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Friday, April 30, 2010

HIRE Act Provides Employers Incentives To Hire And Retain The Recently Unemployed

By Jonathan Judge

Perhaps somewhat lost in the commotion over health care reform legislation is the Hiring Incentives to Restore Employment Act ("HIRE Act"), which provides certain tax incentives to employers that hire and retain recently unemployed or underemployed persons.

Under the HIRE Act, two tax incentives are available:

1. Employers who hire between February 3, 2010, and December 31, 2010, qualifying workers may qualify for a 6.2% payroll tax incentive.

2. An employer may claim on its 2011 federal income tax return an additional tax credit of up to $1,000 for each employee hired under the Act who the employer retains for at least one year. The retention credit is the lesser of either 6.2 percent of the wages paid by the employer to the retained qualified employee during the 52 consecutive week period or $1,000.

Some of the requirements and limitations of the Act include the following:

1. The Act requires employers that wish to claim the tax incentives to obtain from each eligible new hire a statement certifying that he or she was unemployed during the 60 days before beginning work or that he or she worked fewer than 40 hours for another employer during the same 60-day period. The Internal Revenue Service created Form W-11 for this purpose. Click here to download a copy of the form.

2. New hires to fill existing vacant positions qualify so long as the employees being replaced were terminated for cause or voluntarily quit.

3. The 6.2 percent payroll tax incentive may apply also to employees who are rehired so long as such employees were unemployed or underemployed for 60 days immediately preceding the date of rehire.

4. Family members and other relatives of the employer are not eligible.

5. The payroll tax incentive may be claimed on the employer's quarterly federal tax return (form 941) beginning the second quarter of 2010.

6. The retention credit is available for each employee who is a qualified employee for purposes of the payroll tax incentive and who remains employed for 52 consecutive weeks so long as the employee's wages do not decrease significantly in the second half of the year. Specifically, the employee's wages in the second 26 weeks of the year must be at least 80% of the employee's wages during the first 26 weeks of the year.

7. Businesses, agricultural employer, tax-exempt organizations, Native American tribal governments, and public colleges and universities are eligible to claim the tax incentives provided by the Act. Household employers do not qualify.

Click here to view additional information about the Act provided by the IRS.

Thursday, April 29, 2010

California Supreme Court Grants Review Of Court Of Appeal Decision Holding That Staffing Agency Account Executives Do Not Qualify As Exempt Employees

By Christopher S. Andre

As we previously reported here, on January 28, 2010, the California Court of Appeal issued its decision in Pellegrino v. Robert Half International, Inc., ("Pellegrino II") holding that employment agreements shortening to six months the deadline for employees to bring claims arising out of their employment violate public policy and are therefore unenforceable. The court held also that the staffing agency's account executives did not qualify as exempt administrative employees.

The plaintiff employees were employed by RHI as account executives. Their duties involved recruiting candidates to be placed as temporary employees, placing candidates with RHI clients, and new business development. The account executives filed suit against RHI alleging RHI violated wage and hour laws applicable to non-exempt employees, such as the requirements for paying overtime and for providing meal periods.

In a lengthy opinion, the Court of Appeal held the 6 month limitation period of the employment agreements violates Labor Code section 219 and violates public policy and are unenforceable because, according to the court, the 6 month limitation period is tantamount to an unenforceable waiver of non-waivable rights. The court held also the account executives did not qualify as exempt employees because, in the court's view, their duties were not sufficiently related to the administrative operations of RHI but were in the nature of "production" work or sales.

On April 28, 2010, the California Supreme Court granted RHI's petition for review of the Court of Appeal's decision in Pellegrino II by way of what is known as a "grant and hold" order "pending consideration and disposition of a related issue in Harris v. Superior Court." The California Supreme Court granted review of that case quite some time ago on November 28, 2007, and has identified the issue to be decided as follows:
Do claims adjusters employed by insurance companies fall within the administrative exemption (Cal. Code Regs. tit. 8, section 11040) to the requirement that employees are entitled to overtime compensation?
The Supreme Court's decision to grant review is good news for employers at least temporarily because the Court of Appeal's January 28, 2010 decision in Pellegrino II is no longer binding on lower courts and may not be cited as precedent.

