The California Employment Law Blog

Brinker: Supreme Court Allows Further Briefing, Likely Will Delay Decision Again

2012-02-23T17:06:00.000-08:00

In December, the California Supreme Court accepted additional briefing in Brinker on retroactivity and deemed the case re-submitted, which pushed the deadline for its decision out from February to April.

Last week, the defense filed an application to allow post-hearing supplemental briefing on the impact of the Court of Appeal's recent decision in Duran v. U.S. Bank, which I discussed here. The Court granted the application and gave the plaintiffs until February 27 to respond. Assuming that the Court again deems the matter re-submitted, that would push the deadline out to May 29.

Does all of this mean that the Court has some interest in granting review in Duran? Or does it mean that the Court will use the Court of Appeal's reasoning in Duran to affirm the result in Brinker? Hopefully it won't be too much longer before we find out.

The Court's Brinker docket is here.

Transitions: Welcome to the California Employment Law Blog

2012-02-23T12:08:00.002-08:00

I started this blog in January, 2009, because my favorite blogger stopped posting, and I realized that the only way I was going to get my daily fix was if I did it myself. In January, 2010, I started my Mediation and Negotiation Blog to write about my mediation practice and the books and articles I was reading on negotiation.

Between the two blogs, I've published 349 posts over the last three years (this is number 350) and I've had almost 115,000 page views -- almost 100,000 of them on this blog alone. I've spent a tremendous amount of time writing, frequently as a way of avoiding the real work piled up on my desk, and the blog has become part of who I am, rather than just something I do.

So it feels a little strange to be re-naming the blog today. But the fact is that my mediation practice is more broad than my litigation practice was. I am mediating all types of employment law cases. In the last month, I've mediated discrimination, retaliation, and wrongful termination cases, along with wage and hour cases -- both individual cases and class actions. It's only fitting that I would broaden the scope of the blog and -- because it's no longer focused so closely on wage and hour, class action, and arbitration issues -- to call it what it now is: The California Employment Law Blog.

A note to anyone who may be concerned that they will lose a great place to read about wage and hour developments: Don't worry. I'm going to continue posting on wage and hour, class actions, and arbitration. It's just that I'm also going to be putting more focus on FEHA, Title VII, retaliation, whistle-blowers, employee trade secret claims, and the other employment law claims that my mediation clients are interested in.

As always, I hope you find the blog helpful.

Ajamian v. CantorCO2e: Court, Not Arbitrator, Properly Ruled on Unconscionability of Arbitration Agreement

2012-02-16T20:02:00.000-08:00

I started what's likely to be my last jury trial this morning -- I am now a full-time mediator, which I enjoy more than trial work -- and don't have much time to discuss this case, but it did catch my eye.

In Ajamian v. CantorCO2e (2/16/12), an employer and its CEO appealed an order (San Francisco Superior Court, Judge Peter J. Busch) denying their petition to compel arbitration of respondent‟s claims under the Federal Arbitration Act. (9 U.S.C. §§ 1-16.) They contended:

(1) the arbitration panel, rather than the court, should have decided whether the arbitration provision in respondent's employment agreement was unconscionable; (2) respondent failed to establish that the arbitration provision was unconscionable, and any unconscionable portion of the provision should have been severed to permit the arbitration to proceed; and (3) alternatively, arbitration should have been compelled under the terms of an employee handbook.

The Court of Appeal affirmed the order.

Although the arbitration provision was broadly worded and indicated that arbitration might be conducted under the rules of an arbitration service that gives arbitrators the power to decide the validity of arbitration agreements, it did not provide clear and unmistakable evidence that the parties intended to delegate authority to the arbitrator, rather than to the court, to decide the threshold issue of whether the arbitration provision itself was unconscionable. The unconscionability issue was therefore for the court to decide. Furthermore, the provision was procedurally unconscionable and substantively unconscionable in more than one respect, such that the court did not abuse its discretion in concluding that the provision could not be saved by severing the offending terms. In addition, appellants failed to establish that arbitration should have been compelled under the employee handbook.

To me, the decision on unconscionability is less interesting than the decision to allow the court to make the call. See Rent-A-Center, West, Inc. v. Jackson (blogged here).

The Ajamian opinion is available here.

Ruiz v. Affinity Logistics: District Court Erroneously Applied Georgia Law to California Independent Contractor Dispute

2012-02-10T16:53:00.000-08:00

In Ruiz v. Affinity Logistics Corporation (9th Cir. 2/8/12) --- F.3d ----, 2012 WL 388171, Ruiz worked as a furniture delivery person. He entered into an agreement with Affinity stating that he was an independent contractor and that any dispute with Affinity would be governed by Georgia law. Ruiz filed a putative class action alleging violations of federal and California wage and hour laws. After a three-day bench trial, the district court (S.D.Cal., Judge Janis L. Sammartino) found that Ruiz was an independent contractor under Georgia law, which applies a presumption of independent contractor status.

The Ninth Circuit reversed. Although the district court properly found that the chosen state, Georgia, had a substantial relationship to the parties because Affinity was incorporated there, it should have continued the analysis to determine (1) whether applying Georgia’s law “is contrary to a fundamental policy of California,” and then (2) “whether California has a materially greater interest than [Georgia] in resolution of the issue." Slip op. at 7-8.

On the first point, the Court held that Georgia law "is contrary to a fundamental policy of California law" because it applies a presumption of independent contractor status, rather than employee status.

[U]nder California law, once a plaintiff comes forward with evidence that he provided services for an employer, the employee has established a prima facie case that the relationship was one of employer/employee.” Narayan v. EGL, Inc., 616 F.3d 895, 900 (9th Cir. 2010) (citing Robinson v. George, 16 Cal.2d 238, 243-44 (1940)). “Once the employee establishes a prima facie case, the burden shifts to the employer, which may prove, if it can, that the presumed employee was an independent contractor.” Id.

Slip op. at 8-9.

On the second point, the Court held that California also has a "materially greater interest" than Georgia in the outcome of this case. Slip op. at 10.

Here, the drivers entered into the contract with Affinity in California. The drivers completed the work for Affinity in California. The subject matter of the contract deals with completing deliveries in California. Finally, the domicile of the drivers is California. The only connection with Georgia is that Georgia is where Affinity is incorporated. Accordingly, California has a materially greater interest than Georgia in determining whether the drivers are independent contractors or employees of Affinity.

Ibid. Further, Affinity did not explain "how Georgia would suffer" if the court applied California law. Ibid.

The Court remanded the case to the district court to determine Ruiz's status under California, rather than Georgia, law.

The opinion is available here.

Duran v. U.S. Bank: Court of Appeal Reverses Judgment after Class Action Trial, Orders Decertification

2012-02-06T18:31:00.000-08:00

In Duran v. U.S. Bank (blogged here), 260 current and former business banking officers employed by U.S. Bank filed suit, alleging that USB misclassified them as outside sales personnel. After a bench trial (Alameda County Superior, Judge Robert B. Freedman) the Court awarded $15 million to the class members and an additional $18 million in attorney fees.

The Court of Appeal has reversed the judgment and ordered the class decertified. I have not had a chance to read this decision (it's 75 pages long), but here's the introduction from the opinion:

Following a bifurcated bench trial, defendant U.S. Bank National Association (USB) has appealed the resulting $15 million judgment in this wage and hour class action brought under Business and Professions Code section 17200 (section 17200). The plaintiffs in the class action are 260 current and former business banking officers (BBO‘s) who claimed they were misclassified by USB as outside sales personnel exempt from California‘s overtime laws, and were thus unlawfully denied overtime pay. In addition to arguing the case should not have been certified as a class action, USB contends the trial court‘s trial management plan deprived it of its constitutional due process rights in that the plan prevented it from defending against the individual claims for over 90 percent of the class. We agree the trial management plan was fatally flawed and reverse the judgment. We also conclude the case must be decertified, and reverse an order awarding certain expert witness fees to plaintiffs. We remand the two named plaintiffs‘ meal and rest break period violation claims for reconsideration in light of the California Supreme Court‘s ruling in Brinker Restaurant Corp. v. Superior Court (2008) 165 Cal.App.4th 25, review granted October 22, 2008 (S166350).

