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California Employment Law Blog

March 2015 California Employment Law Notes

Posted in Employment Law Notes

We invite you to review our newly-posted March 2015 California Employment Law Notes, a comprehensive review of the latest and most significant developments in California employment law. The highlights include:

Oops! California Court Gets Around to Invalidating 22-Year-Old Meal Period Waiver Rules for Healthcare Employees

Posted in Meal Periods and Rest Breaks, Wage and Hour

For nearly 22 years, IWC Wage Order No. 4 and IWC Wage Order No. 5 have permitted employees in the “health care industry” who work shifts in excess of eight total hours in a workday to “voluntarily waive their right to one of their two meal periods. . . . in a written agreement that is voluntarily signed by both the employee and the employer.” In apparent reliance on the IWC Wage Orders, Orange Coast Memorial Medical Center maintained a policy that allowed health care employees who worked shifts longer than 10 hours to waive one of their two meal periods.

Three of the Medical Center’s former employees brought a putative class action against the Medical Center on the grounds that its meal break policy was unlawful because California Labor Code Section 512(a) states that a second meal period may be by mutual consent “if the total hours worked [by the employee] is no more than 12 hours” and because the Medical Center’s policy permitted employees to “waive” their second meal period even if they worked a shift longer than 12 hours.

Reversing a grant of summary judgment in favor of the Medical Center, the California Court of Appeal for the Fourth Appellate District unanimously held in Gerard v. Orange Coast Mem’l Med. Ctr. that IWC Wage Order Nos. 4 and 5 are partially invalid to the extent they create an  “unauthorized additional exception . . . beyond the express exception for waivers on shifts of no more than 12 hours.”

More significantly (and more concerning for employers), the Court also held that its decision had at least some retroactive effect in that the authorization for waiver of a second meal period in the current IWC Wage Orders was partially invalid from the moment it was promulgated because California Labor Code Section 516 states that the IWC’s authority to issue wage orders is limited by the specific terms of California Labor Code Section 512. Accordingly, the Court of Appeal held that the Medical Center’s former employees were entitled to seek premium pay under California Labor Code Section 226.7 for any failure by the Medical Center to provide mandatory second meal periods predating the Court’s decision and within the three-year statute of limitations period.

In light of Gerard, California employers in the health care industry should immediately review and revise their meal period policies to ensure that employees who work shifts in excess of 12 hours in length retain their right to unpaid, off-duty meal period of at least 30 minutes. And since Gerard authorizes the recovery of meal period premiums predating its decision, employers should be prepared for a flood of new litigation.

U.S. Supreme Court Tires (For Now) of Playing “Whack-a-Mole” With California Over Arbitration

Posted in Arbitration Agreements, California Labor & Employment Law, FAA, Federal Jurisdiction, PAGA

On January 20, 2015, the U.S. Supreme Court denied the petition for certiorari filed in CLS Transp. Los Angeles, LLC v. Iskanian, a case in which the California Supreme Court held that waivers of employees’ right to bring representative actions under California’s Private Attorneys General Act of 2004 (“PAGA”) are unenforceable under state law. You may read our previous post on the Iskanian decision here.

While the California Supreme Court in Iskanian declined to recognize PAGA waivers, several federal district courts are in open revolt, refusing to apply Iskanian. In fact, no fewer than four federal district courts have enforced waivers of representative PAGA claims, citing the U.S. Supreme Court’s decision in AT&T Mobility v. Concepcion, 131 S. Ct. 1740 (2010), which held that “when state law prohibits outright the arbitration of a particular type of claim, the analysis is straightforward: the conflicting rule is displaced by the FAA.” You may read more about federal courts’ rejection of Iskanian here and here. The U.S. Supreme Court’s refusal to accept the case for hearing likely will result in a continuing split between state and federal district courts applying Iskanian — at least until the issue reaches the U.S. Court of Appeals for the Ninth Circuit, which has jurisdiction over federal courts sitting in California.

January 2015 California Employment Law Notes

Posted in Employment Law Notes

We invite you to review our newly-posted January 2015 California Employment Law Notes, a comprehensive review of the latest and most significant developments in California employment law. The highlights include:

San Francisco Passes the “Retail Workers Bill of Rights”

Posted in California Labor & Employment Law, On-call, San Francisco

San Francisco recently enacted two sweeping ordinances that are being referred to as the “Retail Workers Bill of Rights” (you can find the ordinances here and here). The new laws impose strict new requirements on retail employers and establishments in the City of San Francisco. While the ordinances became effective on January 5, 2015, employers will have until July 5, 2015 to comply. Below is an overview of the new laws’ requirements.