We note the Court of Appeal's January 28, 2010 decision in Pellegrino v. Robert Half International, Inc., certified for publication on February 24, 2010, ("Pellegrino I") we previously reported on here remains undisturbed. In that case, the Court of Appeal addressed certain issues about how awards of attorney's fees are to be determined:

1. The court reiterated that an award of attorney's fees is not available to plaintiffs who prevail on claims for alleged violation of California's Unfair Competition Law codified at California Business and Professions Code Section 17200, et seq., which forbids business practices that are unlawful, unfair, or fraudulent. Plaintiffs alleging violations of the Labor Code nearly always allege also violations of the Unfair Competition Law because a four-year statute of limitations period applies to the Unfair Competition Law instead of the three-year statute of limitations that applies to many alleged violations of the Labor Code.

2. The court held, however, that when alleged violations of the Labor Code and of the Unfair Competition Law are sufficiently interrelated, a court is not required to allocate between fees "incurred" to pursue alleged violation(s) of the Labor Code and fees "incurred" to pursue alleged violations of the Unfair Competition Law. The court held the trial court made no error when it reduced the fee award by 15% to account for fees "incurred" to pursue the plaintiffs' claims for alleged violation of the Unfair Competition law.

3. The court affirmed the trial court's use of a 1.75 multiplier to enhance the award of attorney's fees to the plaintiffs' attorneys for fees "incurred" to pursue the plaintiffs' substantive claims, which effectively increased the award from $558,926.85 to $978,121.98.

4. The court held the trial court erred when it applied a multiplier to the fees "incurred" to pursue the plaintiffs' claims for an award of attorney's fees. The court reasoned that the factors that support applying a multiplier to an award of attorney's fees to the plaintiffs for their substantive claims does not apply to attorney's fees "incurred" to pursue an award of attorney's fees.

Wednesday, April 28, 2010

Divided 9th Circuit Court of Appeals Approves Largest Class Action in History

By Christopher S. Andre and Scott K. Dauscher

On April 26, 2010, in Dukes v. Wal-Mart Stores, Inc., a divided Ninth Circuit Court of Appeals decided 6-5 en banc to affirm the decision of the trial court to grant class certification in a discrimination lawsuit alleging Wal-Mart Stores discriminates against its women employees. The nationwide class is reputed by the Los Angeles Daily Journal to number upward of 1.6 million women employees, which would make the class the largest class in United States history.

In 2001, the Impact Fund, a Berkley, California based organization many plaintiff's attorneys donate money to, filed on behalf of Betty Dukes and other current or former employees of Wal-Mart a lawsuit alleging Wal-Mart discriminates against its women employees regarding promotions and pay practices in violation of Title VII of the Civil Rights Act of 1964.

The trial court later certified a class consisting of "all women employed by Wal-Mart at any time after December 26, 1998."

On Appeal, the Ninth Circuit Court of Appeals affirmed the trial court's grant of class certification but remanded to the trial court for further consideration the issue of whether to certify for class treatment the plaintiffs' claims for punitive damages and the issue of whether to certify an additional class or classes consisting of women who were no longer employed by Wal-Mart when the lawsuit was filed.

One of the key issues in any motion for class certification is whether common issues of law and fact predominate over individualized issues of law or fact. Based on our initial review of the decision, we think the following succinct dissent by Chief Judge Alex Kozinski is apt:
Maybe there'd be no difference between 500 employees and 500,000 employees if they all had similar jobs, worked at the same half-billion square foot store and were supervised by teh same managers. But the half-million members of the majority's approved class held a multitude of jobs, at different levels of Wal-Mart's hierarchy, for variable lengths of time, in 3,400 stores, sprinkled across 50 states, with a kaleidoscope of supervisors (male and female), subject to a variety of regional policies that all differed depending on each class member's job, location and period of employment. Some thrived while others did poorly. They have little in common but their sex and this lawsuit.
We are continuing to analyze the lengthy 139 page opinion and will update this blog once we have completed our analysis.

In the meantime, given the stakes involved and the issues involved, we think it is a virtual certainty that Wal-Mart Stores will petition the United States Supreme Court for review of the 9th Circuit's decision. Although review by the Supreme Court is discretionary, we think the Supreme Court would very likely be interested in this case given the importance of the issues not only to Wal-Mart Stores and its employees but to numerous other large employers and their employees. Further, the 9th Circuit Court of Appeals is not only the largest of the Circuit Courts of Appeal; it also the most frequently reversed Circuit Court of Appeals.