I will write more once I have a chance to digest this. The opinion is available here.

Steven G. Pearl to Speak at Los Angeles County Bar Labor and Employment Law Symposium

2012-02-06T08:24:00.000-08:00

Steven G. Pearl will speak at the Thirty Second Annual Los Angeles County Bar Association (LACBA) Labor and Employment Law Symposium on March 7, 2012.

Mr. Pearl will moderate a panel on “Hot Button Issues in Wage and Hour Law." Speaking on the panel are defense attorneys Nancy Bertrando and Richard Simmons and plaintiffs' attorney Eric Kingsley. The panel will address issues such as collateral estoppel and repeat class actions, class action waivers, white collar exemptions, attorney fees, and the upcoming Brinker decision.

Mr. Pearl serves on the Executive Committee of LACBA's Labor and Employment Law Section, and this is the third time that he has spoken at the Symposium.

More information is available on LACBA's web site.

Steven G. Pearl to Present Mediation Seminar to Association of Corporate Counsel

2012-02-03T08:02:00.000-08:00

On February 15, 2012, Steven G. Pearl will present "Achieving Your Goals Through Mediation" to the Association of Corporate Counsel, Southern California Chapter.

Mr. Pearl will address selecting your mediator, who to bring -- and who not to bring -- to mediation, pre-mediation communications with the mediator, and other areas that parties need to consider when preparing for mediation.

Mr. Pearl will speak at 7:30 am at the corporate offices of Guitar Center in Westlake Village and at 11:30 am at the offices of Resources Global in Los Angeles. More information is available from the Association of Corporate Counsel.

Joaquin v. City of Los Angeles: Court of Appeal Issues Retaliation Decision

2012-02-02T08:30:00.000-08:00

Joaquin v. City of Los Angeles (1/23/12) --- Cal.App.4th ----, 2012 WL 171723, concerns a difficult area of discrimination, harassment, and retaliation law: Balancing the rights of employees who have suffered harassment, discrimination, or other unlawful conduct, against the rights of those who are subjected to false allegations of such conduct, and the rights of employers who may have to decide who's telling the truth.

Richard Joaquin was a police officer who complained of sexual harassment by a superior officer, Sands. The Department investigated and found Joaquin's complaint unfounded. After a seven day hearing, a Board of Rights found Joaquin guilty of retaliating against Sands by filing a false complaint of harassment. The Board recommended Joaquin be terminated, and the Department accepted the recommendation.

Joaquin filed a petition for writ of mandate. The Superior Court concluded that the Board of Rights' findings were not supported by the weight of the evidence, granted the petition, and ordered Joaquin reinstated. Interestingly, the court found:

The uncontradicted evidence is that some or all of the events reported by Joaquin actually occurred. Joaquin provided a detailed and consistent account of conduct which made him feel uncomfortable or offended. In the face of these allegations, Sands did not completely deny the shooting range [fn. omitted] or weight room incidents, or calling the front desk. He had a different explanation for the field impound location and Olympics incidents, but again did not deny that they occurred. He was contradicted on the basketball game incident, for he contended he was a member of the team long before Joaquin when Joaquin started the team and had always been one of the two coaches.

Slip op. at 5.

Joaquin then sued the City of Los Angeles, alleging that the City terminated him in retaliation for filing his sexual harassment complaint in violation of the Fair Employment and Housing Act (FEHA). The jury found that Joaquin's complaint of sexual harassment was a motivating reason for the termination and awarded him more than $2 million for lost wages and emotional distress. The City appealed, and the Court reversed, holding that Joaquin "did not present substantial evidence that his termination was motivated by retaliatory animus, a necessary element of his claim." Slip op. at 1.

After a lengthy recitation of the facts, the Court found that Joaquin had established a prima facie case of retaliation, and that the City had articulated a legitimate, nonretaliatory reason for the termination. Slip op. at 8. Relying on cases interpreting Title VII and another state's laws, the Court held:

[I]n appropriate circumstances, an employer may discipline or terminate an employee for making false charges, even where the subject matter of those charges is an allegation of sexual harassment. In such a case, the disciplinary action is subject to the burden-shifting analysis articulated by the United States Supreme Court in McDonnell Douglas Corp. v. Green, supra, 411 U.S. 729, and adopted by our Supreme Court in Yanowitz v. L'Oreal USA, Inc., supra, 36 Cal.4th 1028, 1042, and other cases. Under that analysis, the ultimate question for the fact finder is whether the employer's stated reason for discipline (i.e., that the employee was untruthful during an investigation) was pretextual or whether there is other evidence that, “as a whole supports a reasoned inference that the challenged action was the product of discriminatory or retaliatory animus.”

Slip op. at 12. Perhaps more importantly, the Court held that an employer in such a situation need not prove "more than its good faith belief that a false statement was knowingly made..." Slip op. at 11.

[The] employer can lawfully act on a level of certainty that might not be enough in a court of law. In the workaday world, not every personnel decision involving a false statement (or a cover-up) has to be treated as something like a trial for perjury. Therefore, an employer, in these situations, is entitled to rely on its good faith belief about falsity, concealment, and so forth.

Ibid. The Court then held that Joaquin failed to introduce substantial evidence of retaliatory animus. Slip op. at 12. Although Joaquin alleged that Sands wanted Joaquin disciplined for having made a sexual harassment complaint, he apparently did not argue the cat's paw theory of liability (see Staub v. Proctor Hospital, 562 U.S. ___, 131 S.Ct. 1186 (2011)), and the Court found that Sands' animus, if any, was irrelevant to the Board's recommendation and the Department's decision. Slip op. at 12-13. The Court dealt similarly with the other evidence relied on by Joaquin. Slip op. at 13-14.

Finally, the Court held that CACI 2505 fails to set forth the retaliatory animus factor and urged the Judicial Council to revise the instruction and verdict form "to clearly state that retaliatory intent is a necessary element of a retaliation claim under FEHA." Slip op. at 15.

Some have expressed concern that Joaquin would allow unscrupulous employers to conduct sham investigations, find that the complaints are false, and fire the complaining employees. Yet California law still protects employees who may good faith, but mistaken complaints of illegal conduct. See, e.g., Barbosa v. IMPCO Technologies, Inc. (2009) 179 Cal.App.4th 1116 (blogged here). Some have suggested that the key distinction between Joaquin and the typical retaliation case is the Board of Rights’ finding that Joaquin intentionally fabricated his complaints, but I do not know that trial courts will apply such a distinction. I assume that Joaquin will petition for review, and others will petition for depublication, but I have little doubt that we will see more cases dealing with these issues.

The opinion is available here.

Kirby v. Immoos: California Supreme Court Schedules Oral Argument in Attorney Fee Case

2012-02-01T17:42:00.000-08:00

The California Supreme Court will hear oral argument in Kirby v. Immoos Fire Protection, Inc. on Tuesday, March 6, 2012, at 9:00 a.m., in San Francisco. No word yet on whether the argument will be broadcast over the internet, as Brinker was. (Or if it will be broadcast in a way that actually allows people to watch live!) Kirby presents the following issues:

Does Labor Code section 1194 apply to a cause of action alleging meal and rest period violations (Lab. Code 226.7) or may attorney's fees be awarded under Labor Code section 218.5?
Is our analysis affected by whether the claims for meal and rest periods are brought alone or are accompanied by claims for minimum wage and overtime?

