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Friday, November 18, 2011

Court of Appeal Affirms Sexual Harassment Verdict And Award Of Attorney's Fees And Costs


In a partially published and partially unpublished decision in Fuentes v. AutoZone, Inc., the California Court of Appeal affirmed a judgment for alleged sexual harassment damages of $160,000.00 against the two alleged harassers and against the employer and affirmed the trial court's award of $677,025.00 in attorney's fees and $23,898.76 for a total award of $860,923.76.  The Court of Appeal rejected AutoZone's argument that the verdict was not supported by substantial evidence and rejected AutoZone's argument that the attorney's fees award was inflated.  
Although the decision breaks little new ground, it does offer a number of takeaways for California employers:
  •  The jury found each of the two alleged harassers to be 50% responsible for Fuentes' alleged damages of $160,000, but since an employer is under California law strictly liable for sexual harassment by supervisors, the entire judgment was awarded against AutoZone.
  • Although the allegedly harassing conduct occurred over a relatively compressed period of time (approximately three weeks), the Court of Appeal held there was substantial evidence that the alleged harassment was both pervasive and severe, which are required showings when the plaintiff's theory of liability is a hostile work environment based on alleged sexual harassment.  
  • Appellate courts are reluctant to overturn jury findings of fact, and appellate courts generally will not reweigh the evidence or credibility determinations made by a jury. 
  • "Reasonable" attorney's fees (here $677,025.00) can greatly exceed the amount of damages awarded to an alleged victim of sexual harassment.

Tuesday, November 8, 2011

California Court of Appeal Holds One Time Contract For Removal And Trimming Of Trees For State Agency Requires Payment Of Prevailing Wages


California's Prevailing Wage Law (Labor Code sections 1720-1861) generally requires that persons employed on Public Works be paid "not less than the general prevailing rate of per diem wages for work of a similar character in the locality in which the public work is performed" as determined by the Director of the Department of Industrial Relations.  "Public works" is broadly defined to include "[c]onstruction, alternation, demolition, installation, or repair work done under contract and paid for in whole or in part of of public funds."  The term "prevailing wages" is not synonymous with average or market wage rates for a particular kind of work in a given local.  "Prevailing wages" are typically union scale wages regardless of whether such wages are typically paid in a given market on non public works projects.  For example, the general prevailing wage for a tree trimmer who works above ground is currently $27.49 per hour.  Prevailing wage determinations for various trades can be viewed here
According to a decision of the California Supreme Court, California's Prevailing Wage Law is intended "to protect employees from substandard wages that might be paid if contractors could recruit labor from distant cheap-labor areas; to permit union contractors to compete with nonunion contractors; to benefit the public through the superior efficiency of well-paid employees; and to compensate nonpublic employees with higher wages for the absence of job security and employment benefits enjoyed by public employees."  See Lusardi Construction Co. v. Aubry (1992) 1 Cal.4th 976, 987.  State agencies are not required to pay "prevailing wages" to state employees. 
Significant consequences can be imposed against a contractor that fails to pay prevailing wages when payment of prevailing wages is required.  Such consequences include in addition to payment of the required prevailing wages that were not paid, civil penalties, suspension from bidding on or working on public works projects for up to three years, and criminal prosecution for failing to maintain required payroll records. 
In Reliable Tree Experts v. Christin Baker, Reliable Tree Experts sought a writ of administrative mandamus challenging the determination of the Director of the Department of Industrial Relations that Reliable Tree Expert's contract with the California Department of Transportation (Caltrans) calling for Reliable Tree Experts to prune certain trees and to remove certain diseased trees along state highways in a designated area required the payment of prevailing wages.    
The trial court and the Court of Appeal both disagreed with Reliable Tree Experts' contention the work called for by its contract with Caltrans did not qualify as a "public work" because landscape maintenance work, such as pruning trees and removing trees, is not "[c]onstruction, alternation, demolition, installation, or repair work."  The Court of Appeal held that maintenance work is a type of work that is subject to prevailing wages because, among things, the Prevailing Wage Law codified in part at Labor Code section 1771 states it is "applicable to contracts let for maintenance work," and because the term "maintenance" as defined by applicable regulation set out at Public Contract Code section 21002 expressly includes landscape maintenance.  The Court of Appeal rejected also Reliable Tree Experts' contention that the work called for by its contract was not "maintenance" on the theory that its one time contract with Caltrans did not qualify as maintenance because the project was not a "routine, recurring and usual activity" for Reliable Tree Experts as to its project with Caltrans.  The court agreed with the position of Caltrans and the Director of the Department of Industrial Relations that '[w]hen determining whether work is 'routine, recurring and usual,' the . . . focus must be on the work in terms of the property being worked, not the terms of an individual contract."