Click here to download and to read the opinion.

Tuesday, April 27, 2010

California Supreme Court Strikes Another Blow To Arbitration Of Employment Claims

By Christopher S. Andre

Ordinarily, a decision by an arbitrator is not subject to being reversed by a court based on a legal error by the arbitrator. Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 25. In other words, unlike a decision by a court, a decision by an arbitrator generally cannot be "appealed."

In an April 26, 2010 decision signaling continued judicial antagonism to arbitration of employment claims, the California Supreme Court held in Pearson Dental Supplies, Inc. v. Superior Court that an arbitration decision in favor of an employer is subject to judicial review and to being vacated by a court if a legal error by the arbitrator would deprive a plaintiff employee of a hearing on the merits of a claim for alleged violation of the Fair Employment and Housing Act or, tellingly, a claim based on "other unwaivable statutory rights."

Luis Turcios was employed by Pearson Dental Supplies, Inc., as a janitor. After Pearson Dental Supplies terminated his employment, Turcios submitted to the Department of Fair Employment and Housing ("DFEH") a complaint alleging Pearson Dental Supplies violated the Fair Employment and Housing Act ("FEHA") by discriminating against him based on his age and related claims. After receiving from the DFEH a "right-to-sue" notice, Turcios filed suit against Pearson Dental Supplies.

Approximately five months after Turciou filed suit, Pearson Dental Supplies filed a motion to compel Turcios to arbitrate his claims based on an arbitration agreement Pearson Dental required Turcios to sign as a condition of employment. The trial court granted that motion, and the parties selected an arbitrator.

The arbitrator decided in favor of Pearson Dental Supplies, finding that Turcios' claims were time-barred by a provision of the arbitration agreement requiring Turcios to initiate arbitration of any claims arising out of his employment within one year because Turcios did not submit his claims to arbitration within one year of the date Pearson Dental Supplies terminated his employment.

Turcios then challenged the arbitrator's decision in the trial court. The trial court agreed with Turcios that the arbitrator made a legal error when the arbitrator decided that Turcios' claims were time-barred and vacated the arbitrator's decision.

Pearson Dental then sought appellate review of the trial court's decision vacating the arbitrator's decision. The Court of Appeal agreed Turcios' claims were in fact not time-barred, but the Court of Appeal agreed with Pearson Dental Supplies that the arbitrator's decision was not subject to review based on a legal error by the arbitrator and reversed the trial court's decision to vacate the arbitrator's decision.

Turcios then petitioned the California Supreme Court to review the Court of Appeal's decision. The California Supreme Court agreed with Turcios and with the trial court and held that arbitration decisions based on arbitration agreements entered into as a condition of employment are subject to a greater scope of review than other types of arbitration agreements. The Court held also that a court can vacate an arbitrator's decision if the decision is based on a legal error that effectively bar an employee from having claims for alleged violation of the FEHA or for "other unwaivable statutory rights" decided on the merits. The Court held also that the arbitrator failed to properly apply a provision of the Code of Civil Procedure providing that an arbitration filing deadline is tolled while a related civil action for the same claim(es) is pending.

In one bright spot in the decision, the Court declined to hold that a provision of the arbitration agreement arguably waiving Turcios' right to submit claims to administrative agencies, such as the DFEH, is unconscionable. The Court explained: "[A]s the United States Supreme Court recently recognized [citation], an arbitration agreement could, under federal law, [such as the Federal Arbitration Act,] validly limit the resort of an employee to an administrative agency that acts as an adjudicator, rather than as a prosecutor, of employment claims, such as the Labor Commissioner in this state."

Click here to download and to read the Court's opinion.

The California Supreme Court's decision in this case is a further development in a long line of cases finding various provisions of arbitration agreements between employers and employees unenforceable or otherwise limiting the usefulness of such agreements to employers. In addition, lower appellate courts frequently address employment arbitration agreements in reported opinions. An employment arbitration agreement previously believed to be enforceable might not withstand judicial scrutiny today or in the future. Employers should therefore consider having such agreements reviewed periodically by experienced counsel.