The Court's case summary is here.

Steven G. Pearl Named Super Lawyer in Dispute Resolution and Labor & Employment Law

2012-02-01T09:23:00.000-08:00

For the second year in a row, I have been named a Super Lawyer in Alternative Dispute Resolution and Labor and Employment Law by Super Lawyers Magazine.

Super Lawyers is a rating service of outstanding lawyers who have attained a high degree of peer recognition and professional achievement. The selection process is multi-phased and includes independent research, peer nominations, and peer evaluations. Five percent of the total lawyers in the state are selected as Super Lawyers.

Reyes v. Macy’s: Defendant Cannot Appeal Order Compelling Arbitration of Individual Claims but Not Class or PAGA Claims

2012-01-31T17:57:00.000-08:00

In Reyes v. Macy’s, Inc. (12/21/11, pub. 1/19/12) --- Cal.App.4th ----, 2011 WL 6416432, the plaintiffs filed an action alleging individual discrimination, harassment, and retaliation claims, class wage and hour class claims, and representative claims under PAGA. The employer moved to compel individual arbitration, dismiss the class allegations, and stay the court action. The trial court (San Francisco Superior, Judge Charlotte Walter Woolard) severed the individual claims and ordered them into arbitration. The court declined to dismiss the class and representative claims, but stayed them pending arbitration. The employer appealed, and the employee moved to dismiss the appeal.

The Court of Appeal granted the motion to dismiss. The Court held that that portion of the trial court's order granting the motion to compel arbitration of the individual claims is not appealable, and the remainder of the order denying the motion to dismiss representative claims is not a final judgment and, therefore, also is not appealable at this time. Slip op. at 1. The Court reasoned that the employer had not sought to compel arbitration of the class and representative claims, so the order denying the motion to dismiss them was not appealable. Cal. Code Civ. Proc. 904.1. Slip op. at 3.

Rejecting the employer's argument that the employee's PAGA claims also were individual claims, the Court held:

[P]laintiff may not and does not bring the PAGA claim as an individual claim, but “as the proxy or agent of the state’s labor law enforcement agencies.” (Arias v. Superior Court (2009) 46 Cal.4th 969, 986.) “The purpose of the PAGA is not to recover damages or restitution, but to create a means of ‘deputizing’ citizens as private attorneys general to enforce the Labor Code. [Citation.] [T]he relief is in large part ‘for the benefit of the general public rather than the party bringing the action.’ ” (Brown v. Ralphs Grocery Co. (2011) 197 Cal.App.4th 489, 501.)

***

A plaintiff asserting a PAGA claim may not bring the claim simply on his or her own behalf but must bring it as a representative action and include “other current or former employees.” (Machado v. M.A.T. & Sons Landscape, Inc. (E.D.Cal., July 23, 2009, No. 2:09-cv-00459 JAM JFM) 2009 U.S.Dist. Lexis 63414, *6.) In Machado, the district court, using the “common acceptation” of the word “and,” held that the claim must be brought on behalf of other employees. (Ibid.) “The PAGA statute does not enable a single aggrieved employee to litigate his or her claims, but requires an aggrieved employee “on behalf of herself or himself and other current or former employees to enforce violations of the Labor Code by their employers.” (Urbino v. Orkin Services of California Inc. (C.D.Cal Oct. 5, 2011, No. 2:11-cv-06456-CJC(PJWx)) 2011U.S. Dist. Lexis 114746, *22; see also Plows v. Rockwell Collins, Inc. (C.D.Cal. Aug. 9, 2011, No. SACV 10-01936 DOC (MANx)) 2011 U.S.Dist. Lexis 88781, *14; Brown v. Ralphs Grocery Co., supra, 197 Cal.App.4th 489.) Because the PAGA claim is not an individual claim, it was not within the scope of Macy’s request that individual claims be submitted to arbitration and the court’s order may not be construed as a denial of any such request.

Slip op. at 3-5.

This is one of the few published California appellate decisions discussing PAGA, and as far as I know it is the only one holding that a plaintiff may not bring a PAGA claim only on his or her own behalf, but must include other current or former employees. Someone feel free to correct me if I'm wrong about that. Also, it's interesting that the Court relied on unpublished district court opinions on this point.

The opinion is available here.

Bridgeford v. Pacific Health: Class Cert Denial Does Not Establish Collateral Estoppel Against Absent Class Members

2012-01-27T15:46:00.000-08:00

In Smith v. Bayer Corp., 564 U.S. ---, 131 S.Ct. 2368, 2011 WL 768649 (6/16/11) (blogged here) the Supreme Court of the United States held that a District Court's denial of a Rule 23 class certification motion does not prevent separate plaintiffs from seeking certification in a separate state court action.

In Bridgeford v. Pacific Health Corporation (1/18/12) --- Cal.App.4th ----, 2012 WL 130615, the California Court of Appeal held that denial of class certification in one action does not prevent absent class members from filing a second class action making the same allegations.

The plaintiffs filed a putative class action alleging minimum wage, overtime, and other wage and hour violations. The defendants demurred, arguing that the plaintiffs were collaterally estopped from seeking class certification because the issue of class certification was decided in an earlier putative class action. The trial court (Los Angeles Superior, Judge Zaven V. Sinanian) sustained the demurrer without leave to amend, holding that the trial court in the earlier action had rendered a final decision on the merits of “the issue of class certification,” and the plaintiffs could not bring a class action on either the same causes of action or additional causes of action against the same defendant or additional defendants because such causes of action could not have been asserted in the prior litigation. Slip op. at 6-7.

The Court of Appeal reversed. It rejected those cases in which "California courts have held or suggested that the denial of class certification can establish collateral estoppel against absent putative class members on issues that were actually decided in connection with the denial." Alvarez v. May Dept. Stores Co. (2006) 143 Cal.App.4th 1223, 1236; Bufil v. Dollar Financial Group, Inc. (2008) 62 Cal.App.4th 1193, 1202-1203; Johnson v. GlaxoSmithKline, Inc. (2008) 166 Cal.App.4th 1497, 1510-1513 & fn. 8. The Court concluded, "to the contrary that if no class was certified by the court in the prior proceeding, the interests of absent putative class members were not represented in the prior proceeding and the requirements for collateral estoppel cannot be established...." Slip op. at 11.

Relying on the Supreme Court's decision in Smith v. Bayer, the Court held that "the denial of class certification cannot establish collateral estoppel against unnamed putative class members on any issue because unnamed putative class members were neither parties to the prior proceeding nor represented by a party to the prior proceeding so as to be considered in privity with such a party for purposes of collateral estoppel." Slip op. at 12-13.

The opinion is available here.

Zelasko-Barrett v. Brayton-Purcell: Supreme Court Grants Review and Holds Pending Kirby v. Immoos

2012-01-20T12:53:00.000-08:00

In Zelasko-Barrett v. Brayton-Purcell, LLP (8/17/11) 198 Cal.App.4th 582, the Court of Appeal held that a law school graduate who was not licensed to practice law but who worked for a law firm and performed tasks customarily performed by junior attorneys was exempt as a learned professional. My post on Zelasko-Barrett is here. I thought the Supreme Court would grant and hold pending its decision in Harris v. Superior Court (12/29/11) --- Cal.4th ----, 2011 WL 6823963, which most people thought would shed light on the white collar exemptions. (As it turned out, Harris shed little light on anything, but that's a different story.)

Yesterday, the Supreme Court did in fact grant review in Zelasko-Barrett, but on a different point. The back story is this: after the Court of Appeal issued its August 17 decision, it issued an unpublished decision (available here) on October 24, 2011, holding that the successful employer could not recover its attorney fees under Labor Code section 218.5. This is at issue in Kirby v. Immoos Fire Protection, Inc., which will address the following:

Does Labor Code section 1194 apply to a cause of action alleging meal and rest period violations (Lab. Code 226.7) or may attorney's fees be awarded under Labor Code section 218.5?
Is our analysis affected by whether the claims for meal and rest periods are brought alone or are accompanied by claims for minimum wage and overtime?

