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Monday, April 30, 2012

California Supreme Court Holds Attorney's Fees Are Not Recoverable Under Labor Code Sections 1194 Or 218.5 For Claims For Meal Or Rest Period Violation Penalties Under Labor Code Section 226.7

By Christopher S. Andre and Scott K. Dauscher

Today, in Kirby v. Immoos Fire Protection, Inc., the California Supreme Court put to rest the issue of whether either side--a plaintiff employee or a defendant employer--can be awarded attorney's fees under Labor Code sections 1194 or 218.5 when it prevails on a claim for alleged meal or rest period violation penalties under Labor Code section 226.7.  The court held today that neither Labor Code section 1194 nor Labor Code section 218.5 apply to a claim for meal or rest period violation penalties under Labor Code section 226.7.  For reasons we explain below, we think this common sense decision is a major victory for California employers, and we think this decision has the potential to dramatically alter the landscape of wage and hour class action litigation in California.
The plaintiff alleged in the trial court a variety of wage and hour violations against his employer and sought to litigate his claims as a class action.  After the trial court denied the plaintiff's motion for class certification, the plaintiff, perhaps tellingly, dismissed the action, and the trial court awarded to Immoos attorney's fees under Labor Code section 218.5 based on its determination that Imoos was the prevailing party as to, among other claims, plaintiff's claim that Immoos failed to authorize and permit required rest periods.  On appeal, the Court of Appeal affirmed the award of attorney's fees as to plaintiff's rest period claim.
The California Supreme Court granted the plaintiff's petition for review of the Court of Appeal's decision but limiting the scope of its review to the issues of whether the prevailing party attorney's fees provisions of Labor Code Section 1194 or of Labor Code section 218.5 apply to a claim for meal or rest period penalties under Labor Code section 226.7, which states if an employer in any instance fails to authorize and permit a non-exempt employee to take a required 10-minute paid rest period or fails to provide to a non-exempt employee a required 30-minute unpaid meal period, "the employer shall pay the employee one additional hour of pay at the employee's regular rate of compensation for each work day the meal or rest period is not provided."  
Because Labor Code section 1194 is a one-way attorney's fees shifting statute that enables employees but not employers who prevail on claims for unpaid minimum wages or for unpaid overtime compensation to recover also attorney's fees, the plaintiff argued section 1194 applies to claims for meal and rest period violations under Labor Code section 226.7.  Section 1194 states, in pertinent part: "Notwithstanding any agreement to work for a lesser wage, any employee receiving less than the legal minimum wage or the legal overtime compensation applicable to the employee is entitled to recover in a civil action the unpaid balance of the full amount of this minimum wage or overtime compensation, including interest thereon, reasonable attorney's fees, and costs of suit."  The court rejected plaintiff's argument that "the required payment for missed meal or rest periods is tantamount to a statutorily prescribed minimum wage."  The court explained that "the text and history of [Labor Code section 1194] indicate that the Legislature intended 'the legal minimum wage or the legal overtime compensation' to refer to the ordinary minimum wage and overtime obligations."  Placing the final nail in the coffin of plaintiff's argument, which we have always believed was nonsensical and unfounded, the court stated:  "It is thus unsurprising that plaintiffs have been unable to identify a single case since the provision's adoption almost 100 years ago interpreting it to apply to anything other than claims for unpaid minimum wages or, starting in 1961, unpaid overtime compensation."
Because Labor Code section 218.5 is a two-way attorney's fees shifting statute that enables employees and employers who prevail on claims for unpaid wages other than unpaid minimum wages or unpaid overtime compensation to recover attorney's fees, the employer argued that section 218.5 applies to claims for meal and rest period violations under Labor Code section 226.7.  Labor Code section 218.5 states, in pertinent part: "In any action brought for the nonpayment of wages . . . , the court shall award reasonable attorney's fees and costs to the prevailing party. . . ."  That argument was rooted in the California Supreme Court's 2007 decision in Murphy v. Kenneth Cole Productions, in which the court held that the penalties recoverable under Labor Code section 226.7 for meal or rest period violations are "a 'wage' for purposes of determining what statute of limitations applies to section 226.7 claims."  The court rejected that argument and stated that aspect of its decision in Murphy does not make the Labor Code section 218.5 applicable because "[t]o say that a section 226.7 remedy is a wage, however, is not to say that the legal violation  triggering the remedy is nonpayment of wages."  Simply put, "a section 226.7 action is brought for the nonprovision of meal and resp periods, not for the 'nonpayment of wages.'"
Having defended numerous wage and hour class actions, we can safely say wage and hour class action lawsuit nearly always include claims for alleged meal and rest period violations.  We think today's decision has the potential to dramatically alter the landscape of class action wage and hour litigation in California. 
  • To begin with, pending meal and rest period claims as of today no longer carry the prospect of an attorney's fees award under Labor Code section 1194 or 218.5, which should dramatically reduce the potential exposure of the employers defending those cases.  
  • We think meal and rest period cases as of today will be less attractive to the plaintiff's bar on a going forward basis because as of today there is no obvious means to recover attorney's fees for such claims.  We may therefore see fewer wage and hour class actions based on alleged meal period and rest period violations being filed in the future.
  • It remains to be seen whether the plaintiff's bar will now devote increased attention to coupling claims for alleged wage and hour violations with claims for penalties under the California Labor Code Private Attorneys General Act of 2004, which permits a prevailing "aggrieved" employee to recover for violations of numerous provisions of the Labor Code, including Labor Code section 226.7, penalties and attorney's fees.  Such a strategy might enable the plaintiff's bar to regain some lost ground, but claims under PAGA are subject to a one-year statute of limitations, which means that some claims that might otherwise be brought will be time-barred, and the scope of claims that are not time-barred altogether will be limited to one year.
  • It remains to be seen whether the Legislature will enact legislation to permit attorney's fees to be recovered for claims for meal and/or rest period violations and to effectively negate today's decision.  We suspect that lobbying for such action by the Legislature has already begun.