Monday, November 7, 2011

November 8, 2011 Oral Argument In Brinker To Be Broadcast Live

By Christopher S. Andre and Scott K. Dauscher

As we previously reported here, on July 22, 2008, in Brinker v. Superior Court, the Court of Appeal held that while an employer is required to "provide" to non-exempt employees at least one unpaid, duty-free meal period of at least 30 minutes each workday of more than 6 hours, the obligation to "provide" required meal  periods means to make the required meal periods available and not to ensure that employees take all required meal periods.  This was good news for employers and especially good news to numerous employers defending against claims of alleged meal period violations. 
The good news was short lived, however.  Just two months later, on October 22, 2008, the California Supreme Court granted the plaintiff's petition for review of the Court of Appeal's decision in Brinker.  As a consequence, employers defending lawsuits alleging violation of meal period requirements could no longer cite Brinker as authority that an employer is not required to ensure that employees take all required meal periods made available to them, and plaintiffs could once again contend an employer has a duty to ensure all required meal periods are taken and to document that all required meal periods are taken.
After the California Supreme Court granted review of Brinker, the Court of Appeal issued seven additional decisions holding an employer is required to make required meal periods available but is not required to ensure that employees take all required meal periods made available to them.  See Brinkley v. Public Storage, Faulkinbury v. Boyd & Associates, Brookler v. Radio Shack Corp., Hermandez v. Chipotle Mexican Grill, Tien v. Tenet Healthcare, Lamps Plus Overtime Cases, and Santos v. Vitas Healthcare.  However, the California Supreme Court promptly granted review of each of those seven decisions, too, and, like Brinker, those seven decisions can no longer be cited as authority that an employer is not required to ensure that employees take all required meal periods made available to them.  
This state of affairs left employers, employees, and courts tasked with resolving disputes over whether an employer has or has not complied with its obligations to "provide" required meal periods in the dark about what the law requires and has complicated the handling of the innumerable class action wage and hour lawsuits brought against California employers.  
On October 4, 2011, nearly three years after the California Supreme Court granted review of Brinker, the California Supreme Court scheduled the case for oral argument tomorrow, November 8, 2011, beginning at 9:00 a.m.  
The oral argument will be broadcast live on The California Channel.  We are hopeful that the oral argument will provide some insight into how the court might decide the issue.
While it remains difficult to predict how the California Supreme Court will decide the issue, particularly since the composition of the court has changed since the court granted review of the Brinker case in 2008, we do expect that the court's decision will at long last put to rest disputes over what an employer's obligation to "provide" required meal periods means.

Is Your Company Prepared For The California "Wage Theft Prevention Act Of 2011"?