So Zelasko-Barrett becomes the second Kirby grant-and-hold. The other is In re. UPS Wage and Hour Cases (blogged here). I thought the Court might grant review in Plancich v. United Parcel Service, Inc. (8/11/11) 198 Cal.App.4th 308 (blogged here) in which the Court of Appeal held that while Labor Code section 1194 gives a prevailing employee the right to recover attorney's fees and costs, it "does not contain express language excluding prevailing employers from recovering their costs." Turns out I'm a lousy judge of grant-and-holds. Go figure.

The Supreme Court's Kirby page is here.

Raniere v. Citigroup: District Court Holds Collective Action Waiver Unenforceable as Preventing Employees From Vindicating Substantive Statutory Rights under the FLSA

2012-01-19T15:06:00.000-08:00

Thank you to Andrew Frisch for his Overtime Law Blog. Mr. Frisch does a truly excellent job of covering FLSA developments, and I recommend his blog highly. Mr. Frisch has written a detailed article on an interesting District Court case, Raniere v. Citigroup Inc. (S.D.N.Y. 11/22/11). I will not review the case in detail but will only note a few important points.

In Raniere, three individuals brought a putative nationwide FLSA collective action for unpaid overtime, alleging that the defendants classified its home mortgage consultants as exempt employees and failed to pay them overtime compensation. The defendant moved to compel individual arbitration, and the Court denied the motion. Slip op. at 2.

First, the Court based its ruling in the "federal substantive law of arbitrability," which "requires federal courts to declare otherwise operative arbitration clauses unenforceable when enforcement would prevent plaintiffs from vindicating their statutory rights." Slip op. at 30. The Court stated that AT&T Mobility v. Concepcion "in no way alters" this federal law of arbitrability. Slip op. at 32.

Second, the Court held that employees cannot waive their right to proceed collectively under the FLSA, and "a waiver of the right to proceed collectively under the FLSA is per se unenforceable." Slip op. at 36.

Third, because the agreement at issue included a "blow-up" provision -- a clause stating that if the collective action waiver is found unenforceable, then the action shall proceed in court, rather than in arbitration -- the Court declined to order class arbitration or to stay the court proceedings. Slip op. at 51.

The opinion is available here. Mr. Frisch's post on Raniere is here.

Hosanna-Tabor Evangelical Lutheran Church and School v. EEOC: Teacher/Minister May Not Sue Church for Discrimination, Wrongful Termination

2012-01-18T14:46:00.000-08:00

I am mediating more cases that fall outside of the wage and hour realm, and wanted widen the blog's focus to include more traditional employment law.

In Hosanna-Tabor Evangelical Lutheran Church and School v. EEOC, --- S.Ct. ----, 2012 WL 75047 (1/11/12), the Supreme Court considered whether a minister may sue her church for wrongful termination based on acts of discrimination. In a unanimous opinion written by Chief Justice Roberts, the Court held that the Establishment and Free Exercise Clauses of the First Amendment bar such actions.

Cheryl Perich worked as a teacher for Hosanna-Tabor. She was considered "called," meaning that she was regarded as having been called to her vocation by God through a congregation. She taught academic and religious classes and led the students in prayer. Perich was diagnosed with narcolepsy and went on disability leave. When Perich advised the school that she was able to return to work, it told her that it had filled her position. After Perich showed up for work, Hosanna-Tabor terminated her.

Perich filed a charge with the Equal Employment Opportunity Commission (EEOC), alleging that Hosana-Tabor had terminated her employment in violation of the Americans with Disabilities Act (ADA). 42 U. S. C. §12101 et seq. The EEOC filed suit, alleging that Hosanna-Tabor had fired Perich in retaliation for threatening to file an ADA lawsuit. Hosanna-Tabor moved for summary judgment, arguing that Perich was a minister, and she had been fired for a religious reason - namely, that her threat to sue the Church violated the Synod’s belief that Christians should resolve their disputes internally. The District Court agreed that the suit was barred by the ministerial exception and granted summary judgment in Hosanna-Tabor’s favor. The Sixth Circuit Court of Appeals vacated the decision, but the Supreme Court granted certiorari and affirmed.

The Court began by tracing the history of the First Amendment Establishment and Free Exercise Clauses from the Magna Carta, through the reign or Henry VIII, to the founding of the colonies by the Puritans, and the early days of the United States. The principal lesson drawn from this history is that the government under the First Amendment has no role in telling a church whom to choose as its minister. In the words of then Secretary of State James Madison in 1806, the selection of church functionaries was an “entirely ecclesiastical” matter left to the Church’s own judgment. Slip op. at 9.

The Court then considered whether "this freedom of a religious organization to select its ministers is implicated by a suit alleging discrimination in employment." Slip op. at 13. The Court held that there is a “ministerial exception,” grounded in the First Amendment, that precludes application of anti-discrimination legislation to claims concerning the employment relationship between a religious institution and its ministers. Ibid.

The members of a religious group put their faith in the hands of their ministers. Requiring a church to accept or retain an unwanted minister, or punishing a church for failing to do so, intrudes upon more than a mere employment decision. Such action interferes with the internal governance of the church, depriving the church of control over the selection of those who will personify its beliefs. By imposing an unwanted minister, the state infringes the Free Exercise Clause, which protects a religious group’s right to shape its own faith and mission through its appointments. According the state the power to determine which individuals will minister to the faithful also violates the Establishment Clause, which prohibits government involvement in such ecclesiastical decisions.

Slip op. at 13-14.

The Court then held that the ministerial exception applied to the facts of the present case. The Court declined to set a bright line rule on the limits of the ministerial exemption and instead looked to the particular facts of the case, including: Hosanna-Tabor held Perich out as a minister; her title as a minister "reflected a significant degree of religious training followed by a formal process of commissioning;" Perich held herself out as a minister of the Church by accepting the formal call to religious service; and her job duties reflected a role in conveying the Church’s message and carrying out its mission. Slip op. at 16-18. The Court concluded:

The interest of society in the enforcement of employment discrimination statutes is undoubtedly important. But so too is the interest of religious groups in choosing who will preach their beliefs, teach their faith, and carry out their mission. When a minister who has been fired sues her church alleging that her termination was discriminatory, the First Amendment has struck the balance for us. The church must be free to choose those who will guide it on its way.

Slip op. at 21-22.

The opinion is available here.

CompuCredit Corp. v. Greenwood: New SCOTUS Arbitration Decision May Shed Light on Future of Employment Class Action Waivers

2012-01-18T12:41:00.000-08:00

In CompuCredit Corp. v. Greenwood, --- S.Ct. ----, 2012 WL 43514 (1/10/12) the Supreme Court of the United States (SCOTUS) considered whether the Credit Repair Organizations Act (CROA), 15 U.S.C. § 1679 et seq., precludes enforcement of an arbitration agreement in a lawsuit alleging violations of that Act. The plaintiffs filed a putative class action under the CROA, the defendant moved to compel arbitration, the trial court (N.D.Cal., Judge Claudia Wilken) denied the motion, and the Ninth Circuit affirmed.

In an opinion written by Justice Scalia, the Supreme Court reversed. First, the CROA's provision requiring credit repair organizations to notify consumers of their right to sue ("You have a right to sue a credit repair organization that violates the Credit Repair Organization Act") is a notification provision, not a private right of action provision (which occurs elsewhere in the CROA) and "does not create a right to initial judicial enforcement." Slip op. at 4.