Thursday, April 26, 2012

Court of Appeal Holds Employers Cannot Be Compelled To Arbitrate On A Class Basis If The Arbitration Agreement Limits Arbitration To Arbitration Of Disputes Between The Employer And The Employee Individually

By Scott K. Dauscher and Christopher S. Andre
Yesterday, the California Court of Appeal, Second Appellate District, Division Three, issued its decision in Kinecta Alternative Financial Solutions, Inc. v. Malone, published in part and unpublished in part, in which the Court held employers cannot be compelled to arbitrate class action claims if the employment arbitration agreement between the employee and the employer expressly limits arbitration of disputes as to those between the individual employee and the employer.
When Kinecta hired plaintiff Malone, Malone signed a “Comprehensive Agreement Employment At-Will and Arbitration” agreement which stated that Kinecta and Malone would arbitrate disputes arising out of Malone’s employment.
On November 2, 2010, Malone filed a wage and hour class action lawsuit against Kinecta on behalf of herself and all other employees similarly situated.  Kinecta filed a motion to compel arbitration of Malone’s claims and to dismiss the class claims.  The trial court denied Kinecta’s motion to dismiss the class claims but ordered Kinecta and Malone to arbitrate all claims in the lawsuit.  Kinecta appealed the trial court’s order and requested dismissal of the class claims from the complaint.
The Court of Appeal observed that by granting Kinecta’s motion to compel arbitration but denying its motion to dismiss the class claims, the trial court imposed class arbitration, even though the arbitration agreement was silent on the issue of class arbitration and limited arbitration to disputes between Malone and Kinecta.  The Court addressed the issue whether a party to an arbitration agreement which neither authorizes nor prohibits class arbitration can be compelled to arbitrate class claims.
The Court held the outcome was governed by the United States Supreme Court case Stolt-Nielsen v. Animalfeeds International Corp. (2010) 130 S.C.t 1758, which holds that under the Federal Arbitration Act, a party may not be compelled to submit to class arbitration unless the arbitration agreement provides a basis for concluding the party agreed to do so. 
Malone relied on the California Supreme Court’s decision in Gentry v. Superior Court, (2007) 42 Cal.4th 443.  Gentry held that even where an employment arbitration agreement expressly waives class arbitration the trial court can invalidate the class arbitration waiver if the trial court finds, based on several factors, that: (1) a class arbitration is likely to be a significantly more effective practical means of vindicating the employees’ rights than individual litigation or arbitration, and (2) disallowance of the class action would likely lead to a less comprehensive enforcement of overtime laws for employees affected by the employer’s alleged violations.
The Court of Appeal acknowledged that a question exists as to whether the holding in Gentry is still valid because Gentry rejected an argument that a rule invalidating class arbitration waivers violated the Federal Arbitration Act (“FAA”), relying on Discover Bank v. Superior Court, (2005) 36 Cal.4th 148, which was overruled by the United States Supreme Court in AT&T v. Concepcion (2011) 131 S.Ct. 1740.  But the Court determined that Gentry established a different test that Discover Bank to determine whether to enforce a class arbitration waiver, and because Gentry has not to date been expressly overruled, held that Gentry is still binding law in California.
Nonetheless, the Court determined that Gentry did not help Malone because the Court found that Malone failed to establish the two elements necessary to invalidate the arbitration agreement.  Instead, the Court found that the arbitration agreement expressly limited arbitration to the arbitration of disputes between Malone and Kinecta and made no reference to, and did not authorize, class arbitration of disputes.  Thus, the Court reversed the trial court’s order denying Kinecta’s motion to dismiss the class claims.
This case provides another strong reason for employer’s to consider using arbitration agreements.  While not one-size-fits-all, and not without some downside, arbitration agreements can provide a means for employers to limit their exposure in the ever threatening wage and hour class action litigation.  Employers are encouraged to discuss the pros and cons of arbitration agreements to determine whether they are a viable option for them.

