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California Employment Law Blog

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.

Employers Should Now Run—Not Walk—Toward Adopting Arbitration Agreements in California

Posted in Arbitration Agreements, Class Actions, NLRA, PAGA

Yesterday, the California Supreme Court issued its long-awaited decision in Iskanian v. CLS Transp. Los Angeles, LLC, upholding class action waivers in employment arbitration agreements. This means that the U.S. Supreme Court’s 2011 opinion in AT&T Mobility LLC v. Concepcion is to be given full force and effect in the employment setting in California. That said, however, Iskanian distinguishes the right of an employee to bring a representative action under California’s Private Attorneys General Act of 2004 (“PAGA”), and holds that such claims may not be barred in an arbitration agreement.

Iskanian is a favorable decision for employers. First, Iskanian reaffirms that class actions are a procedural device that exist to make the resolution of certain claims more efficient, not a substantive right to which litigants are invariably entitled. Iskanian also rejects the NLRB’s conclusion in D.R. Horton (discussed in detail here­) that class action waivers violate employees’ rights under Section 7 of the National Labor Relations Act to engage in “concerted activities for the purpose of collective bargaining or other mutual aid or protection.”

Additionally, Iskanian confirms that an employer does not waive its right to enforce an arbitration agreement when the law suggests that moving to compel arbitration would be futile. In Iskanian, for example, the employer withdrew its petition to compel arbitration when the California Supreme Court issued its opinion in Gentry v. Superior Court (which made clear that further petition would be futile), and renewed its petition after the U.S. Supreme Court decided Concepcion, which implicitly overruled Gentry. In this context, Iskanian holds that a delay in moving to compel arbitration is permitted so long as it is not unreasonable.

In sum, Iskanian clears the way for employers to enter into enforceable arbitration agreements that also contain class action waivers. Further, employers should know that arbitration agreements also operate as “wolfsbane” in warding off some of the most active members of the Plaintiffs’ bar who simply refuse to take a case to arbitration—they would much prefer to pluck at the heart strings of a sympathetic jury. And, while representative PAGA actions may survive and are likely to multiply in the wake of Iskanian, these actions are subject to a significantly shorter statute of limitations period (one year) as compared to the four year statute of limitations employers typically see in other non-PAGA actions. This means that any putative “representative group” will consist of significantly fewer employees (and possibly less exposure).

California Courts May No Longer Be Able to Certify a Ham Sandwich

Posted in Class Actions, Exempt Employees, FLSA, Meal Periods and Rest Breaks, PAGA, Wage and Hour
Commentators have quipped that class certification is so easy in California that with little effort a group of plaintiffs could certify even a ham sandwich.  In fact, as we have discussed here, we have seen a proliferation of recent appellate decisions hinging class certification on the mere existence of an employer’s uniform policy – no matter how facially lawful that policy may be or how diverse its application is to the putative class at issue.The law may be changing.  On May 29, 2014, the California Supreme Court issued its long-awaited decision in Duran v. U.S. Bank Nat’l Ass’n, which sets forth the degree of rigorous analysis in which trial courts must engage before certifying a class action.  Importantly, Duranconfirms that plaintiffs need more than the mere existence of a uniform policy to support their effort to certify a class.Duran involves a group of loan officers for U.S. Bank who allege they were misclassified as overtime-exempt pursuant to the outside sales exception, which applies to employees who spend more than 50% of their workday engaged in sales activities outside their home office.  Plaintiffs argued that the common issue for certification purposes was the fact that U.S. Bank had a common policy that classified its loan officers as exempt and used a common job description.  Rejecting this argument, the Supreme Court confirmed that plaintiffs need more: “In wage and hour cases where a party seeks class certification based on allegations that the employer consistently imposed a uniform policy or de facto practice on class members, the party must still demonstrate that the illegal effects of this conduct can be proven efficiently and manageably within a class setting.”