Second, the CROA's non-waiver language ("Any waiver by any consumer of any protection provided by or any right of the consumer under this subchapter—(1) shall be treated as void; and (2) may not be enforced by any Federal or State court or any other person") does not prohibit the waiver of one's right to proceed in court because, again, the CROA "does not create a right to initial judicial enforcement." Ibid.

Because the CROA "is silent on whether claims under the Act can proceed in an arbitrable forum, the FAA requires the arbitration agreement to be enforced according to its terms." Slip op. at 6.

This brings to my mind the somewhat related issue in the National Labor Relations Board's recent decision in D.R. Horton, Inc. (blogged here). In D.R. Horton, the Board held that an employer violates Section 8(a)(1) of the National Labor Relations Act (NLRA) when it requires employees covered by the Act, as a condition of employment, to sign an agreement that precludes them from filing joint, class, or collective claims addressing their wages, hours, or other working conditions against the employer in any forum, whether arbitral or judicial. The Board emphasized that its holding did not implicate the Federal Arbitration Act (FAA) because the policy at issue prohibited collective or class actions in any forum, not just in arbitration. However, even if the NLRA did conflict with the FAA, the FAA would have to yield:

[U]nder the Norris-LaGuardia Act, a private agreement that seeks to prohibit a “lawful means [of] aiding any person participating or interested in” a lawsuit arising out of a labor dispute (as broadly defined) is unenforceable, as contrary to the public policy protecting employees’ “concerted activities for . . . mutual aid or protection.” To the extent that the FAA requires giving effect to such an agreement, it would conflict with the Norris-LaGuardia Act. The Norris-LaGuardia Act, in turn—passed 7 years after the FAA,—repealed “[a]ll acts and parts of act in conflict” with the later statute (Section 15).

Would this reasoning hold in the Supreme Court? Addressing federal laws that prohibit arbitration, Justice Scalia in CompuCredit wrote:

When [Congress] has restricted the use of arbitration in other contexts, it has done so with a clarity that far exceeds the claimed indications in the CROA. See, e.g., 7 U.S.C. § 26(n)(2) (2006 ed., Supp. IV) (“No predispute arbitration agreement shall be valid or enforceable, if the agreement requires arbitration of a dispute arising under this section”); 15 U.S.C. § 1226(a)(2) (2006 ed.) (“Notwithstanding any other provision of law, whenever a motor vehicle franchise contract provides for the use of arbitration to resolve a controversy arising out of or relating to such contract, arbitration may be used to settle such controversy only if after such controversy arises all parties to such controversy consent in writing to use arbitration to settle such controversy”); cf. 12 U.S.C. § 5518(b) (2006 ed., Supp. IV) (granting authority to the newly created Consumer Financial Protection Bureau to regulate predispute arbitration agreements in contracts for consumer financial products or services).

Slip op. at 5. Justice Sotomayor, joined by Justice Kagan, joined in the result, but added this note:

The majority opinion contrasts the liability provision of the Act with other, more recently enacted statutes that expressly disallow arbitration. I do not understand the majority opinion to hold that Congress must speak so explicitly in order to convey its intent to preclude arbitration of statutory claims. We have never said as much, and on numerous occasions have held that proof of Congress' intent may also be discovered in the history or purpose of the statute in question. See ibid. (“If such an intention exists, it will be discoverable in the text of the [statute], its legislative history, or an ‘inherent conflict’ between arbitration and the [statute's] underlying purposes”); Shearson/American Express Inc. v. McMahon, 482 U.S. 220, 227, 107 S.Ct. 2332, 96 L.Ed.2d 185 (1987) (“If Congress did intend to limit or prohibit waiver of a judicial forum for a particular claim, such an intent ‘will be deducible from [the statute's] text or legislative history,’ or from an inherent conflict between arbitration and the statute's underlying purposes” (quoting Mitsubishi Motors Corp. v. Soler Chrysler–Plymouth, Inc., 473 U.S. 614, 628, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985); citation omitted)).

Slip op. at 8.

If the Supreme Court does eventually take up the Board's decision in D.R. Horton, it is possible that the decision will turn on the question of whether Congress, in enacting the NLRA and the Norris-LaGuardia Act, intended the employee protections of those acts to trump the policies at work in the FAA.

Until then, the Court's opinion in CompuCredit is available here.

Wisdom v. AccentCare: Court Invalidates Unconscionable Arbitration Agreement

2012-01-18T10:31:00.000-08:00

In Wisdom v. AccentCare, Inc. (1/3/12) --- Cal. App. 4th ----, 2012 WL 8701, the defendant employed the plaintiffs as on-call staffing coordinators. The plaintiffs filed suit, alleging that they were not paid for off-the-clock work. They sought damages and injunctive and declaratory relief.

The employer moved to compel arbitration based on an acknowledgment form that some of the plaintiffs signed when they applied for employment. The form stated:

I hereby agree to submit to binding arbitration all disputes and claims arising out of the submission of this application. I further agree, in the event that I am hired by AccentCare,that all disputes that cannot be resolved by informal internal resolution which might arise out of my employment with AccentCare, whether during or after that employment, will be submitted to binding arbitration. I agree that such arbitration shall be conducted under the rules then in effect of the American Arbitration Association.

Slip op. at 2. The trial court (Sacramento County Superior, Judge Steven H. Rodda) denied the motion, holding that the acknowledgment form was unconscionable. Ibid.

Relying on Armendariz v. Foundation Health Psychcare Services, Inc., (2000) 24 Cal.4th 83, the Court of Appeal affirmed, holding that the acknowledgment was procedurally and substantively unconscionable. On procedural unconscionability, the Court held:

The contract, being one of adhesion, was oppressive. It was given to plaintiffs upon their application for employment. This situation leads to inherent unconscionability because of the unequal bargaining power of the parties and the nature of the relationship. There was no evidence that the plaintiffs in this case were highly sought-after skilled employees who individually negotiated the details of their employment relationship with AccentCare.

Slip op. at 3. The Court noted that the arbitration was to be conducted under the American Arbitration Association rules, but the acknowledgment did not attach those rules. The Court also found that an element of surprise, as stated in the plaintiffs' declarations, in that the plaintiffs did not know what “binding arbitration” meant, no one explained it to them, and they did not know that they were giving up their right to trial. Ibid. Cf. Roman v. Superior Court (2009) 172 Cal.App.4th 1462, 1468-1469.

The Court also found the acknowledgment substantively unconscionable because it lacked mutuality, i.e., it required the plaintiffs to arbitrate their claims but did not require the defendant to do so. Slip op. at 6. The Court concluded:

The arbitration language in the acknowledgment signed by plaintiffs did not create mutual obligations. This, combined with the elements of procedural unconscionability present in the circumstances of the execution of the agreement compel the conclusion that the arbitration agreement was unenforceable.

Slip op. at 7. The opinion is available here.

Sky Sports v. Superior Court: Court of Appeal Finds No Waiver of Right to Arbitrate

2012-01-09T17:47:00.000-08:00

Sky Sports, Inc. v. Superior Court (Hogan) (12/15/11) 2011 WL 6225228, brings an interesting twist to the question of whether a party waives its right to demand arbitration by taking part in litigation.

The plaintiff filed a putative class action against his former employer for meal and rest period violations. In opposition to the plaintiff's motion for class certification, the defendant argued that he was not typical of the class because, unlike the majority of his co-workers, he had not signed an arbitration agreement. The trial court (Los Angeles Superior, Judge Ernest M. Hiroshige) granted certification and held that the defendant had waived its right to compel arbitration. Slip op. at 2.

The Court of Appeal reversed. The Court held that the defendant could not have compelled the plaintiff to arbitrate because he had not signed an agreement to arbitrate. Slip op. at 3. The defendant's delay in bringing the motion to compel arbitration until certification of a class that included people who had signed an arbitration agreement could not constitute a waiver of the defendant's right to move compel arbitration. Slip op. at 4.