On October 9, 2011, Governor Jerry Brown signed into law Assembly Bill 469, sponsored by State Assembly Member Sandre R Swanson (Dem. Oakland), which will be known as the "Wage Theft Prevention Act of 2011."  Effective January 1, 2012, the Wage Theft Prevention Act of 2011 will, among other things, subject California employers to new notice and record keeping requirements and to additional penalties for failing to comply with various provisions of the California Labor Code.  Some of the coming changes are as follows: 
1.  The new law amends Labor Code section 98 regarding the procedures used for Labor Commissioner hearings of employee complaints known as "Berman hearings."
2.  The new law adds to the Labor Code section 200.5 to increase from one year to three years the deadline for the Division of Labor Standards Enforcement to commence an action to collect "a civil penalty, fee, or penalty fee."
3.  The new law amends Labor Code section 226 to require employers to show on wage statements (i.e., check stubs) the name and address of the entity that secured the services of the employer, if the employer is a farm labor contractor.
4.  The new law amends Labor Code section 240 to permit the Labor Commissioner to require an employer that has been convicted of violating the provisions of the Labor Code governing the payment of wages or that has failed to pay within the time allowed any judgment for nonpayment of wages to deposit for up to two years a bond "in such sum as the Labor Commissioner may deem sufficient and adequate" that is conditioned upon the requirement that the employer pay its employees in accordance with the provisions of the Labor Code governing the payment of wages and upon the employer paying any judgment(s) for nonpayment of wages.  If an employer fails to post a required bond, the Labor Commissioner can require the employer "to provide an accounting of assets of the employer, including a list of all bank accounts, accounts receivable, personal property, real property, automobiles, or other vehicles, and any other assets, in a form and manner as prescribed by the Labor Commissioner," and can require the employer to provide an amended accounting.  If an employer fails to post a required bond, the employer becomes subject to a civil penalty of up to $10,000, and the Labor Commissioner can bring an action to compel the employer to post the bond or to stop doing business until the employer posts the required bond.
5.  The new law amends Labor Code section 243 to make it easier for an employee or for an attorney for an employee to obtain a court order prohibiting an employer from conducting business for 30 days unless the employer posts a required bond conditioned upon the requirement that the employer pay its employees in accordance with the provisions of the Labor Code governing the payment of wages and upon the employer paying any judgment(s) for nonpayment of wages, if within the preceding 10 years the employer was convicted of violating the provisions of the Labor Code governing the payment of wages or that has failed to pay within the time allowed any judgment for nonpayment of wages.  Further, ""t]o aid in the enforcement of this section, upon a request by the Labor Commissioner or an employee bringing an action . . ., the court may additionally require the employer to provide an accounting of assets of the employer, including a list of all bank accounts, accounts receivable, personal property, real property, automobiles, or other vehicles, and any other assets, in a form and manner as prescribed by the Labor Commissioner," and can require the employer to provide an amended accounting."  
6.  The new law amends Labor Code section 1174 to increase from two years to three years the period of time employers are required to maintain specified records, including records of hours worked and payroll records, and to forbid employers from prohibiting employees from keeping personal records of hours worked or of piece-rate units earned.
7.  The new law adds to the Labor Code section 1194.3 to permit an employee to recover attorney's fees and costs incurred to enforce a judgment for unpaid wages.
8.  The new law amends Labor Code section 1197.1 to permit an employee to recover under that section restitution of unpaid wages in addition to civil penalties.
9.  The new law adds to the Labor Code section 1197.2 to provide for criminal penalties to be imposed against an employer that is able to pay but "willfully fails to pay" a final judgment or a final order of the Labor Commissioner for wages due to an employee whose employment terminated within 90 days of the date the judgment was entered or the order became final. 
10.  The new law adds to the Labor Code section 1206 to state the penalties provided for by the Labor Code are "minimum penalties.
11.  The new law adds to the Labor Code section 2810.5 to require employers to provide to each employee at the time the employee is hired a written notice "in the language the employer normally used to communicate employment-related information to the employee" containing all of the following information: (a) "The rate or rates of pay and basis thereof, whether paid by the hour, shift, day, week, salary, piece, commission, or otherwise, including any rates for overtime, as applicable;" (b) "Allowances, if any, claimed as part of the minimum wage, including meal or lodging allowances," (c) "The regular payday designated by the employer in accordance with the requirements" of the Labor Code, (d) "The name of the employer, including any 'doing business as' names used by the employer," (e) "The physical address of the employer's main office or principal place of business, and a mailing address, if different," (f) the telephone number of the employer, (g) "The name, address, and telephone number of the employer's workers' compensation insurance carrier," and (h) "Any other information the Labor Commissioner deems material and necessary."  Further, except for information shown on "a timely wage statement furnished in accordance with Section 226," employers must also notify employees in writing within seven calendar days of any changes to the information required to be contained in the notice.  Notably, this new section of the Labor Code does not apply persons employed by any state or local government or to any employee covered by a valid collective bargaining agreement, if the agreement "expressly provides for the wages, hours of work, and working conditions of the employee, and if the agreement provides premium wage rates for all overtime hours worked and a regular hourly rate of apply for those employees of not less than 30 percent more than the state minimum wage."
We are continuing to analyze the California "Wage Theft Prevention Act of 2011," together with other new employment laws that will become effective January 1, 2012.  Beginning January 1, 2012, California employers will be faced with a bumper crop of new employment laws, and we will comment further here about those new laws.  
In any event, we suggest employers consult with competent employment law counsel now in order to prepare for the new employment laws to become effective January 1, 2012.

