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California Employment Law Blog

PAGA Claims and Arbitration – A Federal Court Parts Ways With Iskanian

Posted in FAA, PAGA, Supreme Court

The California Supreme Court’s decision in Iskanian v. CLS Transp. Los Angeles, LLC, (discussed here), held that class action waivers in arbitration agreements are enforceable under the Federal Arbitration Act (FAA) except as to claims that were made pursuant to the Private Attorneys General Act (PAGA). PAGA allows aggrieved employees to represent other current and former employees and recover civil penalties on behalf of the State of California for purported Labor Code violations.

CLS Transportation has since filed a writ to the US Supreme Court seeking review of this ruling arguing that an employee who signs an arbitration agreement is equally bound to litigate his or her PAGA claims in arbitration as he is with any other claim. Plaintiffs’ response is due on October 24, 2014.

In the interim, at least one federal court has rejected the California Supreme Court’s holding and ordered a claimant’s PAGA claims proceed in arbitration. In Fardig et al. v. Hobby Lobby Stores Inc., Case No. 8:14-cv-561-JVS-AN (C.D. Cal.), the putative plaintiffs all signed arbitration agreements including an arbitration clause with class and representative action waivers. Defendant filed a motion to compel arbitration, which Judge James Selna granted on August 11, 2014. The court held that the US Supreme Court’s decision in Concepcion v. AT&T preempted any state law rule invalidating class or representative waivers in arbitration agreements and noted that federal district courts are not bound by state courts on questions of federal law, such as FAA preemption. The Court expressly disapproved of the California Supreme Court’s holding in Iskanian on the PAGA issue and said, “[e]ven in light of Iskanian, the Court continues to hold that the rule making PAGA claim waivers unenforceable is preempted by the FAA.”

Lawful Shmawful: Ninth Circuit Ignores Lawful Written Policy and Uses Statistical Sampling to Certify Class Based on Alleged “Unofficial Policy”

Posted in Class Actions, Off-the-clock Issues, Overtime

On September 3, 2014, the U.S. Court of Appeals for the Ninth Circuit upheld certification of a class of approximately 800 nonexempt insurance claims adjusters who claimed they worked overtime without compensation despite the employer’s lawful written policy to pay nonexempt employees for all hours worked.

In Jimenez v. Allstate Ins. Co., the Ninth Circuit upheld certification after finding three common questions existed.  First, whether Allstate had an unofficial policy of discouraging employees from reporting overtime; second, whether the employees’ workload forced them to work in excess of eight hours in a day or 40 in a week; and third, whether Allstate’s timekeeping method caused an underpayment of overtime.

Specifically, the court found that the adjusters were not responsible for preparing time sheets or clocking in and out.  Rather, their time cards were set to a default of eight hours per day and 40 hours per week, and their supervisors could submit “deviations” or “exceptions” for hours worked outside of this schedule.  Accordingly, the Ninth Circuit determined that a common question existed regarding whether this timekeeping method led to the adjusters working unpaid overtime.

Notably, the Ninth Circuit held that liability on these issues, as well as the issue of whether the employer should have known that employees were working off the clock, could be resolved via statistical sampling.  Importantly, neither the Ninth Circuit nor the trial court orders specified how the proposed statistical sampling would actually resolve these issues.  Similarly, neither decision explains how the certified claims will be managed at trial.

Even so, the court held that statistical sampling could only get the plaintiffs so far.  Indeed, the court held that plaintiffs would be prohibited from utilizing representative testimony or statistical sampling during the damages phase of the case because a contrary finding would prevent the company from exercising its right to raise individualized defenses.

Based on the Jimenez decision, an employer’s lawful written policy is not enough to insulate it from class certification.  The Court’s decision deviates somewhat from the U.S. Supreme Court’s decisions in Walmart Stores v. Dukes and Comcast Corp. v. Behrend and the California Supreme Court’s decision in Duran v. Superior Court.  All of these decisions instruct trial courts to examine how any purportedly unlawful policy is applied to the putative class when deciding to certify the class and how any individualized issues surrounding this application will be managed at trial.  While the courts continue to sort these issues out, employers can help themselves by ensuring that employees accurately track and report their hours worked regardless of what the “official” policy may be.