The opinion is available here.

D.R. Horton: National Labor Relations Board Holds that Class Action Waivers Violate National Labor Relations Act

2012-01-06T17:49:00.000-08:00

The National Labor Relations Board has announced its decision in the case of D.R. Horton, Inc. Case No. 12-CA-25764. Many of us have been watching this case closely since the SCOTUS decision in AT&T Mobility v. Concepcion, 131 S.Ct. 1740 (2011), which held that the Federal Arbitration Act (FAA) preempts the California Supreme Court's decision in Discover Bank v. Superior Court (2005) 36 Cal.4th 148 regarding unconscionability analysis of class action waivers in arbitration agreements. My posts on Concepcion are here and here.

In D.R. Horton, the NLRB considered whether an employer violates Section 8(a)(1) of the National Labor Relations Act when it requires employees covered by the Act, as a condition of their employment, to sign an agreement that precludes them from filing joint, class, or collective claims addressing their wages, hours, or other working conditions against the employer in any forum, whether arbitral or judicial. The Board found that such an agreement violates section 7 of the Act, which gives employees the right to engage in concerted activities for mutual aid or protection, notwithstanding the FAA, which generally makes employment-related arbitration agreements judicially enforceable. The Board found that under the circumstances presented, there was no conflict between Federal labor law and policy, on the one hand, and the FAA and its policies, on the other. Slip op. at 1.

The Board began by discussing section 7 of the Act, which preserves the right of employees to engage in concerted activity for their mutual benefit. Slip op. at 2. The Board and the courts have long held that section 7 protects the right of employees to bring legal action addressing their wages, hours, and working conditions. Ibid. This includes the right to bring "employment-related claims on a classwide or collective basis in court or before an arbitrator." Slip. op at 3.

The employer's Mutual Arbitration Agreement (MAA) violates section 7 because it requires employees, as a condition of their employment, to refrain from bringing collective or class claims in any forum at all. They cannot proceed in court, because the MAA waives their right to a judicial forum; and they cannot proceed in arbitration, because the MAA prohibits the arbitrator from consolidating claims or awarding collective relief. "The MAA thus clearly and expressly bars employees from exercising substantive rights that have long been held protected by Section 7 of the NLRA." Slip op at 4.

Because the MAA "expressly restricts protected activity," the employer violated section 8(a)(1) of the Act by imposing it on employees as a condition of employment. Slip op. at 4. Further, even if "entered into without coercion," any agreement that obligates an employee to bargain individually constitutes a restraint upon collective action. Slip op. at 5. The prohibition on such agreements "lies at the core of the prohibitions contained in Section 8" and implicates Federal labor policy that predates the Act. Slip op. at 5-6.

The Board next rejected the defendant's argument that finding a violation of the Act would conflict with the FAA. Slip op. at 7.

Enacted in 1925, the FAA sought to “reverse the longstanding judicial hostility to arbitration agreements” and to place private arbitration agreements “upon the same footing as other contracts.” Slip op. at 8, citing Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24 (1991). Agreements to arbitrate remain subject to the same defenses against enforcement to which other contracts are subject. Slip op. at 8.

The Board's finding that the MAA violates the NLRA does not conflict with the FAA for several reasons. First:

To find that an arbitration agreement must yield to the NLRA is to treat it no worse than any other private contract that conflicts with Federal labor law. The MAA would equally violate the NLRA if it said nothing about arbitration, but merely required employees, as a condition of employment, to agree to pursue any claims in court against [their employer] solely on an individual basis.

Slip op. at 9.

Second, an agreement to arbitrate statutory claims may not require a party to forego its substantive statutory rights. Ibid. The MAA's "categorical prohibition" of joint, class, or collective claims in any forum - either judicial or arbitral - violates section 7's right to engage in concerted activity. Ibid. That right is substantive, not merely procedural. It is "the core substantive right protected by the NLRA and is the foundation on which the Act and Federal labor policy rest." Slip op. at 10.

Third, "nothing in the text of the FAA suggests that an arbitration agreement that is inconsistent with the NLRA is nevertheless enforceable." Slip op. at 11. To the contrary, the FAA provides that arbitration agreements may be invalidated in whole or in part upon any “grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. section 2. The generally applicable defense here is that the MAA violates the NLRA. Ibid.

The Board then discussed Concepcion and the concern expressed by the Supreme Court that the “switch from bilateral to class arbitration sacrifices the principal advantage of arbitration—its informality.” Concepcion, 131 S.Ct. at 1750. The Board reasoned that "the weight of this countervailing consideration was considerably greater in the context of AT&T Mobility than it is here" because the employment agreement at issue here differs substantially from the consumer contract at issue in Concepcion. Slip op. at 11. Employment class actions represent only a subset of all class actions and tend to be more limited than consumer class actions, so any intrusion on the policies underlying the FAA is similarly limited. Slip op. at 11-12.

The Board thus held that its holding accommodates "to the greatest extent possible" the policies underlying both the NRLA and the FAA. Slip op. at 12.

The Board then reasoned that, even if there were a direct conflict between the NLRA and the FAA, it is the FAA that must yield:

As explained above, under the Norris-LaGuardia Act, a private agreement that seeks to prohibit a “lawful means [of] aiding any person participating or interested in” a lawsuit arising out of a labor dispute (as broadly defined) is unenforceable, as contrary to the public policy protecting employees’ “concerted activities for . . . mutual aid or protection.” To the extent that the FAA requires giving effect to such an agreement, it would conflict with the Norris-LaGuardia Act. The Norris-LaGuardia Act, in turn—passed 7 years after the FAA,—repealed “[a]ll acts and parts of act in conflict” with the later statute (Section 15).

Slip op. at 12.

Finally, the Board held that its decision does not implicate the Supreme Court's restriction on compelling class arbitration, as expressed in Concepcion and Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 130 S.Ct. 1758, 1775–1776 (2010). Slip op. at 12. Neither Concepcion nor Stolt-Nielsen involved the waiver of rights protected by the NLRA. Further, Concepcion involved a conflict between the FAA and state law, which implicated the Constitution's Supremacy Clause, while this case arguably involves a conflict between two federal statutes. Finally, the Board's decision does not require any employer to submit any employment dispute to class arbitration:

We need not and do not mandate class arbitration in order to protect employees’ rights under the NLRA. Rather, we hold only that employers may not compel employees to waive their NLRA right to collectively pursue litigation of employment claims in all forums, arbitral and judicial. So long as the employer leaves open a judicial forum for class and collective claims, employees’ NLRA rights are preserved without requiring the availability of classwide arbitration. Employers remain free to insist that arbitral proceedings be conducted on an individual basis.

Slip op. at 12.

The Board's opinion is available here.

Harris v. Superior Court (Liberty Mutual Insurance): Cal. Supreme Court Reverses Insurance Adjuster Exemption Case

2012-01-05T09:14:00.000-08:00

Plaintiffs worked as claims adjusters for defendants. They alleged that defendants erroneously classified them as exempt “administrative” employees and sought unpaid overtime. Plaintiffs moved for class certification, and the trial court certified a class of “all non-management California employees classified as exempt by [defendants] who were employed as claims handlers and/or performed claims-handling activities.”

Plaintiffs moved for summary adjudication of defendants’ affirmative defense that plaintiffs were exempt from the overtime compensation requirements under Industrial Welfare Commission (IWC) Wage Order No. 4. Cal. Code Regs., tit. 8, § 11040. Defendants opposed the motion and moved to decertify the class.