Accordingly, Duran instructs 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.  The Court said, “[t]rial courts must pay careful attention to manageability when deciding whether to certify a class action” and explained that “[i]f the court makes a reasoned, informed decision about manageability at the certification stage, the litigants can plan accordingly…”

In this way, Duran seems to adopt the reasoning of the U.S. Supreme Court’s 2011 decision in Wal-Mart Stores v. Dukes, thereby making Dukes’ application to California state law class actions apparent.  First, Duran relies on Dukes in affirming that a defendant has a due process right to litigate its defenses and that the individualized issues surrounding these defenses must be considered at the class certification stage.  Second, in stating that class certification must hinge on “some glue that binds class members together” Duran seems to echo the U.S. Supreme Court’s admonition in Dukes that plaintiffs need some “glue holding the alleged reasons for [the unlawful conduct] together” in order to support class certification.  Both Duran and Dukes similarly instruct that class certification is proper only where an examination of all of the class members’ claims for relief will produce a common answer to the critical liability question.

Additionally, Duran confirms that plaintiffs may propose using statistical or survey data to prove class wide liability at trial.  However, the Court clearly stated that plaintiffs cannot use statistical evidence as “an evidentiary substitute for demonstrating commonality.”  For example, in Duran, even though the trial court found certain allegations were common to the class (i.e. whether U.S. Bank uniformly classified the loan officers as exempt employees and allegedly failed to train or monitor their compliance with the exemption), these questions did not produce common answers as to how the 260 class members actually spent their time.  Moreover, the statistical model used by the trial court failed to ameliorate the problem.

The trial court permitted plaintiffs to submit a “random” sample of 20 employees chosen by the court and did not permit U.S. Bank to introduce any favorable evidence from employees who were not part of the sample.  Based on the evidence from this 20-employee sample and statistical extrapolations that were applied to the rest of the class, judgment was rendered against U.S. Bank for the misclassification of all 260 employees – even though some of those employees signed declarations demonstrating that they were properly classified as exempt.  Duran, therefore, emphasizes that when using statistical evidence, the defendant must be permitted to address questions supporting its defenses even if those questions must be answered on an individualized basis.  And, if these individualized questions become so numerous that the trial would be unmanageable, the class should not be certified.

May 2014 California Employment Law Notes

Posted in Employment Law Notes

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

Rebuking “Trial by Formula,” Federal Court Decertifies Rule 23(b)(3) Class Action

Posted in Class Actions, Off-the-clock Issues, Wage and Hour

In Stiller v. Costco Wholesale Corp., No. 3:09-cv-2473-GPC-BGS, Plaintiffs Eric Stiller and Joseph Moro alleged that Costco’s loss-prevention closing procedures effectively “forced” employees to work off-the clock without getting paid because they were required to remain on-site after they had clocked out of their shifts to go through security screenings. In December 2010, the district court certified a California-wide class finding that common questions predominated because Costco employed a centralized policy which applied to all employees. However, on April 15, the Court decertified the class finding that the purportedly “common” question of whether Costco had a “de facto policy of detaining employees in warehouses during closing procedures without pay” would only determine whether “employees were sometimes detained without pay as a result of the alleged policy.” Costco’s liability would still hinge on individualized determinations as to “whether, how often, and for how long [individual] class members actually experienced unpaid [off-the-clock] time.”

Stiller contrasts starkly with Williams v. Superior Court (Allstate Ins. Co.), where the California Court of Appeal characterized “trial by formula” as “a method of calculating damages” with “little, if any, relevance at the certification stage before the trial court and parties have reached the merits of the class claims.” (See our blog post aboutWilliams here.) Citing the U.S. Supreme Court’s decision in Wal-Mart Stores, Inc.  v. DukesStiller emphasized that “trial by formula” would thwart Costco’s right to assert defenses to individual claims of liability. Moreover, the Court held that the plaintiffs’ proposal to determine Costco’s liability to the class by drawing inferences about class members’ work from expert testimony and Costco’s payroll records, scheduling records, and cash register logout data improperly “put the damages cart before the liability horse” because class members were not all subject to Costco’s policies in the same way. Individualized questions relating to a class member’s right to recover, therefore, bore directly on the question of whether common questions predominated.

Hopefully, California courts take note. While California courts are not bound by federal authority when ruling on class certification decisions, the California Supreme Court’s decision in Brinker Restaurant Corp. v. Superior Court clearly indicated that California’s certification standards are derived from “federal precedent.” Hence, similar to Federal Rule of Civil Procedure 23, California courts require the party advocating for class treatment to, among other things, demonstrate the existence of a “well-defined community of interest,” which includes showing that “predominant common questions of law or fact” exist. Thus, Dukes’ rejection of “trial by formula” should apply regardless of whether the class certification decision is being considered by a federal court or a California state court.