Thou Shalt Not Bully – Employers Must Educate Supervisors about “Abusive Conduct”

Posted in Employee Discipline, Employer Liability for Worker's Actions, Employment Policies, Harassment, New and Proposed Laws and Legislation, News, Sexual Harassment, Workplace Violence

California businesses that have 50 or more employees are already required to train supervisors on legally prohibited sexual harassment. Following California Governor Jerry Brown’s recent signing of A.B. 2053, that training must now also include education on preventing “abusive conduct” in the workplace, even if the conduct is not based on a protected characteristic nor constitutes legally prohibited discrimination or harassment.

As amended by A.B. 2053, Section 12950.1 of the Government Code defines abusive conduct as malicious conduct “that a reasonable person would find hostile, offensive, and unrelated to an employer’s legitimate business interests.” Although A.B. 2053 provides that a single act is not abusive “unless especially severe and egregious,” its list of conduct that may be abusive is expansive:

  • infliction of verbal abuse, such as the use of derogatory remarks
  • insults
  • epithets
  • verbal or physical conduct that a reasonable person would find threatening, intimidating, or humiliating
  • gratuitous sabotage or undermining of a person’s work performance

Supervisory employees must receive at least two hours of this enhanced anti-harassment training in an interactive format every two years.

Unpaid Interns Are Now Protected Against Discrimination and Harassment

Posted in Disability, Discrimination, Employment Policies, FEHA, Harassment, New and Proposed Laws and Legislation, News, Reasonable Accommodation, Religion, Retaliation, Uncategorized, Wage and Hour

On September 9, 2014, California Governor Jerry Brown signed A.B. 1443, which extends the state’s anti-harassment and anti-discrimination protections to unpaid interns.

Employers are now prohibited from discrimination based on protected characteristics in the “selection, termination, training or other terms” of unpaid interns. A.B. 1443 also prohibits harassment of unpaid interns based on protected characteristics, and it makes employers liable for sexual harassment of unpaid interns by non-employees if an employer knew or should have known of the conduct but failed to promptly take appropriate corrective action.

In addition, employers may not take adverse actions against unpaid interns based on their religious beliefs and must provide reasonable accommodations for religious observance unless doing so would pose an undue hardship.

Update: California Employees Entitled to Paid Sick Leave Starting July 2015

Posted in Disability, Employee Benefits, Employment Policies, New and Proposed Laws and Legislation, News

On September 10th, California became the second state in the country to require businesses to provide employees with paid sick leave, following Governor Jerry Brown’s signing of A.B. 1522, which goes into effect on July 1, 2015, and will be known as the Healthy Workplaces, Healthy Families Act of 2014.

 

Click here to read our detailed post about A.B. 1522.

September 2014 Employment Law Notes

Posted in Employment Law Notes

We invite you to review our newly-posted September 2014 California Employment Law Notes, a comprehensive review of the latest and most significant developments in California employment law. The highlights include:

California Employees May Soon Be Entitled to Paid Sick Leave

Posted in Client Alerts, Employee Benefits, Employment Policies, Leaves of Absence, Payroll, Wage and Hour

California Governor Jerry Brown has until September 30th to sign or veto A.B. 1522, a recently passed bill that would require businesses employing at least one person in California to provide employees with paid sick leave and to comply with new recordkeeping and informational requirements. If signed by the governor, the bill will become effective on July 1, 2015.

Most employees would accrue one hour of paid sick leave for every 30 hours worked.

Employees may use accrued sick leave for the treatment of their own or a family member’s existing health conditions, as well as for preventive care. In addition, employees may use sick leave to recover from crimes such as sexual assault and domestic violence. Employers must compensate time off at the employee’s regular rate of pay.

Employers would have limited compliance flexibility and exemptions.