The trial court decertified the class in part, depending on then the plaintiffs’ claims arose. For claims arising before October 1, 2000, the trial court granted the motion for summary adjudication on grounds that the Bell v. Farmers Insurance line of cases – Bell v. Farmers Ins. Exchange (2001) 87 Cal. App. 4th 805 (“Bell II”) and Bell v. Farmers Ins. Exchange (2004) 115 Cal. App. 4th 715 (“Bell III”) – compelled a ruling that the claims adjusters were nonexempt “production workers.” The court decertified the class as to all claims arising after October 1, 2000, the effective date of a new Wage Order 4.

Both parties appealed. A divided court of appeal ruled for plaintiffs, concluding that they could not be considered exempt employees under either version of the Wage Order. The court of appeal directed the trial court to vacate its prior order and enter an order granting plaintiffs’ motion for summary adjudication and denying defendants’ motion to decertify.

The California Supreme Court granted defendants’ petition for review. In a unanimous but relatively narrow decision, the Court reversed and remanded to the court of appeal for reconsideration, holding that the “administrative/production worker dichotomy” is not dispositive.

In 1998, the IWC issued a new series of wage orders, abolishing overtime compensation for work over eight hours in a day. In response, the Legislature passed the AB 60, “Eight-Hour-Day Restoration and Workplace Flexibility Act of 1999.” The Act amended Labor Code section 510 to provide overtime compensation for work over eight hours in a day. It also added section 515, which permits the IWC to exempt from overtime compensation executive, administrative, and professional employees, provided that they are primarily engaged in duties that meet the test of the exemption, that they regularly exercise discretion and independent judgment in performing those duties, and that they earn a monthly salary no less than two times the state minimum wage for full-time employees, currently $640 per workweek.

Following passage of AB 60, the IWC issued new wage orders, including Wage Order 4-2001. Whereas Wage Order 4-1998 did not “articulate the precise scope” of the administrative exemption, Wage Order 4-2001 contains “a much more specific and detailed description of work that is properly described as administrative.” Harris, slip op. at 4, 7. The Order provides a multi-pronged test of the exemption. Harris focuses on the first and last factors: that an administrative employee is one whose duties and responsibilities involve “the performance of office or non-manual work directly related to management policies or general business operations of his/her employer or his/her employer’s customers” and who is primarily engaged in duties that meet the test of the exemption.

The Wage Order provides that the activities constituting exempt and non-exempt work “shall be construed in the same manner” as in certain regulations under the federal Fair Labor Standards Act in effect as of the date of the order. The relevant regulation provides that work is “directly related to management policies or general business operations” only if it satisfies two components. Fed. Regs. § 541.205(a) (2000). First, it must be qualitatively administrative. Second, quantitatively, it must be of substantial importance to the management or operations of the business. Both components must be satisfied before work can be deemed exempt in nature. Harris, slip op. at 10.

In their motion for summary adjudication, plaintiffs argued that defendants could not show that their work was qualitatively administrative in nature. They argued that they fell on the production side of the administrative/production worker dichotomy, as explained in the Bell cases. The administrative/production worker dichotomy distinguishes between administrative employees who are primarily engaged in “administering the business affairs of the enterprise” and production-level employees whose “primary duty is producing the commodity or commodities, whether goods or services, that the enterprise exists to produce and market.” (Bell II, 87 Cal. App. 4th at p. 821.)

Like Harris, Bell asked whether a class of insurance adjusters could be deemed administrative exempt employees. Examining the role of the plaintiffs in the defendant’s business, the Bell court held that the defendant’s business was to handle claims, the adjusters fell squarely on the production side of the administrative/production dichotomy, and they could not be deemed administrative employees. Bell II, 87 Cal. App. 4th at 826.

The Supreme Court distinguished Bell on two grounds. First, the Bell courts were careful to limit their holdings to the facts before them, including the defendants’ stipulation that the plaintiffs’ work was “routine and unimportant.” Bell II, 87 Cal. App. 4th at 826. “Second, because Wage Order 4-1998 did not provide sufficient guidance, the Bell II court looked beyond the language of the wage order and employed the administrative/production worker dichotomy as an analytical tool.” Harris, slip op. at 17. In contrast, Wage Order 4-2001 provides “detailed guidance” on the issue. Ibid.

Having thus distinguished Bell, the Supreme Court held that the court of appeal erred in placing too much reliance upon it.

First, the court of appeal both failed to consider all of the relevant aspects of the federal regulations incorporated into Wage Order 4-2001 and it “reached out for support” to other regulations not incorporated into the Wage Order. Harris, slip op. at 18.

Specifically, the court of appeal focused on former part 541.205(a), concluding that only work performed at the level of policy or general operations can qualify as “directly related to management policies or general business operations” and that work that merely carries out the particular day-to-day operations of the business is production, not administrative, work. Harris, slip op. at 19. The court failed to take into account former part 541.205(b), which provides that “administrative operations of the business” includes work performed by “white-collar employees engaged in ‘servicing’ a business as, for example, advising the management, planning, negotiating, [and] representing the company.” Ibid. The court thus read the phrase “directly related to management policies or general business operations” in too narrow a fashion. Ibid.

Second, the court of appeal erred in relying on Bratt v. County of Los Angeles (9th Cir. 1990) 912 F.2d 1066 to support its conclusion that “although advising management about the formulation of policy is exempt administrative work, advising management about the settlement of an individual claim is not.” Harris, slip op. at 19-20. The Supreme Court distinguished Bratt because the Ninth Circuit more recently held that claims adjusters may be exempt from the Fair Labor Standards Act’s overtime requirements and because Bratt involved probation officers, not claims adjusters. Harris, slip op. at 20. The court of appeal’s reliance on Bratt “highlights the difficulty in relying on the particular role of employees in one enterprise to deduce a rule applicable to another kind of business” and “reveals the limitations of the administrative/production worker dichotomy itself as an analytical tool.” Harris, slip op. at 20-21. The Court held that modern-day, post-industrial, service-oriented businesses may not follow the administrative/production worker dichotomy, and that courts should not strain to apply the dichotomy where it does not fit. Harris, slip op. at 21.

The court of appeal did not err in considering two opinion letters issued by the Division of Labor Standards Enforcement (DLSE): a 1998 letter applying the administrative/production worker dichotomy to find that certain claims adjusters were not exempt; and a 2003 letter stating that the dichotomy is still viable after adoption of Wage Order 4-2001. Harris, slip op. at 21. The Supreme Court stated that its opinion was not inconsistent with the opinion letters.

We do not hold that the administrative/production worker dichotomy was misapplied to the Bell II plaintiffs, based on the record in that case, or that the dichotomy can never be used as an analytical tool. We merely hold that the Court of Appeal improperly applied the administrative/production worker dichotomy as a dispositive test.

Harris, slip op. at 22.

The Supreme Court thus reversed and remanded with instructions that the court of appeal review the trial court’s denial of the summary adjudication motion, applying the legal standards set forth in the opinion. The Court did not take immediate action in either of the two companion cases, Pellegrino v. Robert Half International, Inc., Case No. S180849 (blogged here) and Hodge v. AON Insurance Services, Case No. S191415 (blogged here).

The opinion is available here.

Harris v. Superior Court: Supreme Court Says Court of Appeal Erred in Finding Insurance Adjustors Not Exempt

2011-12-29T11:34:00.000-08:00

The California Supreme Court has issued its decision in Harris v. Superior Court (Liberty Mutual Insurance). I will post more later, but for the time being, here's the headline:

This litigation tests whether certain insurance company claims adjusters are exempt employees, not entitled to overtime compensation under the Labor Code and regulations of the California Industrial Welfare Commission (IWC or Commission). Reviewing the trial court’s denial of a summary adjudication motion, the Court of Appeal held the adjusters are not exempt employees as a matter of law. In doing so, the Court of Appeal misapplied the substantive law. We reverse.