California Labor Commissioner Introduces new “Wage Theft” Website, paid for by PAGA

Posted in PAGA, Wage and Hour

On April 30, 2014, the California Labor Commissioner introduced a new website, WageTheftIsACrime.com in an outreach attempt aimed at what the Commissioner calls the “underserved population of low-wage workers.” Although the Labor Commissioner already operates a thorough and comprehensive website, https://www.dir.ca.gov/dlse/dlse.html, the new site is purposefully written in plain English in an attempt to reach out to low-wage workers with a minimum of legalese. Notably, there is a sister website in Spanish, RoboDeSueldoEsUnCrimen.com

The website provides examples of what the Labor Commissioner calls “wage theft,” including “paying less than minimum wage, not paying workers overtime, not allowing workers to take meal and rest breaks, or taking workers’ tips” and gives employees a step-by-step guide on gathering facts against their employers and filing a wage claim. Interestingly, the website states that it is funded by penalties the Labor Commissioner has received pursuant to the Private Attorney’s General Act, Labor Code § 2698 et seq., which are earmarked “for enforcement of labor laws and education of employers and employees about their rights and responsibilities under this code.”

March 2014 California Employment Law Notes

Posted in Attorney's Fees, Class Actions, Collective Bargaining, Employment Law Notes, FEHA, FMLA, Harassment, Kin Care, Leaves of Absence, Overtime, Privacy, Retaliation, Sexual Harassment, Wage and Hour, Whistleblowers, Wrongful Termination

$150,000 Sexual Harassment Verdict And $680,000 Fee Award Affirmed
Taylor v. Nabors Drilling USA, LP, 222 Cal. App. 4th 1228 (2014)

Max Taylor worked as a floorhand on an oil rig where he alleged he was harassed by his supervisors who called him “queer,” “fagot [sic],” “homo,” and “gay porn star” and was subjected to other humiliating and harassing conduct, including simulated masturbation in his presence. Following a trial, the jury awarded Taylor $160,000 in damages, including $10,000 for past economic loss. In its unsuccessful motion for judgment notwithstanding the verdict (“JNOV”), the defense argued that Taylor had failed to prove that he was harassed “because of his sex and/or perceived sexual orientation” in the absence of evidence of actual sexual desire or intent by the harassers. The Court of Appeal affirmed denial of the JNOV motion on the ground that “the focus of a [sexual harassment] case is whether the victim has been subjected to sexual harassment, not what motivated the harasser.” See also newly enacted Cal. Gov’t Code § 12940(j)(4)(C) (same). The defense also unsuccessfully challenged a defective special verdict form because it had failed to object to it before the jury was discharged. Because the jury had concluded that Taylor had been lawfully discharged, the Court reduced the verdict by $10,000 (from $160,000 to $150,000) but otherwise affirmed the verdict and the award of $680,520 in attorney’s fees. See also Kelley v. CUIAB, 2014 WL 505343 (Cal. Ct. App. 2014) (conditions for return to work demanded by employee’s lawyer were not “ultimatums” and did not justify employer’s termination of employee for purposes of eligibility for unemployment benefits).

$238,000 Wrongful Termination Verdict Is Reversed In Light Of Improper Jury Instructions
Mendoza v. Western Med. Ctr. Santa Ana, 222 Cal. App. 4th 1334 (2014)

Romeo Mendoza worked as a nurse for the hospital for more than 20 years. In late 2010, Mendoza reported that he was being sexually harassed by a supervisor (Del Erdmann). Both Mendoza and Erdmann are gay. Mendoza’s complaint was investigated, and it was determined that Erdmann had made inappropriate sexual comments to Mendoza and that he had shown his genitals to Mendoza. Erdmann contended that Mendoza welcomed the behavior and that he had “bent over provocatively” in front of Erdmann, requested that Erdmann display his genitals and in fact had “assisted Erdmann in exposing his genitals.” Erdmann claimed he was a “reluctant participant” in the conduct initiated by Mendoza. Upon completion of the investigation, the hospital fired both Mendoza and Erdmann for “unprofessional conduct.” Mendoza subsequently sued for wrongful termination in violation of public policy (for reporting sexual harassment to his employer), and the jury awarded him $238,328, including $145,000 in past emotional distress damages. However, because the jury was instructed to determine if Mendoza’s reporting sexual harassment was “a motivating reason” and not “a substantial motivating reason” for his termination as required by Harris v. City of Santa Monica, 56 Cal. 4th 203 (2013), the Court of Appeal reversed the judgment. The Court rejected the employer’s contention that its simultaneous termination of Erdmann was “conclusive proof” that it had acted in good faith in light of the “numerous shortcomings in the investigation” conducted by the employer following Mendoza’s complaint.

