the "interactive process." The court found that the institute did not initiate a meeting before reducing the hours and that, perhaps, a jury would find that it should have. However, the court also found that the failure to have the meeting did not require a trial. That is because the employee must identify a potential accommodation that would have been effective to recover on the cause of action:

To prevail on a claim under section 12940, subdivision (n) for failure to engage in the interactive process, an employee must identify a reasonable accommodation that would have been available at the time the interactive process should have occurred. An employee cannot necessarily be expected to identify and request all possible accommodations during the interactive process itself because "„"[e]mployees do not have at their disposal the extensive information concerning possible alternative positions or possible accommodations which employers have. . . ."‟" (Wysinger, supra, 157 Cal.App.4th at p. 425.) However . . . once the parties have engaged in the litigation process, to prevail, the employee must be able to identify an available accommodation the interactive process should have produced: "Section 12940[, subdivision ](n), which requires proof of failure to engage in the interactive process, is the appropriate cause of action where the employee is unable to identify a specific, available reasonable accommodation while in the workplace and the employer fails to engage in a good faith interactive process to help identify one, but the employee is
able to identify a specific, available reasonable accommodation through the litigation process." (Nadaf-Rahrov, supra, 166 Cal.App.4th at p. 984.)

The case is Scotch v. Art Inst. of Orange Cty. and the opinion is here.

California Supreme Court to Review Section 203 Waiting Time Penalties

2009-05-06T08:58:00.001-07:00

The statute of limitations for a penalty is usually one year under California law. But, Labor Code Section 203 says that the statute of limitations for "waiting time penalties" is the same as the limitations period for the underlying wage claim. So, if the underlying wage claim is three years (such as unpaid overtime), then the statute of limitations for late payment of those wages at termination is also three years.

But, what happens if the underlying wages are paid already and an employee just wants to recover penalties in a civil lawsuit? There IS no underlying claim for wages in that case. So, the court of appeal reasoned in Pineda v. Bank of Am., that the one-year statute of limitations should apply in cases where there is no accompanying claim for unpaid wages.

The court in Pineda also clarified that the unfair competition law's four year statute does not apply to waiting time penalties, since the UCL ordinarily only applies to "restitution" of the plaintiff's property, and waiting time penalties are not the employee's property.

The California Supreme Court just accepted review of Pineda on both issues discussed above. The docket is here. We posted about the court of appeal's opinion here.

Ninth Circuit Asks CA Supremes for Guidance on Wage and Hour

2009-05-05T20:11:00.000-07:00

The Ninth Circuit has before it three cases involving pharmaceutical sales representatives. These folks visit with doctors and give them information on medications. The Ninth Circuit wants to know if these employees count as "outside salespersons" under California law. So, they asked the California Supreme Court for an opinion:

1. The Industrial Welfare Commission’s Wage Orders 1-2001 and 4-2001 define “outside salesperson” to mean “any person, 18 years of age or over, who customarily and regularly works more than half the working time away from the employer’s place of business selling tangible or intangible items or obtaining orders or contracts for products, services or use of facilities.” 8 Cal. Code Regs., tit. 8, §§ 11010, subd. 2(J); 11040, subd. 2(M). Does a pharmaceutical sales representative (PSR) qualify as an “outside salesperson” under this definition, if the PSR spends more than half the working time away from the employer’s place of business and personally interacts with doctors and hospitals on behalf of drug companies for the purpose of increasing individual doctors’ prescriptions of specific drugs?

If the sales representatives don't qualify as outside salespersons, because they don't take orders or actually sell the medications, the court wants to know if they qualify as "administrative" employees:

2. In the alternative, Wage Order 4-2001 defines a person employed in an
administrative capacity as a person whose duties and responsibilities involve (among other things) “[t]he performance of office or non-manual work directly related to management policies or general business operations of his/her employer or his employer’s customers” and “[w]ho customarily and regularly exercises discretion and independent judgment.” Cal. Code Regs., tit. 8 § 11040, subd. 1(A)(2)(a)(I), 1(A)(2)(b). Is a PSR, as described above, involved in duties and responsibilities that meet these requirements

The Ninth Circuit seeks guidance on the administrative test because California case law is sparse on what it means to "exercise discretion and independent judgment" for the administrative exemption, and whether the PSRs are involved in "office or non-manual work directly related ot management policies or general business operations" of Bayer's customers. The court appears to believe that California law on outside salespersons differs from the federal test under the FLSA such that reliance on FLSA cases would be of "limited" assistance.

The Supreme Court does not have to answer the questions. If the Court chooses not to, then the case will return to the Ninth Circuit for a prediction on how the Supreme Court would rule. Otherwise, this case could provide needed guidance in this area of wage and hour law.

The case is D'Este v. Bayer Corporation and the opinion/request for answers is here.

California Supreme Court Takes Tips

2009-05-01T04:57:00.000-07:00

(Or at least they accept tip pooling cases for review. ) What's tip pooling? We blogged about it here and wrote an article here. Yeah, we're on it.

Who knew tip pooling was the new meal break? There have been about four recent appellate decisions on tip pools in recent months. The Supreme Court decided to have its say, accepting review in Lu v. Hawaiian Gardens. We'll see if they grant and hold the rest of them or leave one on the books for guidance to the bar while the Lu review is pending.

DGV