The opinion is available on the Supreme Court's web site.

Aleman v. AirTouch Cellular: Court Issues Decision on Reporting Time, Split Shifts

2011-12-22T09:55:00.001-08:00

In Aleman v. AirTouch Cellular (12/21/11) --- Cal.App.4th ----, the Court of Appeal affirmed an order granting summary judgment (Los Angeles Superior Court, Judge William Highberger) to an employer in a putative class action.

The plaintiffs alleged that the defendant violated two separate provisions of Industrial Welfare Commission (IWC) Wage Order No. 4-2001. They alleged that defendant: (1) failed to pay reporting time pay for days when they were required to report to work just to attend work-related meetings; and (2) failed to pay split shift compensation for days on which they attended a meeting in the morning and worked another shift later the same day.

The trial court granted motions for summary judgment against two of the named plaintiffs. The Court of Appeal affirmed, issuing three holdings of note.

First, the defendant did not have to pay the plaintiffs “reporting time pay” for attending meetings at work, because all the meetings were scheduled, and the plaintiff worked at least half the scheduled time, even if the scheduled time was less than four hours. In other words, if an employee's only scheduled work for the day is a mandatory meeting of one and a half hours, and the employee works a total of one hour because the meeting ends a half hour early, the employer is not required required to pay reporting time pay pursuant to subdivision 5(A) of Wage Order 4 in addition to the one hour of wages because the employee was furnished work for more than half the scheduled time. Slip op. at 10.

Second, the defendant did not owe the plaintiffs additional compensation for working “split shifts” because on each occasion he worked a split shift he earned more than the minimum amount required by the wage order. Slip op. at 17. In other words, the plaintiff would be entitled to split shift pay only if his total earnings for the day were less than the number of hours worked, plus the split shift premium of one hour's pay, at the minimum wage rate. Ibid.

Third, the defendant could not recover its attorney fees from the plaintiffs because the claims arose under Labor Code section 1194, the one-way fee-shifting statute, rather than section 218.5, which allows either successful party to recover its fees. Slip op. at 22. "Ultimately, reporting time and split shift pay requirements serve the same general purpose as Labor Code section 1194." Slip op. at 25.

The opinion is available here.

Brinker-Watch 2012

2011-12-15T12:29:00.000-08:00

The California Supreme Court held oral argument in Brinker on November 8, 2011. (You can view the oral argument on youtube.) The Court deemed the matter submitted as of that date, meaning that it would issue its opinion no later than 90 days later, or February 6, 2012.

On December 2, the Court granted permission to the California Employment Law Council to file an amicus brief regarding the retroactive application of the Court's opinion. Yesterday, the Court vacated its prior order deeming the case submitted and held that it will be deemed "resubmitted" on January 13, 2012:

Pursuant to California Rules of Court, rule 8.520(f)(7) and this court's December 2, 2011, order, the parties' answers to the amicus curiae brief of the California Employment Law Council, addressing the grounds for prospectively applying portions of this court's eventual decision on the merits, are due Tuesday, January 3, 2012. Each party may file a simultaneous reply to the other party's answer within 10 days thereafter. Submission of the cause is vacated. (See Cal. Rules of Court, rule 8.524(h)(1) [submission runs from expiration of the time in which to file briefs, including supplemental briefs].) The cause will be resubmitted on January 13, 2012.

The result is that we will have the opinion no later than April 12, 2012. Stay tuned.

As a reminder, the Court's docket is here.

Christopher v. SmithKline Beecham: SCOTUS Grants Review in Pharmaceutical Sales Rep Action

2011-12-15T11:40:00.000-08:00

On November 28, 2011, the Supreme Court of the United States granted certiorari in Christopher v. SmithKline Beecham Corp. (blogged here). The Ninth Circuit in Christopher upheld a district court's finding that pharmaceutical sales representatives (PSRs) are exempt employees under the Fair Labor Standards Act (FLSA).

Here are the questions presented:

The outside sales exemption of the Fair Labor Standards Act exempts from the overtime requirements of the Act "any employee employed ... in the capacity of outside salesman (as such terms are defined and delimited from time to time by regulations of the Secretary ...)." 29 U.S.C. § 213(a)(1). The Secretary of Labor has implemented various regulations that "define and delimit" the outside sales exemption and, filing as amici in this and other related matters, has interpreted these regulations to find the exemption inapplicable to pharmaceutical sales representatives. A split exists between the Second and Ninth Circuits concerning whether this interpretation is owed deference and whether the outside sales exemption of the Fair Labor Standards Act applies to pharmaceutical sales representatives.

The questions presented are:

(1) Whether deference is owed to the Secretary's interpretation of the Fair Labor Standards Act's outside sales exemption and related regulations; and

(2) Whether the Fair Labor Standards Act's outside sales exemption applies to pharmaceutical sales representatives.

The case number is 11-204, and the docket is here.

Haligowski v. Superior Court: Like FEHA, California Law Prohibiting Discrimination Against Members of Armed Services Does Not Permit Action Against Individual Supervisor

2011-12-14T19:24:00.000-08:00

In Haligowski v. Superior Court (Pantuso) (11/10/11), 200 Cal.App.4th 983, the Court of Appeal reversed a trial court order (Los Angeles Superior Court, Judges Susan Bryant–Deason and Coleman A. Swart) overruling a demurrer, holding:

Like the California Fair Employment and Housing Act (FEHA), which contains similar language and embodies similar goals, Military and Veterans Code section 394, which prohibits employers from discriminating against members of the armed forces,allows servicemen and servicewomen plaintiffs to hold their employers, but not individual employees, liable for discrimination; and
The Uniformed Services Employment and Reemployment Rights Act (USERRA) (38 U.S.C. 4301 et seq.) does not supersede the California anti-discrimination statute.

The opinion is available here.

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Raniere v. Citigroup: ﻿District Court Holds Collective Action Waiver Unenforceable as Preventing Employees From Vindicating Substantive Statutory Rights under the FLSA

Hosanna-Tabor Evangelical Lutheran Church and School v. EEOC: Teacher/Minister May Not Sue Church for Discrimination, Wrongful Termination

CompuCredit Corp. v. Greenwood: New SCOTUS Arbitration Decision May Shed Light on Future of Employment Class Action Waivers

Wisdom v. AccentCare: Court Invalidates Unconscionable Arbitration Agreement

Sky Sports v. Superior Court: Court of Appeal Finds No Waiver of Right to Arbitrate

D.R. Horton: National Labor Relations Board Holds that Class Action Waivers Violate National Labor Relations Act

Harris v. Superior Court (Liberty Mutual Insurance): Cal. Supreme Court Reverses Insurance Adjuster Exemption Case

Harris v. Superior Court: Supreme Court Says Court of Appeal Erred in Finding Insurance Adjustors Not Exempt

Aleman v. AirTouch Cellular: Court Issues Decision on Reporting Time, Split Shifts

Brinker-Watch 2012

Christopher v. SmithKline Beecham: SCOTUS Grants Review in Pharmaceutical Sales Rep Action

Haligowski v. Superior Court: ﻿Like FEHA, California Law Prohibiting Discrimination Against Members of Armed Services Does Not Permit Action Against Individual Supervisor

Reyes v. Macy’s: Defendant Cannot Appeal Order Compelling Arbitration of Individual Claims but Not Class or PAGA Claims

Bridgeford v. Pacific Health: Class Cert Denial Does Not Establish Collateral Estoppel Against Absent Class Members

Raniere v. Citigroup: District Court Holds Collective Action Waiver Unenforceable as Preventing Employees From Vindicating Substantive Statutory Rights under the FLSA

Haligowski v. Superior Court: Like FEHA, California Law Prohibiting Discrimination Against Members of Armed Services Does Not Permit Action Against Individual Supervisor