California Court Invalidates Arbitration Agreement Based on Unconscionable Terms

By Ronald W. Novotny

In the case of Trivedi v. Curexo Technology Corp. published on October 20, 2010, a California appellate court refused to enforce an arbitration provision in an employment contract on the ground that it contained multiple unconscionable provisions. By permitting it to pursue injunctive relief in court, and by including a provision in the agreement requiring that the prevailing party be awarded its attorneys’ fees and costs, the employer forfeited its ability to enforce the agreement when the employee sued for discrimination and wrongful termination.

The court first concluded that with respect to the attorneys' fees provision, the employee was placed at greater risk in arbitration than if he pursued a claim in court because he could only be held responsible for the employer’s attorneys’ fees in a judicial action if his claim was determined to be groundless or brought in bad faith. By providing for an award of attorneys’ fees automatically to the prevailing party, the agreement therefore "served as a vehicle for the waiver of statutory rights" created by the Fair Employment & Housing Act, under which the employee’s suit was asserted. The court further concluded that because it was "more likely that the employer would seek injunctive relief" than the employee, the agreement was unlawfully one-sided.

Notably, the court refused to sever these two provisions and enforce the remainder of the agreement. It also found that the agreement was "procedurally unconscionable" because it was imposed by the employer unilaterally and without providing the employee with a copy of the American Arbitration Association Rules that would govern any arbitration proceeding. The case accordingly represents another example of judicial hostility to arbitration agreements which do not merely provide for a substitute forum for the employee to resolve their claims.

Survey Shows Labor and Employment Claims On The Rise

By Christopher S. Andre and Scott K. Dauscher

The Los Angeles Daily Journal reports that corporate counsel who participated in a recent survey are seeing increases in a variety of employment related claims, especially: wage-and-hour disputes; labor union matters; discrimination cases based on alleged age, sex, gender, and disability, and Employee Retirement Income Security Act claims.  According to the Daily Journal, "Wage-and-hour disputes remain the primary concern, with nearly half of survey respondents identifying worker classification and over-time claims as seeing the greatest spikes."   Predictably, respondents attribute the increase in discrimination claims "due to the rising number of laid-off and fired workers who are suing their former employers."  

The good news is there are steps an employer can take to help reduce the likelihood of being sued and to help defend against a suit if one is brought.  Some of those steps include:

Having good written policies can make it more difficult for a plaintiff current or former employee to credibly contend the employer has a policy or practice of not complying with applicable laws and regulations.  Such written policies can, among other things, make it more difficult for plaintiffs to obtain class certification. 

Properly documenting when non-exempt employees begin and end the workday, take rest periods, and take meal periods can make it more difficult for a plaintiff current or former employee to credibly contend the employer did not pay the employee for all hours worked, did not authorize and permit required rest periods, the employer did not provide all required unpaid meal periods, and/or did not provide accurate wage statements or "pay stubs," which are some of the most common claims we see.  

Having an enforceable arbitration agreement can help make an individual discrimination, harassment, or retaliation case less attractive to a plaintiff's attorney.  Plaintiff's attorneys sometimes rely on the prospect of a jury trial to increase the value of such a case. 

California Supreme Court Upholds Implemented Furloughs of State Employees

By: Kevin R. Dale, Irma Rodriguez Moisa, and Nate J. Kowalski

The California Supreme Court recently upheld the Governor's unilaterially-implemented mandatory furloughs of represented state employees.  Professional Engineers in Calfornia Gvoernment, et al. v. Arnold Schwarzeneegar, et al., California Supreme Court Case NO. S183411, October 4, 2010.  The Court determined that the Budget Act of 2008 "reasonably included the furlough plan that was then in existence," tehre therefore the Legislature approved the Governor's furlough plan as required by law.  The Court's ruling was premised on state law that specifically requires the Legislature to approve provisions of memoranda of understanding requiring the expenditure of state funds in the annual Budget Act.  

Click here to read the full alert. 

Governor Schwarzenegger Signs Meal Period and Marrow Donation Leave Bills, Vetoes Nine Other Employment-Related Bills

By Jonathan Judge


Governor Schwarzenegger vetoed nine out of the eleven employment-related bills we were tracking that made it to his desk for approval.