For example, employers may set minimum sick leave use increments, albeit not greater than two hours. Yearly use may be limited to 24 hours (or three days) total. Although unused leave will carry over to the following year, accrual may be capped at 48 hours (or 6 days) total. Employees are not entitled to receive pay for unused leave upon separation; but those who are re-hired within one year must have their previously accrued leave balances reinstated.

Employers whose paid leave policies already comply with the bill’s requirements do not need to provide additional sick leave. Similarly, employers need not give sick leave to certain employees, such as those who provide in-home supportive services or are unionized under collective bargaining agreements that meet enumerated requirements.

Employers would face new recordkeeping and informational requirements.

At the time of hiring, employees must receive notice about their right to accrue and use sick leave free from retaliation. Employees would again receive notice of their rights under the bill through posters that the Labor Commissioner will create to be conspicuously displayed at the workplace. In addition, employees must receive written notice of accrued sick leave amounts on either their itemized wage statements or on separate documents provided with their wages on payday.

Employers must keep records of hours worked, as well as of accrued and used sick leave, for at least three years.

Beware the bill’s sharp enforcement teeth.

Not only does the bill prohibit retaliation, but also imposes a rebuttable presumption against employers who take adverse action against employees within 30 days of their exercise of their right to take sick leave. The Labor Commissioner, tasked with enforcing the bill, may levy fines against employers who violate the bill. Both the Labor Commissioner and the Attorney General are also empowered to bring civil suits on behalf of aggrieved employees.

July 2014 California Employment Law Notes

Posted in Employment Law Notes

We invite you to review our newly-posted July 2014 California Employment Law Notes, a comprehensive review of the latest and most significant developments in California employment law. The highlights include:

California Supreme Court Limits Recovery for Employees Who Misrepresent Their Immigration Status

Posted in E-Verify, Federal Jurisdiction, FEHA, Immigration, Wrongful Termination

On June 26, 2014, the California Supreme Court handed down Salas v. Sierra Chemical, a case at the intersection of employment and immigration law. Salas, a former employee of Sierra Chemical, filed suit alleging disability discrimination and wrongful termination. Prior to trial, Salas notified the court that he would assert a Fifth Amendment privilege to any questions regarding his immigration status. This apparently alerted Sierra Chemical, which investigated and discovered that Salas had wrongfully used someone else’s Social Security Number when applying for the job. Sierra then moved for summary judgment. The trial court initially denied the motion only to be reversed by a writ issued by the Court of Appeal. On remand, the trial court granted the motion for summary judgment, and the Court of Appeal affirmed.

The Supreme Court was called upon to determine whether plaintiff’s claims under the California Fair Employment and Housing Act (“FEHA”) were barred by the doctrines of after-acquired evidence and unclean hands, and whether California Senate Bill No. 1818, which states that “[f]or purposes of enforcing state labor, employment, civil rights, and employee housing laws, a person’s immigration status is irrelevant to the issue of liability,” statutorily preempted those common law defenses. The Supreme Court also asked the parties to submit briefing on whether federal immigration law, which forbids the knowing employment of any unauthorized worker, preempted state law on this issue.

The Court first held that federal immigration law preempted Senate Bill 1818 only in part. Citing the U.S. Supreme Court’s recent decision in Arizona v. U.S., 132 S. Ct. 2492 (2012), the Court held that federal law did not “preempt the field” – that is, supersede any and all state laws relating to immigrants. Instead, federal law only preempts state laws that conflict with a federal law or create an obstacle to achieving its objectives. Federal statutes expressly forbid an employer from employing anyone whom it knows is unauthorized to work in this country; doing so would subject an employer to civil and criminal sanctions. Thus, federal law preempts an award of lost wages that would have accrued after the employer discovered that the employee was unauthorized. However, since federal law does not forbid an employer from unknowingly employing an authorized worker, any preexisting lost wage claim remains valid.

