California Employment Law Update

May 2020 California Employment Law Notes

We invite you to review our newly-posted May 2020 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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Court Properly Dismissed Employer’s Civil Rights Claim Against Employee

Patel v. Chavez, 2020 WL 2109599 (Cal. Ct. App. 2020)

Balubhai Patel and various entities sued Manuel Chavez, the former on-site property manager of the Stuart Hotel, which was owned and operated by Patel and the other plaintiffs. Plaintiffs alleged a federal civil rights violation (42 U.S.C. § 1983) against Chavez based upon his allegedly false testimony given during a labor commissioner hearing in which Chavez was awarded $235,000 in unpaid wages, penalties and interest against the plaintiffs; Patel, et al., also sued two Labor Commissioner officials and sought $10 million in damages. The trial court granted Chavez’s anti-SLAPP motion and dismissed the complaint on the ground that it arose from the testimony Chavez gave before the Labor Commissioner and that such testimony was absolutely privileged pursuant to Cal. Civ. Code § 47(b) (the litigation privilege). The trial court also dismissed the claims against the two Labor Commissioner officials. The Court of Appeal affirmed the dismissal of the claims, holding that the anti-SLAPP procedure can be applied to a federal claim filed in state court.

Employees Who Were Required To Call-In Prior To Shift Were Entitled To Reporting-Time Pay

Herrera v. Zumiez, Inc., 953 F.3d 1063 (9th Cir. 2020)

Alexa Herrera filed this putative class action against her employer, alleging that Zumiez failed to provide reporting-time pay to employees at its California retail stores for their “Call-In” shifts. Employees scheduled for a Call-In shift were required to make themselves available to work during the shift and then call their manager 30 to 60 minutes before the shift or, if they worked a shift immediately before the Call-In shift, contact their manager at the end of that shift. At the time of the contact, the manager would then tell the employee whether s/he was required to work during the Call-In shift. If the employee was not required to work, Zumiez would not pay the employee. The employer filed a motion for judgment on the pleadings, which the district court denied.

In this appeal, the Ninth Circuit affirmed the denial of the employer’s motion based upon the California Court of Appeal’s recent ruling in Ward v. Tilly’s, Inc., 31 Cal. App. 5th 1167 (2019), holding that an employee need not physically report to work in order to be eligible for reporting-time pay. The Ninth Circuit also affirmed denial of the employer’s motion to dismiss the claim for “hours worked” associated with the time spent by employees (five to 15 minutes) calling in three to four times each week. The Court reversed the denial of the employer’s motion to dismiss the claim for indemnification for the telephone expenses incurred in calling in, but ordered that the plaintiff be allowed to amend the complaint to include more specific allegations about that. Cf. Cardinal Care Mgmt., LLC v. Afable, 2020 WL 1909143 (Cal. Ct. App. 2020) (trial court provided an adequate hearing on residential care facility’s financial ability to post an undertaking before it filed a de novo appeal from a $2.5 million award to employees, and also properly awarded attorneys’ fees to prevailing-party employees).

Lyft Was Not Liable For Accident Involving One Of Its Drivers

Marez v. Lyft, Inc., 2020 WL 2108643 (Cal. Ct. App. 2020)

While driving a car rented through Lyft’s “Express Drive Program,” Jonathan Guarano struck the plaintiffs and caused significant injuries. Plaintiffs sued Lyft under the doctrine of respondeat superior, but the trial court granted summary judgment to Lyft on the ground that at the time of the accident, Guarano was not acting within the course and scope of his employment. The Court of Appeal affirmed summary judgment for Lyft, holding that at the time of the accident, Guarano was returning home from working at a gaming conference in San Francisco, which was not within the course and scope of his employment for Lyft. See also Alaniz v. Sun Pac. Shippers, L.P., 2020 WL 2029279 (Cal. Ct. App. 2020) (trial court erred by failing to instruct jury about the Privette/Hooker doctrine relating to a landowner’s responsibility to employees of an independent contractor, despite defendants’ failure to request same).

Threat To Terminate Employee May Constitute Extortion

Galeotti v. International Union of Operating Eng’rs Local No. 3, 2020 WL 2188995 (Cal. Ct. App. 2020)

John Galeotti, a former business agent for the union, alleged he was wrongfully terminated for refusing to contribute money toward the campaigns of various union officials who had run for election to union positions. Galeotti alleged his employment was terminated after he failed to contribute $1,000 to the union officials’ campaign; among other things, he alleged extortion under Penal Code §§ 484 and 518. The trial court sustained the employer’s demurrer and dismissed the claims, but the Court of Appeal reversed, holding that Galeotti properly alleged a “threat” to “injure his property” (i.e., the termination of his employment) within the meaning of the extortion statute.