The two bills the Governor signed are effective January 1, 2011:

Signed - AB 569 (Emmerson) Meal & Rest Periods - This bill amends Labor Code Section 512 and exempts from meal and rest period provisions, employees in construction, commercial drivers, employees of local publically owned electric utilities, and security officers, as defined, if such employees are covered by a valid Collective Bargaining Agreement (“CBA”). To qualify for the exemption, the CBA must provide for: wages, hours of work, and working conditions of employees, and meal periods for those employees, final and binding arbitration of disputes concerning application of its meal period provisions, premium wage rates for all overtime hours worked, and a regular hourly rate of pay of not less than 30 percent more than the state minimum wage rate.

Signed - SB 1304 (DeSaulnier) Marrow Donation Leave - This bill requires employers with 15 or more employees to permit employees to take paid leaves of absence for organ donation (up to 30 days) and bone marrow donation (up to five days), and to restore an employee returning from such leave to the same or equivalent position. The bill also prohibits an employer from interfering with, or retaliating against, an employee taking such leave, or opposing an unlawful employment practice related to such leave. The bill also creates a private right of action for aggrieved employees to seek enforcement of these provisions. Covered employers may require an employee take up to five days of earned but unused sick or vacation leave for bone marrow donation, and up to two weeks of earned but unused sick or vacation leave for organ donation as a condition of receiving such leave.

The vetoed bills are summarized below, with the Governor’s veto message linked where available.

Vetoed - AB 482 (Mendoza) Consumer Credit Reports - This bill would have prohibited employers, with the exception of certain financial institutions, from obtaining a consumer credit report for employment purposes unless the information is (1) substantially job-related, meaning that the position of the person for whom the report is sought has access to trade secrets, money, other assets, or confidential information, and (2) the position of the person for whom the report is sought is a position in the state Department of Justice, a managerial position, that of a sworn peace officer or other law enforcement position, or a position for which the information contained in the report is required to be disclosed by law or to be obtained by the employer.

Vetoed - AB 1881 (Monning) Liquidated Damages in Wage Claims - This bill would have, in cases of minimum wage violations, increased the amount of liquidated damages that may be awarded to an employee to twice the amount of wages unlawfully unpaid, plus interest.

Vetoed - AB 2187 (Arambula) Failure to Pay Final Wages Additional Penalty - This bill would have created a new separate prohibition against a person, who, having the ability to pay, willfully fails to pay all wages due to an employee who has been discharged or quit within 90 days. The bill would have imposed a fine of between $1,000 and $10,000, up to six months jail time, or both, for such conduct. The violating individual would have also been required to pay restitution to the aggrieved employee upon conviction.

Vetoed - AB 2340 (Monning) Bereavement Leave - This bill would have allowed for three days unpaid leave for bereavement purposes upon the death of a spouse, child, parent, sibling, grandparent, grandchild, domestic partner, or domestic partner’s child, within 13 months of the death of the bereaved individual. The provisions of the bill would not have applied to an employee who is covered by a valid CBA that provides for bereavement leave and other specified working conditions.

Vetoed - AB 2468 (DeLeon) Lactation Breaks - This bill would have authorized an employer to use the designation "Mother-Friendly Worksite" in its promotional materials, if it submitted its workplace breast-feeding policy to the Labor Commissioner and the Labor Commissioner determined that the employer's policy provides for specified criteria.

Vetoed - AB 2770 (Monning) Labor Code Enforcement - This bill would have, until January 1, 2017, established a pilot program to investigate employment and payment practices within the swimming pool and spa construction industry. The Employment Development Department (“EDD”), in conjunction with other agencies and industry representatives, would have been required to establish criteria that would trigger a recommendation for an audit or investigation state authorities.

Vetoed - SB 903 (Wright) Statute of Limitations - This bill would have extended the period within which the Division of Labor Standards Enforcement (“DLSE”) may commence a collection action, as defined, from one year to three years.

Vetoed - SB 1370 (Ducheny) Commission Agreements - Effective January 1, 2012, this bill would have required all employers entering into commission agreements with employees to enter into written agreements or face liability in a civil action to the employee for treble damages.

Vetoed - SB 1474 (Steinberg) Agricultural Employee Labor Representatives - This bill would have authorized the Agricultural Labor Relations Board, under specified circumstances, to set aside an election where there has been misconduct by the employer affecting the outcome of the election and to certify a labor organization as the exclusive bargaining representative for a bargaining unit if the organization had previously presented the board with authorization cards signed by more than 50% of the employees in that bargaining unit.