Affected Employers—“Formula Retail Establishments”

The new laws apply to “Formula Retail Establishments” with at least 20 retail sales establishments worldwide and 20 or more employees in San Francisco. The term “Formula Retail Establishment” applies to retail sales or service establishments that maintain at least two of the following features: (1) a standardized array of merchandise, (2) a standardized façade, (3) a standardized décor and color scheme, (4) uniform apparel, (5) standardized signage, and (6) a trademark or servicemark.

New Requirements for Formula Retail Establishments

Offering Additional Hours Worked to Current Part-Time Employees – Under the ordinances, employers must offer, in writing, additional work to qualified part-time employees before hiring new employees or using contractors or staffing agencies to perform additional work. Employers only need to offer part-time employees up to the number of hours required for the employee to reach 35 hours worked per week. Employers must retain offers of additional hours to employees for at least three years.

Good Faith Initial Estimate of Minimum Hours and Two Weeks’ Notice of Schedules – Prior to the start of employment, employers are required to provide new employees with a good faith written estimate of the employee’s expected minimum number of scheduled shifts per month and the days and hours of those shifts. The estimate need not include on-call shifts. The ordinances also require employers to provide employees with their schedules two weeks in advance. Employers must retain employee work schedules and payroll records for at least three years.

Notice of Schedule Changes and “Predictability Pay” for Schedule Changes – Employers must provide employees with notice of schedule changes. If the employer changes an employee’s schedule on less than seven days’, but more than 24 hours’ notice, the employer must provide an extra hour of pay for each changed shift. A “schedule change” is defined as changing the date or time of a scheduled shift, cancelling a scheduled shift, or requiring the employee to work when he or she was previously unscheduled. However, an employer does not need to provide “predictability pay” when it extends an employee’s scheduled shift to include overtime hours.

If the employer changes the employee’s schedule on less than 24 hours’ notice, the employer must provide an additional two hours of pay if the changed shift is four hours or less or an additional four hours of pay if the changed shift is longer than four hours.

Key Exceptions: Employers do not have to provide “predictability pay” if any of the following conditions apply:

  • Another employee was scheduled to work, but is unable to work due to illness, vacation, or other approved time off, and the employee failed to provide the employer with at least seven days’ notice.
  • Another employee was scheduled to work, but failed to report to work on time or is sent home as a disciplinary action.
  • The employee requests a change in shifts or trades shifts with another employee.
  • Emergency situations: the business closes due to threats to safety, public utility failure, a natural disaster, or a state of emergency declared by the Mayor or Governor.

On-Call Shift Pay – If an employee is required to be “on-call,” but is not called in to work, the employer must provide the employee with two hours of pay if the on-call shift lasted four hours or less, or four hours of pay if the on-call shift exceeded four hours.

Equal Treatment for Part-Time Employees – Employers must provide equal treatment, subject to certain qualifications, for full-time and part-time employees regarding: (1) starting hourly wage; (2) access to paid and unpaid time off; and (3) eligibility for promotions. However, hourly wage differentials are permissible if they are based on reasons other than part-time status, such as seniority or merit systems. Further, employees’ time off allotments may be prorated based on hours worked.

Workplace Posting – Formula Retail Establishments are required to post at the workplace a notice informing covered employees of their rights under the new laws.

Require Contractor Compliance – Covered employers must include in service contracts with contractors for janitorial or security services: (1) a provision requiring the contractor to comply with the new laws; and (2) a copy of the new laws.

Penalties for Non-Compliance

The San Francisco Office of Labor Standards Enforcement (“OLSE”) is charged with implementing and enforcing the ordinances. The OLSE can order compliance, impose administrative fines, and require employers to pay lost wages and reimburse the City’s enforcement costs. Additionally, the ordinances authorize the City Attorney to bring a civil action against employers for violation of the laws. The City may recover payment of lost wages, civil penalties, reinstatement of employment, and reasonable attorney’s fees and costs. Notably, if an employer fails to maintain or retain records as required by the new laws, the City will presume that the employer did not comply with the ordinances.