Racial Discrimination/Sexual Harassment Case Was Properly Dismissed On Summary Judgment

Ducksworth v. Tri-Modal Distrib. Servs., 47 Cal. App. 5th 532 (2020)

Bonnie Ducksworth and Pamela Pollock are customer service representatives at Tri-Modal Distribution Services who alleged a failure to promote based upon racial discrimination by two staffing agencies used by Tri-Modal; Pollock also alleged sexual harassment. The trial court granted the staffing agencies’ motion for summary judgment based upon the undisputed material fact that the agencies “did not provide any input, have any authority or make any decision regarding the promotion of any employees leased to Tri-Modal.” The trial court also granted summary adjudication on the sexual harassment claim based on the statute of limitations, which commences running in a failure-to-promote case when the plaintiff is told she has been denied the promotion, not when the promoted employee assumes the position. The Court of Appeal affirmed.

Unlimited Vacation Policy Failed To Properly Compensate Employees

McPherson v. EF Intercultural Fndn., Inc., 47 Cal. App. 5th 243 (2020)

In this case of first impression, the California Court of Appeal affirmed the trial court’s judgment (except for the amount of damages and attorneys’ fees awarded) and held that the unlimited vacation policy at issue in this case was not as described and that the employer (EF Intercultural Foundation) owed the plaintiffs for certain accrued but unpaid vacation benefits. Importantly, however, the court did not determine that an unlimited vacation policy (if correctly applied) would necessarily violate California law: “We by no means hold that all unlimited paid time off policies give rise to an obligation to pay ‘unused’ vacation when an employee leaves.”

The defendant, EF Intercultural Foundation, is a nonprofit that runs organizational and cultural exchange programs between the U.S. and other countries. Three former employees — area managers who ran seasonal homestay programs for international students and who worked from home and in the field — brought an action against EF Intercultural, claiming that they were entitled to accrued vacation pay upon separation under its ostensibly unlimited vacation policy. While EF Intercultural included a vacation policy in its handbook, which provided a specified number of vacation days for certain salaried positions, the vacation policy that applied to these particular plaintiffs was untracked and unwritten. The employees did not accrue vacation days and were only required to notify a supervisor before taking time off. EF Intercultural argued that this was an unlimited vacation policy that did not result in any accrual of benefits or require any payment upon termination.

The court distinguished EF Intercultural’s policy from a truly unlimited vacation policy and essentially sidestepped the question of whether a properly administered unlimited vacation policy would require payout of anything upon termination: “We need not decide whether vacation wages are earned under an unlimited policy — whether ‘uncapped time off’ equate[s] to ‘vested vacation’ — as that is not the policy here.” The appellate court held that although EF Intercultural characterized its policy as unlimited, its actual practice was to give plaintiffs a fixed amount of vacation time with an implied limit of two to four weeks, which was really no different from the amount of PTO provided to other corporate employees under the policy set forth in the handbook.

Even though the court limited its holding to EF Intercultural’s specific vacation policy and practice, noting the “particular, unusual facts of this case,” it provided helpful guidance for employers that already have implemented or are considering adopting an unlimited vacation policy. The court determined that such a policy may relieve an employer from having to pay out any accrued vacation benefits upon separation if, in writing, it:

  1. clearly provides that employees’ ability to take paid time off is not a form of additional wages for services performed, but perhaps part of the employer’s promise to provide a flexible work schedule — including employees’ ability to decide when and how much time to take off;
  2. spells out the rights and obligations of both employee and employer and the consequences of failing to schedule time off;
  3. in practice allows sufficient opportunity for employees to take time off, or work fewer hours in lieu of taking time off; and
  4. is administered fairly so that it neither becomes a de facto ‘use it or lose it policy’ nor results in inequities, such as where one employee works many hours, taking minimal time off, and another works fewer hours and takes more time off.

Another problem with EF Intercultural’s policy was its informal nature — it was not described in writing and was instead communicated informally by way of “side conversations” between employees and their supervisors. If an employer is going to maintain an enforceable unlimited vacation policy, it must be memorialized in writing and should fully describe the benefits to the affected employees as well as the potential that they will leave money on the table by working more hours for the same pay than those who scheduled more PTO.