California Employment Law Update

California’s Arbitration Ban Challenged in Federal Court

As expected, California’s effort to ban employers from requiring employees and applicants to sign an arbitration agreement has been challenged in federal court.  The lawsuit was filed by a business coalition that includes the U.S. Chamber of Commerce and the National Retail Federation.

AB-51 was signed into law in October along with a constellation of other new laws targeting employers in the state. The bill prohibits “any person” from requiring an applicant or employee to “consent to the waiver of any right, forum, or procedure for a violation of the California Fair Employment and Housing Act or [the Labor] code.”  Any person violating this prohibition is subject to a misdemeanor.

Although the statute expressly states that the law does not intend to invalidate a written arbitration agreement that is otherwise enforceable under the Federal Arbitration Act (the “FAA”), it’s unclear how it could survive federal preemption in its current form.  The lawsuit that was filed on Friday seeks to invalidate the law on that basis. Former California Governor Jerry Brown vetoed similar bills on precisely that ground: they “plainly violate federal law.

While it may take some time for the lawsuit to work its way through the court, employers should keep an eye out here for any developments, as this case is likely to have far-reaching implications

“OK, Boomer!”: Not Okay In the Office

As recently highlighted by the New York Times, a new phrase emblematic of the real or perceived “War Between the Generations” has gone viral: “OK, Boomer!”  The phrase, popularized on the Internet and, in particular, Twitter by Generation Z and Millennials, has been used to dismiss baby boomers’ thoughts and opinions, sometimes viewed by younger generations as paternalistic or just out of step.

And, the phrase isn’t just living in Twitter feeds and the comments sections of opinion pieces.  There is “OK, Boomer!” merchandise and, just last week, a 25 year-old member of the New Zealand Parliament used the phrase to dismiss a fellow lawmaker’s perceived heckling during a debate about climate change.

While many may find “OK, Boomer!” a harmless way to point out generational differences, the phrase’s popularity could lead to problems once it creeps into the workplace.  Age (over 40) is a protected category under both California law (i.e., the Fair Employment and Housing Act) and federal law (i.e., the Age Discrimination in Employment Act).  Whether the speaker is well-intentioned or not, dismissive attitudes about older workers could form the basis of claims for discrimination and/or harassment.  And, as one radio host recently opined, the phrase “OK, Boomer!” may be regarded by some as an outright slur.

Generation Z and Millennial employees understand that using derogatory or dismissive comments related to gender, race, religion, national origin, disability and sexual orientation are inappropriate.  Yet, for some reason, some may not have made the leap with regard to insidious/disparaging comments about a co-worker’s age.  Given the prevalence of age discrimination lawsuits, employers should take heed and consider reminding their workforce about the impropriety of this and other age-related phrases, and train their employees to leave the generation wars at the door.

November 2019 California Employment Law Notes

We invite you to review our newly-posted November 2019 California Employment Law Notes, a comprehensive review of the latest and most significant developments in California employment law. The highlights include:

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Determination Of Class Certification Motion Should Be Based On Dynamex’s “ABC Test”

Gonzales v. San Gabriel Transit, Inc., 2019 WL 4942213 (Cal. Ct. App. 2019)

Francisco Gonzales filed this putative class action against his former employer, San Gabriel Transit (“SGT”), alleging that he and 550 other drivers were misclassified as independent contractors rather than employees. The trial court denied class certification on the ground that Gonzales had failed to demonstrate the requisite community of interest or typicality among SGT drivers. While Gonzales’ appeal was pending, the California Supreme Court decided Dynamex Ops. W., Inc. v. Superior Court, 4 Cal. 5th 903 (2018) in which it adopted the “ABC Test” for determining employee/independent contractor status. In this opinion, the Court of Appeal reversed the denial of the class certification motion and ordered the trial court to apply the ABC Test to those claims involving enforcement of wage order requirements and the test from S.G. Borello & Sons, Inc. v. Department of Indus. Relations, 48 Cal. 3d 341 (1989) to those claims not involving enforcement of wage order requirements. Cf. Modaraei v. Action Prop. Mgmt., Inc., 40 Cal. App. 5th 632 (2019) (trial court properly denied class certification based upon commonality and class superiority criteria); Supershuttle Int’l, Inc. v. Labor & Workforce Dev. Agency, 2019 WL 4926864 (Cal. Ct. App. 2019) (employer’s declaratory relief action filed against the Labor Commissioner is not subject to dismissal under the anti-SLAPP statute).