The Eight Most Horrible Features of California Labor Law

Posted in California Labor & Employment Law

California continues to be perhaps the most pro-employee state in the country and is well known for its ever more restrictive labor and employment laws. Here is an interesting recent blog post by The Federalist (“The Eight Most Horrible Features of California Labor Law”) that describes some of the Golden State’s more problematic employment restrictions and helps explain the “Flight to Texas” that is occurring with ever greater frequency.


Multiple PAGA Representative Claims Crumble As Federal Courts Continue To Reject Iskanian and Enforce Arbitration Agreements Containing PAGA Waivers

Posted in Arbitration Agreements, Class Actions, PAGA, Wage and Hour

When the California Supreme Court decided Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal. 4th 348 (2014), this June, some legal commentators assumed that employees could not waive pre-litigation claims under the Private Attorneys General Act (PAGA). Those assumptions may have been premature. As we noted here, at least one federal court refused to apply Iskanian forcing an employee’s individual PAGA claims to arbitration. The list seems to be growing. The Courts in Ortiz v. Hobby Lobby Stores, Inc. Case No. 13-CV 1619 (E.D. Cal. Oct. 1, 2014); Chico v. Hilton Woarldwide, Inc., Case No. 14-CV-5750 (JFW) (C.D. Cal. Oct. 7, 2014); Langston v. 20/20 Companies, Inc. Case No. 14-CV-1360 JGB (C.D. Cal.); Mill v. Kmart Corp., Case No. 14-CV-02749 (KA) (N.D. Cal. Nov. 26, 2014); and, Lucero v. Sears Holdings Mgmnt. Corp., Case No. 14-1620 (AJB) (S.D. Cal.) have all similarly rejected this holding in Iskanian and, as discussed more fully below, all but one court has forced the each plaintiff’s individual PAGA claims to arbitration.

In all five cases, the plaintiffs brought putative class actions and PAGA representative actions against their respective employers even though each Plaintiff had signed a valid arbitration agreement containing a waiver of class and representative claims. Despite this knowing waiver, the Plaintiffs argued that the California Supreme Court’s decision in Iskanian rendered the arbitration agreements unenforceable. Each court rejected the Plaintiffs’ argument, citing the U.S. Supreme Court’s decision in AT&T Mobility v. Concepcion, 131 S.Ct. 1740 (2010), which held that “when state law prohibits outright the arbitration of a particular type of claim, the analysis is straightforward: the conflicting rule is displaced by the FAA.” See e.g. Mill, at 10 and Lucero, at 5.

Notably, all of the courts recognized that they were not bound by the California Supreme Court’s interpretation of federal pre-emption law under the FAA. And, given the absence of any fraud or coercion in the formation of the arbitration agreements, the Courts found that the employees were bound by their contracts. The courts noted that the FAA reflects a liberal federal policy favoring arbitration and it is a “fundamental principle that arbitration is matter of contract.” See, e.g., Chico v. Hilton, at *5. More specifically, the Courts in Langston and Lucero found a significant flaw with the California Supreme Court’s reasoning in Iskanian barring PAGA waivers in arbitration agreements. As the Court in Langston put it:

[A]lthough the court asserts that the basis for holding representative PAGA claim waivers unconscionable is that an employee cannot waive a right that properly belongs to the government, the court nevertheless acknowledges that an employee may actually sometimes waive the government’s right to bring a PAGA claim. That inconsistency illuminates the fact that, it is not an individual’s ability to waive the government’s right that drives the court’s rule but rather the court’s disfavor for pre-existing agreements to arbitrate such claims individually.

Langson at 8-9.

Interestingly, while four of the Courts (implicitly and/or explicitly) required each plaintiff to arbitrate the PAGA claim on an individual basis, the Court in Ortiz did not compel the plaintiff’s individual PAGA claims to arbitration but instead, struck the PAGA claims entirely. The Ortiz court recognized that there was a split of federal authority as to whether a plaintiff who had waived his right to bring a representative action under PAGA could be compelled to arbitrate a purportedly individual PAGA claim. Siding with the view that PAGA can only be litigated on a representative basis, the court held that by waiving his right to bring any representative claims, Ortiz had waived his right to litigate any PAGA claim whatsoever irrespective of the forum. Ortiz at 21.

November 2014 California Employment Law Notes

Posted in Employment Law Notes

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

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.