Wednesday, November 2, 2011

New Law To Require Employers That "Willfully" Misclassify Employees As Independent Contractors To Pay Penalties And Wear Scarlett Letter

By Christopher S. Andre and Scott K. Dauscher

As we previously reported herethe consequences of misclassifying a worker as an independent contractor who should have been classified as a non-exempt hourly employee can be substantial.  For example, if, because of misclassifying a worker as an independent contractor, the business failed to provide the worker with required meal and rest periods, failed to pay the worker for all hours worked, failed to pay premium pay for overtime hours, and/or failed to provide properly itemized wage statements, the business could become liable for substantial damages for unpaid wages, for various civil penalties, and for attorney's fees. 
On October 9, 2011, Governor Jerry Brown signed into law Senate Bill 459 sponsored by State Senator Ellen M. Corbett (Dem. Alameda County), which will become effective January 1, 2012, which will impose significant additional consequences against employers that "willfully" misclassify an employee as an independent contractor.  Among other things, the new law will:
1.  Make it a violation of the Labor Code for an employer to "willfully" misclassify an employee as an independent contractor.  "'Willful misclassification' means avoiding employee status for an individual by voluntarily and knowingly misclassifying that individual as an independent contractor."
2.  Make it a violation of the Labor Code for an employer to charge a person who has been "willfully" misclassified as an independent contractor "a fee, or making any deductions from compensation, for any purpose, including for goods, materials, space, rental, services, government licenses, repairs, equipment maintenance, or fines arising from the individual's employment where any of the acts . . . would have violated the law if the individual had not been misclassified."
3.  Impose civil penalties of at least $5,000.00 and up to $25,000.00 for each violation. 
4.  Require that violations be reported to the State Contractors' License Board if either the Labor and Workforce Development Agency or a court determines that the employer violated the requirements of the new law if the employer is a licensed contractor.  Further, in such cases, the registrar of the Contractors' State License Board is required to initiate disciplinary proceedings against the employer if the order resulted in disbarment of the employer.
5. Require that the Labor and Workforce Development Agency or court order in addition to any other remedy(ies) ordered, "order the person or employer to display prominently on its internet Web site, in an area which is accessible to all employees and the general public, or, if the person or employer does not have an internet Web site, to display prominently in an area that is accessible to all employees and the general public at each location where a violation . . . occurred, a notice that sets forth all of the following:
(1) That the Labor and Workforce Development Agency or a court, as applicable, has found that the person or employer has committed a serious violation of the law by engaging in the willful misclassification of employees.
(2) That the person or employer has changed its business practices in order to avoid committing further violations of this section.
(3) That any employee who believes that he or she is being misclassified as an independent contractor may contact the Labor and Workforce Development Agency.  The notice shall include the mailing address, e-mail address, and telephone number of the agency.
(4) That the notice is being posted pursuant to a state order."
Further, when such a notice is required, it must be signed by an officer of the employer and the notice must be posted for one year commencing on the date of the final decision or order issued by the  Labor and Workforce Development Agency or by a court. 
As we previously reported here, also, California courts will look beyond parties' agreements when evaluating whether a person is an "employee" or an "independent contractor" for purposes of determining whether the numerous provisions of the Labor Code applicable to employees apply.  Typically, the more control a business exercises over how work is done, the more likely it is a California court will find the relationship to be an "employment" relationship and therefore subject to the numerous requirements of the Labor Code and of the Industrial Welfare Commission wage order applicable to the particular industry or occupation.  For example, in  S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal. 3d 341, the California Supreme Court held there are several factors that must be considered in determining the existence of an employment relationship; while the employer’s right to control the work is the most significant, other factors that must be taken into consideration include “(a) whether the one performing services is engaged in a distinct occupation or business; (b) the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision; (c) the skill required in the particular occupation; (d) whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work; (e) the length of time for which the services are to be performed; (f) the method of payment, whether by the time or by the job; (g) whether or not the work is a part of the regular business of the principal; and (h) whether or not the parties belief they are creating the relationship of employer-employee.” (Id. at 351.)