Thursday, April 15, 2010

Presidential Executive Order on Economy in Government Contracting Foreshadows Likely Challenge to Supreme Court Decision on Union Neutrality

By Robert Fried


In Chamber of Commerce vs.. Brown (2008), the United States Supreme Court struck down a California statute that sought to indirectly regulate the labor relations policy of employers who received state funds by either prohibiting their use of those monies in their response union to organizing drives or, in the alternative, require proof that they were not so used, holding that such regulation violated free speech in the workplace rights protected by Congress in the National Labor Relations Act.

Executive Order 13494, released for public comment on April 14, will likely require the Supreme Court to revisit this issue. The Executive Order proclaims “the costs of the activities of preparing and distributing materials; hiring or consulting legal counsel or consultants, holding meetings (including paying the salaries of the attendees at meetings held for this purpose); and planning or conducting activities by managers, supervisors, or union representatives during work hours, when they are undertaken to persuade employees to exercise or not to exercise, or concern the manner of exercising, rights to organize and bargain collectively" to be “unallowable costs.” In so doing, the Executive Order will impose burdens similar to those previously struck down in Brown by either indirectly pressuring employers to remain “neutral” in organizing campaigns or, in the alternative, to, at their risk, attempt to segregate their expenses on organizing responses such that they can prove, under audit conditions, that they were not used to cover such costs.

The Executive Order comment period runs through June 12, 2010. It is anticipated that employers will seek to argue, as they did successfully in Brown, that such regulatory pressures, however nominally indirect, are an unlawful infringement of freedom of speech in the workplace.  

Editor's Note: Robert Fried served as counsel for a principal amicus for the employer position in Brown through oral argument.

Tuesday, April 13, 2010

Will President Obama's Recent NLRB Appointments Clear Backlog Of Cases?

By Christopher S. Andre


The National Labor Relations Board is a five member body of presidential appointees. However, for approximately the past 26 months, the NLRB has operated with just two sitting board members, Republican Peter Schaumber and Democrat Wilma Liebman. This has resulted in a backlog of unresolved cases pending before the NLRB and in a case pending before the United States Supreme Court calling for the Supreme Court to decide whether the National Labor Relations Act permits the NLRB to act when there are only two sitting members of the NLRB, New Process Steel v. National Labor Relations Board, in which the Supreme Court heard oral arguments on March 23, 2010. Click here for a transcript of the oral arguments.

As we previously reported here, on Saturday, March 27, 2010, President Obama made two recess appointments to the NLRB, appointing Craig Becker who, as we reported here, failed to obtain Senate confirmation largely on account of his close union ties, and Mark Pearce, another union side labor lawyer. So called "recess appointments" made while the Congress is in recess enable the White House and its nominees to postpone until a later date when the Congress is in session Senate confirmation of the appointees. As presently constituted, the NLRB now how has three sitting Democrats, one sitting Republican, and one seat still vacant.

In an April 12, 2010 article entitled, "Labor Cases Affected by Bottleneck May Speed Up," The Press-Enterprise reports that the backlog of cases pending before the NLRB, reportedly numbering approximately 250, is expected to ease with the two new "recess appointments." The Press-Enterprise reports also that "Because Obama is a Democrat, it is expected the new board will lean toward labor."


Among those interviewed for that article was AALRR partner Thomas A. Lenz who served as a staff attorney with the NLRB before joining AALRR. Tom told the Press-Enterprise "[t]he NLRB is very prone to political sway." Tom further explained the NLRB board members "don't rely on pages and pages of regulations like the Labor Department. Rules vacillate according to politics. What was law in the Clinton administration is not law during the Bush administration."


Tuesday, April 6, 2010

Court of Appeal Affirms Denial Of Class Certification Of Claims By Allegedly Misclassified Restaurant Managers

By Christopher S. Andre

Today, the California Court of Appeal certified for publication its decision in Arenas v. El Torito Restaurants, et al., holding that the trial court did not abuse its discretion when it denied class certification of the plaintiff restaurant managers' claims that they and other managers were improperly classified as exempt employees.

The plaintiffs were employed as salaried managers at El Torito, El Torito Grill and GuadalaHarry's restaurants. They alleged that they were improperly classified as exempt employees because their duties did not meet the exemption requirements of Industrial Welfare Commission Wage Order 5-2001 and that they defendants were therefore liable to them and to the alleged class for unpaid overtime, for missed meal periods, for missed rest periods, and for related claims.