$100,000 Attorney’s Fees Award Was Properly Granted Against Employee
Robert v. Stanford Univ., 2014 WL 739112 (Cal. Ct. App. 2014)

Francis Robert, an American Indian, was terminated from his employment at Stanford due to his harassment of a female Stanford employee. Before his termination, Robert was given several warnings and was the subject of a restraining order. Robert then sued Stanford for discrimination under the Fair Employment and Housing Act (“FEHA”), claiming he was discriminated against on the basis of his “native ancestry.” The trial court granted Stanford’s motion for nonsuit as to his FEHA claim but allowed his claims for retaliation and breach of contract to go to the jury, which returned a defense verdict in 15 minutes. The trial court awarded Stanford $100,000 in attorney’s fees against Robert on the ground that the “FEHA claim was without merit and was frivolous and vexatious. It was a legal theory in search of facts.” The Court of Appeal affirmed the award against Robert despite the trial court’s failure to make written findings or consider Robert’s purported impecuniousness.

State Overtime Law Does Not Apply To Employees Covered By Collective Bargaining Agreement
Vranish v. Exxon Mobil Corp., 223 Cal. App. 4th 103 (2014)

George Vranish, Jr. and Steve Teague are employees of Exxon Mobil whose employment is governed by the terms of a collective bargaining agreement (“CBA”). Plaintiffs contend that the CBA does not provide premium compensation for all “overtime hours worked” and, therefore, Cal. Lab. Code § 514 (exempting employees subject to a CBA from the state’s overtime law) does not apply. The trial court granted the employer’s summary judgment motion, and the Court of Appeal affirmed on the ground that the word “overtime” as used in Section 514 is defined by the CBA and not by Cal. Lab. Code § 510. See also Sandifer v. United States Steel Corp., 571 U.S. ___, 134 S. Ct. 870 (2014) (unionized steelworkers’ donning and doffing of protective gear constituted non-compensable time spent “changing clothes” within the meaning of the Fair Labor Standards Act).

Employer Proved Conversion By Employee’s Misuse Of Its Credit Card
Welco Elec., Inc. v. Mora, 223 Cal. App. 4th 202 (2014)

Welco sued its former quality assurance manager (Nicholas J. Mora) for more than $400,000 based on Mora’s use of Welco’s credit card to transfer specific sums of money to Mora’s bank account. Mora contended that Welco agreed to pay him “like a vendor using [Welco's] credit card account” because Welco’s president “was concerned about a garnishment of Mora’s wages.” Following a bench trial, judgment was entered in favor of Welco and against Mora in the amount of $446,447.81. The Court of Appeal affirmed, holding that Mora’s use of a credit card to obtain money wrongfully from Welco constituted the tort of conversion – “[t]aking a credit card or its information in order to obtain money is not materially different in effect than conversions by taking other instruments such as checks, bonds, notes, bills of exchange, warehouse receipts, stock certificates, and information related to those instruments, to obtain someone else’s money.”

Federal Court In California Has No Jurisdiction Over Foreign Employees’ Claims
Daimler AG v. Bauman, 571 U.S. ___, 134 S. Ct. 746 (2014)

In this case, 22 Argentinian residents (including a Chilean national) sued DaimlerChrysler Aktiengesellschaft (“DCAG”) in federal court in California, alleging that one of DCAG’s subsidiaries, Mercedes-Benz Argentina (“MBA”), collaborated with state security forces to kidnap, detain, torture and kill plaintiffs and their relatives during Argentina’s “Dirty War” in the 1970s. (Some of the plaintiffs are former employees of MBA.) The Ninth Circuit held that the district court had personal jurisdiction in California over DCAG through the contacts of its subsidiary and agent, Mercedes-Benz USA, in view of the “interest of California in adjudicating important questions of human rights….” In this opinion, the Supreme Court unanimously reversed the Ninth Circuit, holding that “[e]xercises of personal jurisdiction so exorbitant… are barred by due process constraints on the assertion of adjudicatory authority.”