Employer’s “Service Charge” May Be A Gratuity Owed To Employees

O’Grady v. Merchant Exchange Prods., Inc., 2019 WL 5617001 (Cal. Ct. App. 2019)

In this putative class action, banquet server and bartender Lauren O’Grady alleged that her employer’s practice of automatically imposing a 21 percent “service charge” to every food and beverage banquet bill constituted a gratuity that had to be fully paid to nonmanagerial service staff employees pursuant to Cal. Lab. Code § 351. The trial court sustained the employer’s demurrer to the complaint on the ground that a service charge can never be a gratuity. The Court of Appeal reversed, observing that the terms “tip,” “gratuity,” and “service charge” are not “interchangeable synonyms” and that “service charge” is a “protean term of no fixed meaning.” Accordingly, the Court held that plaintiffs might be correct that the custom in the hospitality industry is to treat sums designated as “service charges” as gratuities for employees within the mean of Section 351.

Employer Must Have Written Meal Period Agreement, Which Includes A Revocation Clause

Naranjo v. Spectrum Sec. Servs., Inc., 40 Cal. App. 5th 444 (2019)

Spectrum contracts with federal agencies to take temporary custody of federal prisoners and ICE detainees who must travel offsite for medical treatment and other appointments; Spectrum’s officers provide continuous supervision until the individuals are returned to their custodial locations. Spectrum had a policy that required on-duty meal periods for which officers were paid at their regular rate, but it did not have a written agreement with its employees that included an advisement that employees could revoke, in writing, the on-duty meal break policy agreement at any time. The Court of Appeal held that the employees were entitled to premium wages since the employer did not have a written agreement that included an on-duty meal period revocation clause; unpaid premium wages for meal break violations accrue prejudgment interest at the rate of seven percent; unpaid premium wages for meal break violations do not entitle employees to additional remedies for inaccurate wage statements if the statements include the wages earned for on-duty meal breaks but not the unpaid premium wages; absent a violation of Cal. Lab. Code § 226 (wage statements), attorney’s fees under Section 226(e) may not be awarded; and the trial court erred in denying class certification of a rest break class. See also Ferra v. Loews Hollywood Hotel, LLC, 2019 WL 5061494 (Cal. Ct. App. 2019) (meal and rest premiums are to be paid at employees’ hourly base rate of compensation; employer’s neutral rounding policy did not systematically undercompensate employees).

Expense Reimbursement Claims Are Covered By Employment Practices Insurance

Southern Cal. Pizza Co. v. Certain Underwriters at Lloyd’s, London, 40 Cal. App. 5th 140 (2019)

Lloyds of London provided the employer in this case with an employment practices liability insurance (“EPLI”) policy, which contained an exclusion relating to “wage and hour or overtime law(s).” In this insurance coverage dispute, the employer alleged the policy exclusion is narrower in scope than Lloyd’s contended. The trial court sustained the insurer’s demurrer to the complaint, but the Court of Appeal reversed, holding that “we conclude many of the disputed underlying lawsuit claims are potentially subject to coverage.” Specifically, the Court held that claims in the underlying lawsuit involving failure to reimburse delivery drivers for mileage expenses (Cal. Lab. Code §§ 2800 and 2802) fall outside the EPLI policy’s wage-and-hour exclusion, as do the derivative claims for violation of Cal. Bus. & Prof. Code § 17200 and the PAGA.

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