The trial court denied the plaintiffs motion for class certification on the ground that the plaintiffs failed to meet their burden of showing that common issues of law and fact predominated over individual issues of law and fact such that litigating the claims on a class basis would be superior to litigating the claims on an individual basis. The trial court found that the evidence presented in support of and in opposition to the motion for class certification showed that the issue of whether the managers' duties met the exemption requirements was not susceptible to common proof. The trial court ruled that findings as to one or a few managers could not be applied to other managers because how managers spent their time varied from store to store. The court stated: "Based on the record presented, the plaintiffs have not demonstrated that resolution of the common issues of act and law will be accomplished by common proof that can be extrapolated to all class members. Instead, the plaintiffs have demonstrated that the case is replete with individual factual issues."

On appeal, the court held that the trial court applied the correct legal standards when it determined that the plaintiffs' claims were not susceptible to common proof and that the trial court's decision was supported by substantial evidence. Further, the court rejected plaintiffs' contention that defendants "cannot on one hand assert they have determined, based on job activities, that all managers are exempt but on the other hand argue a court must examine each individual's tasks to determine whether that person is exempt." In other words, the court held that just because an employer has classified a category of employees as exempt does not necessarily mean that the issue of whether the employees were correctly classified as exempt can properly be adjudicated on a class basis.

The court's decision is welcome news for California employers because it provides trial courts direction about what plaintiffs must show to demonstrate their claims can be decided based on common proof.

Click here to download and to read a copy of the court's decision.

Thursday, April 1, 2010

US Department of Labor Launches New Program to Inform Workers About Their Rights in the Workplace

By Robert R. Roginson

Today, the United States Department of Labor Wage and Hour Division officially launched a national public awareness campaign called “We Can Help.” According to the DOL, "this public awareness effort is intended to provide workers with information about their rights in the workplace and to educate them on how to seek the assistance of the Wage and Hour Division when they believe that they have been the subject of a violation." The DOL's new campaign includes a launch of a new web page called "We Can Help." The website includes links informing workers of federal wage and hour requirements, how to file complaints, and Frequently Asked Questions (FAQs).

The new public awareness program follows other steps taken by the DOL under the Obama Administration to strengthen the enforcement of federal labor standards. Earlier this year, Secretary of Labor Hilda Solis released the administration’s proposed fiscal year 2011 budget for the DOL requesting $25 million for its Employee Misclassification Initiative, a multi-agency initiative to strengthen and coordinate federal and state efforts to enforce statutory prohibitions, and identify and deter employee misclassification as independent contractors.

US Department of Labor Changes Course on Compliance Assistance: Will Issue Broad Based Administrator Interpretations Instead of Opinion Letters

By Robert R. Roginson

On March 24th, the United States Department of Labor Wage and Hour Division made a significant change in its compliance assistance by moving from its longstanding practice of issuing fact specific opinion letters to issuing more general, across-the-board Administrator's Interpretations. The change is significant because it likely signals the DOL's intention to more aggressively establish its own interpretation of federal wage and hour laws.

According to the DOL, the move to Administrator Interpretations is being taken "to provide meaningful and comprehensive guidance and outreach to the broadest number of employers and employees." The DOL states that the Interpretations "will set forth a general interpretation of the law and regulations, applicable across-the-board to all those affected by the provision in issue [and that] guidance in this form will be useful in clarifying the law as it relates to an entire industry, a category of employees, or to all employees." The DOL does not intend to abandon opinion letters altogether, but will response to such requests "by providing references to statutes, regulations, interpretations and cases that are relevant to the specific request but without an analysis of the specific facts presented."

In a telling development of how the DOL may use the Interpretations, the DOL issued its first Interpretation under the new policy reversing its position on the exempt status of mortgage loan officers as "administrative" employees. Vacating an opinion letter issued by the DOL under the Bush Administration in 2006, Deputy Administrator Nancy J. Leppink concluded that employees performing the typical duties of a mortgage loan officer do not qualify as administrative employees exempt from the provisions of the federal Fair Labor Standards Act. Click here to download and view a copy of the new Administrator’s Interpretation. We will provide in the coming days an analysis of that new interpretation.