Former Employee Could Proceed With Age Discrimination Lawsuit
Cheal v. El Camino Hosp., 223 Cal. App. 4th 736 (2014)

Carol Cheal worked as a “Dietetic Technician Registered” for the hospital for 21 years before her termination at age 61. Before Kim Bandelier became Cheal’s supervisor (approximately a year before her termination), Cheal received the “highest category of performance” ratings on her annual evaluations; after Bandelier became Cheal’s supervisor, she was “accused of numerous shortcomings” and received written warnings and her employment was terminated. Cheal sued for age discrimination under the Fair Employment and Housing Act, and the trial court granted summary judgment in favor of the employer. In this opinion, however, the Court of Appeal reversed the summary judgment, holding that “[a] factfinder could conclude that, apart from … one error eight months before her discharge, plaintiff exhibited no significant failures of competence while under Bandelier’s supervision.” The Court also relied upon an alleged “confession of bias,” which it characterized as “another smoking gun,” that Bandelier told a “former friend” that she favored “younger and pregnant workers.”

Staffing Company Is Not Liable For Employee’s Poisoning Of Coworker
Montague v. AMN Healthcare, Inc., 2014 WL 659690 (Cal. Ct. App. 2014)

AMN Healthcare, Inc., dba Nursefinders, is a staffing company that provides prescreened nurses and medical personnel to hospitals and other medical facilities. Nursefinders hired Theresa Drummond as a medical assistant and later assigned her to Kaiser (one of Nursefinders’ clients) where Sara Montague also worked as a medical assistant. Drummond and Montague had a couple of disagreements at work before Drummond surreptitiously poured carbolic acid into Montague’s water bottle, which burned Montague’s tongue and throat and caused her to vomit. Montague and her husband sued Nursefinders for negligent training of Drummond and various related torts under a theory of respondeat superior. The trial court granted summary judgment in favor of Nursefinders, and the Court of Appeal affirmed, holding that “[t]he facts, construed most favorably for Montague, do not support liability against Nursefinders because Drummond’s poisoning of Montague was highly unusual and startling.” The Court also affirmed dismissal of Montague’s husband’s loss of consortium claim and found that Nursefinders was not liable for negligently training Drummond because the poisoning could not have been caused by its failure to properly train her. See also Elsheref v. Applied Materials, Inc., 223 Cal. App. 4th 451 (2014) (employer did not owe duty of care to not-yet-conceived child of employee who had been exposed to toxic chemicals, but plaintiffs could proceed with products liability claim); Gonzalez v. Seal Methods, Inc., 223 Cal. App. 4th 405 (2014) (employee could not proceed with civil claim under Lab. Code § 4558 because there was no evidence that employer bypassed, removed or tampered with point of operation guard on power press); Solus Indus. Innovations, LLC v. Superior Court, 2014 WL 690512 (Cal. Ct. App. 2014) (federal OSHA preempts California law, precluding prosecutor’s pursuit of civil penalties under Unfair Competition Law); People v. Superior Court (Solus Indus. Innovations, LLC), 2014 WL 690607 (Cal. Ct. App. 2014) (district attorney has no power to pursue civil penalties unless specifically authorized by statute to do so).

Terminated Physician Need Not Succeed In Mandamus Action Before Proceeding With Civil Suit
Fahlen v. Sutter Central Valley Hosps., 2014 WL 655995 (Cal. S. Ct. 2014)

Dr. Mark T. Fahlen claimed that Sutter terminated his physician staff privileges in retaliation for his reports of substandard performance by hospital nurses in violation of Health & Safety Code § 1278.5. The hospital moved to dismiss Fahlen’s action on the ground that he could not bring a civil suit under Section 1278.5 unless he first succeeded by mandamus in overturning the hospital’s action. The trial court denied the motion, the Court of Appeal reversed in part, and in this opinion the California Supreme Court affirmed the appellate court, holding that a hospital staff physician who claims a hospital decision to restrict or terminate his staff privileges was an act in retaliation for his or her whistleblowing in furtherance of patient care and safety need not seek and obtain a mandamus petition to overturn the decision before filing a civil action under Section 1278.5. See also Air Wis. Airlines Corp. v. Hoeper, 571 U.S. ___, 134 S. Ct. 852 (2014) (immunity from suit under Aviation and Transportation Security Act may not be denied without a determination that a disclosure was materially false); Driscoll v. Superior Court, 223 Cal. App. 4th 630 (2014) (state courts have concurrent jurisdiction over federal False Claims Act retaliation claims).