The Supreme Court reversed the Court of Appeal’s holding that the affirmative defenses of unclean hands and after-acquired evidence served as complete defenses to Salas’s claims. Instead, the Court held that these are partial defenses whose application depends on the particular equities of each case. As a general rule, the Court held that “when the employer shows that information acquired after the employee’s claim has been made would have led to a lawful discharge or other employment action, remedies such as reinstatement, promotion, and pay for periods after the employer learned of such information would be inequitable and pointless,” thus precluding a plaintiff from claiming such relief.

However, in line with the U.S. Supreme Court’s decision in McKennon v. Nashville Banner Publishing Co., 513 U.S. 352 (1995), the California Supreme Court held that “to allow . . . after-acquired evidence to be a complete defense would eviscerate the public polices embodied in the FEHA by allowing an employer to engage in invidious employment discrimination with total impunity.” Consequently, the employee could seek compensation “for loss of employment from the date of wrongful discharge or refusal to hire to the date on which the employer acquired information of the employee’s wrongdoing or ineligibility for employment.” The Court did not address the effect that after-acquired evidence or unclean hands could have on a plaintiff’s claim to compensatory or punitive damages, although it has generally been held that a plaintiff may seek such damages in connection with his or her claim of employment discrimination.

The Court found that there was a disputed issue of fact whether Sierra Chemical knew of the incorrect Social Security Number before Salas’s termination. If it did, the employer’s decision to “look the other way” would adversely affect its right to assert the after-acquired evidence and unclean hands defenses. The Court thus remanded for further findings of fact on this issue.

As this opinion addresses the “hot topic” of illegal immigration, in a field traditionally reserved solely to federal authority, it will be interesting to see whether Sierra Chemical seeks review by the U.S. Supreme Court. Assuming that this result stands, the primary takeaway for employers is, as ever, to remain vigilant about the employment status of their employees and to take the appropriate action upon receiving information showing that the employee lacks authorization to work in this country. In addition, when faced with litigation, a defendant should take the initiative to investigate potential affirmative defenses at an early stage of litigation and assert them as quickly as possible.

California Supreme Court Leaves Unanswered Questions in Independent Contractor Case

Posted in Class Actions, Independent Contractors

On Monday, June 30, 2014, the California Supreme Court handed down its decision in Ayala v. Antelope Valley Newspapers, a lawsuit brought on behalf of a group of newspaper delivery carriers who alleged that they had been misclassified as independent contractors instead of employees.  The trial court had initially denied certification, finding that common issues did not predominate and that a classwide trial would be unmanageable in view of the differences in the way in which each carrier performed his or her work and the type of supervision that the company exercised over each.  The Court of Appeal reversed in part, finding that some of the claims were suitable for class treatment while others (such as overtime and meal and rest break claims) were not.  (Our discussion of the 2012 Court of Appeal decision may be found here.)

The California Supreme Court affirmed and held that the independent contractor analysis could be resolved on a classwide basis.  This holding depends largely on a quirk of the common law independent contractor-employee test:  the crucial question is not whether the company actually exercises control over the worker’s daily tasks; the question is whether the company has authority to do so.  In this case, the scope of the company’s authority to control the workers was set forth in the parties’ contracts, which were all essentially identical.  Therefore, the interpretation of that contract created a common issue that could answered on a classwide basis.  The Supreme Court held that in at least some cases, the parties’ actual conduct could be relevant to the analysis to show that different workers had “variable rights.”  However, the Court did not set forth a clear test for when this conduct should be considered.

Ayala is notable for what it does not decide.  Going forward there remains an open question as to what factors California courts should apply in wage and hour cases involving independent contractors – the traditional common law test, the factors set forth in the Wage Orders, the factors used by federal courts interpreting the FLSA, or some conglomeration of all three?  This may be an issue that the Court will revisit in another case.  The Court also declined to set forth any broad principles of law related to class certification, as its discussion on this issue is mostly limited to a short recitation of its own prior precedent.  As a result, Ayala, far from a landmark opinion, is a study in judicial restraint – a narrowly decided case, closely tied to its specific facts, without the wide-reaching ramifications of other recent cases such as Duran and Iskanian.