United Airlines’ Sick Leave Plan Is Not Exempt From Kin Care Law
Airline Pilots Ass’n Int’l v. United Airlines, Inc., 223 Cal. App. 4th 706 (2014)

United Airlines created an employee sick leave plan and trust, which United contends is subject to ERISA and, thus, exempt from state regulation, including California’s Kin Care Law (Lab. Code § 233), which requires employers that provide paid sick leave to their employees to allow them to use sick leave to care for family members. The trial court ruled against United, holding that application of the Kin Care Law to California-domiciled pilots was not preempted by ERISA. The Court of Appeal affirmed, holding that the trusts United established are not “bona fide separate trusts” and thus ERISA preemption does not apply. The Court also rejected United’s argument that the pilots union did not have standing to prosecute the action.

Continuous Videotaping Of Truck Drivers Does Not Violate Labor Code § 1051
Opinion of Cal. Atty. Gen. Kamala D. Harris, No. 12-1101 (Feb. 13, 2014)

The question presented by the Hon. Jerry Hill, Member of the State Senate, is “Does continuous videotaping surveillance of truck drivers during their on-the-job driving constitute a misdemeanor under Labor Code section 1051 [which prohibits requiring an employee to be photographed for the purpose of furnishing the photograph to another employer or third party] where the video file is inspected by a third party and used as a basis for discipline by the driver’s employer.” The Attorney General answered the question “No,” provided that “the third party is an agent of the driver’s employer who is videotaping and inspecting the file for the sole benefit of the driver’s employer, and that the file is furnished only to the driver’s employer.” The Attorney General reasoned that the statute was originally intended as an anti-blacklisting provision (that predates more modern laws on the subject) and that in any case the videotapes in question are not being provided to another employer or a third party who is not the agent of the current employer.

Contractor’s Employees’ Wage And Hour Claims Against Airlines Were Properly Dismissed
Hawkins v. TACA Int’l Airlines, S.A., 223 Cal. App. 4th 466 (2014)

Arlette Hawkins filed a putative class action alleging wage and hour claims against her former employer (Sereca Security Corp.) and a Labor Code § 2810 claim against the airlines that had hired Sereca on the ground that Section 2810 authorizes the employees of a service contractor to sue the party hiring the contractor if the hiring party knowingly pays a contract price that is insufficient to permit the contractor to comply with the law in performing the contract. Hawkins sued the airline defendants (Sereca was not a party to this appeal) for entering into “underfunded contracts” with Sereca though she admitted she had never seen the relevant contracts and had no information concerning their contents. The trial court sustained the airlines’ demurrers on the ground that Hawkins had failed to allege any facts to show that they had knowingly entered into underfunded contracts in violation of Section 2810. The Court of Appeal affirmed dismissal on demurrer, holding that Hawkins should have obtained the contracts with the airlines through means of third-party discovery – “upon obtaining the contracts, Hawkins could have ascertained whether they were underfunded.”  Further, Hawkins’ allegation that Sereca had the ability to pay all wages earned by the putative classes meant “the contracts were not underfunded.” See also Petrosyan v. Prince Corp., 223 Cal. App. 4th 587 (2014) (mistrial should not have been granted in employee’s case against former employer where employee represented himself and had not violated judge’s in limine order).

Employee Who Expressly Declined To Take FMLA Leave Was Properly Denied Relief Under The Statute
Escriba v. Foster Poultry Farms, Inc., 2014 WL 715547 (9th Cir. 2014)

Maria Escriba worked in a Foster Poultry Farms processing plant in Turlock, California for 18 years before her employment was terminated for failing to comply with the company’s “three day no show, no call rule” at the end of a previously approved period of leave during which she was caring for her ailing father in Guatemala. She claimed her termination was an unlawful interference with her rights under the Family Medical Leave Act (“FMLA”), but Foster Farms contended that Escriba had explicitly declined to have her time off count as FMLA leave. The jury found in favor of the employer, and the Ninth Circuit affirmed, holding that “an employee can affirmatively decline to use FMLA leave, even if the underlying reason for seeking the leave would have invoked FMLA protection.” The Court further found that the district court did not abuse its discretion in declining to award costs of suit to Foster Farms as the prevailing party.

Overtime Class Action Was Properly Removed To Federal Court Under CAFA
Rea v. Michaels Stores, Inc., 2014 WL 607322 (9th Cir. 2014)

Plaintiffs brought this putative class action against Michaels Stores, alleging the misclassification of store managers as exempt from overtime. Michaels removed the case to federal court within 30 days under the Class Action Fairness Act (“CAFA”). The district court remanded the case back to state court, finding that CAFA’s $5 million amount-in-controversy requirement was not met because plaintiffs expressly disclaimed any recovery in excess of $4,999,999.99. Michaels removed the case again the day after the Supreme Court’s opinion in Standard Fire Ins. Co. v. Knowles, 133 S. Ct. 1345 (2013), holding that attempted damages waivers are ineffective to defeat removal under CAFA. The district court again remanded on the grounds that the second removal was untimely and that Michaels had failed to carry its burden to demonstrate that the amount in controversy exceeded $5 million. The United States Court of Appeals for the Ninth Circuit reversed the second remand, holding that the amount in controversy is to be determined from the time of the first removal (thus ignoring subsequent developments that might suggest a lower amount in controversy) and that the second removal was timely because of a “change of circumstances” created by the Supreme Court’s opinion in Standard Fire Ins.


Ninth Circuit Clarifies CAFA Removal Requirements

Posted in Class Actions, Federal Jurisdiction

In its recent per curiam opinion in Rea v. Michaels Stores, Inc., the U.S. Court of Appeals for the Ninth Circuit clarified rules and procedures relevant to defendants seeking to remove cases to federal court.

In Rea, the plaintiffs filed a class action alleging that Michaels improperly classified California store managers as exempt from overtime. Michaels removed the action to federal court under the Class Action Fairness Act (CAFA), but the district court remanded the case back to state court because Plaintiffs had expressly waived the right to recover more than $4,999,999.99, meaning that the case fell one-cent shy of the necessary $5 million amount in controversy requirement. After remand, the U.S. Supreme Court decided Standard Fire Ins. Co. v. Knowles, which invalidated purported damage waivers used by plaintiffs to defeat CAFA removal. Michaels once again removed to federal court under CAFA, but the district court deemed Michaels’ attempted removal barred by CAFA’s 30-day rule and found that Michaels failed to show that the amount in controversy exceeded $5 million.

The Ninth Circuit reversed, finding that the California state court’s post-remand decision to certify the class could not defeat federal removal jurisdiction “if jurisdiction was properly invoked as of the time of the filing.” As to Michaels’ failure to remove within 30 days of receiving the complaint, the Ninth Circuit held that that CAFA’s 30-day time period does not start to run until a complaint or an amended pleading, motion, order, or other paper “affirmatively reveals on its face” that the case is removable. Because controlling law generally recognized damages waivers as valid and effective when plaintiffs filed their complaint, the Ninth Circuit ruled that the complaint did not “affirmatively reveal” the facts necessary for federal court jurisdiction and, therefore, did not trigger the initial 30-day removal period. Here, the Court explained, Michaels’ 30-day limit did not commence until the U.S. Supreme Court decided Standard Fire, after which Michaels timely filed for removal. Even so, the Court found that Standard Fire amounted to “a relevant change in circumstances” that justified reconsideration of Michaels’ “successive, good faith petition for removal.”

The Ninth Circuit also held that Michaels satisfied CAFA’s $5 million amount-in-controversy requirement by providing evidence that managers were expected to work at least 45 hours per week and by pointing out that named plaintiffs testified that they actually worked at least 45 hours per week. This, the Court found, was “substantial, plausible evidence” that the amount in controversy could exceed $5 million, despite the fact that Michaels did not proffer evidence that any of the other class members actually worked more than 45 hours per week.

Rea thus fortifies employers’ right to remove class actions under CAFA. Particularly valuable is Rea’s rejection of the “legal certainty” standard for establishing the amount in controversy and holding that defendants can establish the amount in controversy by pointing to plausible, rather than actual, damages. Using such tactics, defendants should have an easier time establishing removal jurisdiction, especially since Rea indicates any plausible showing of an amount in controversy exceeding $5 million effectively shifts the burden to plaintiffs to affirmatively prove that the value of their case is less than $5 million, which few plaintiffs are likely to want to do.