Wednesday, April 25, 2012

U.S. Supreme Court To Decide Whether FLSA Outside Salesperson Exemption Applies To Pharmaceutical Sales Representatives

By: Christopher S. Andre and Scott K. Dauscher

On April 16, 2012, the Supreme Court of the United States conducted oral argument in Christoper v. Smithkline Beecham Corp., and will decide whether the federal Fair Labor Standards Act exemption for outside salespersons applies to pharmaceutical sales representatives ("PSRs") such that PSRs are not required to be paid in addition to their substantial salaries and incentive compensation based on sales productivity overtime pay for hours worked in excess of 40 hours in a workweek. 
Both the trial court and the Ninth Circuit Court of Appeals in a published decision agreed the FLSA outside salespersons exemption applies to PSRs.  The trial court ruled PSRs "unmistakably fit within the terms of the exemption," and noted PSRs "are not hourly workers, but instead earn salaries well above minimum wage--up to $100,000 a year" and receive bonuses in lieu of overtime pay.  The trial court, addressing the fact that PSRs cannot lawfully under federal law actually sell prescription medications to anyone, explained: "A PSRs ultimate goal is to close an encounter with a physician by obtaining a nonbinding commitment from the physician to prescribe the PSR's assigned product.  In this highly regulated industry, that is the most a PSR can achieve."  On appeal, based on its analysis of the FLSA, implementing regulations adopted by the Department of Labor, and applicable precedent, the Ninth Circuit Court of Appeals affirmed the trial court's decision to grant summary judgment in favor of Smithkline Beecham and held the FLSA outside salespersons exemption applies to PSRs.  In so holding, the Ninth Circuit Court of Appeal rejected the plaintiffs' argument "that by not transferring any product to physicians, they are not selling pharmaceuticals, but only 'promoting' them."  The court explained: "Plaintiffs' contention that they do not 'sell' to doctors ignores the structure and realities of the heavily regulated pharmaceutical industry.  It is undisputed that federal law prohibits pharmaceutical manufacturers from directly selling prescription medications to patients."  The court went on to explain: "Unlike conventional retail sales, the patient is not at liberty to choose personally which prescription pharmaceutical he desires.  As such, he cannot be fairly characterized as the 'buyer.' Instead, it is patient's physician, who is vested with both a moral and legal duty to prescribe medication appropriately, who selects the medication and is the appropriate focus of our 'sell/buy' inquiry."  
The Ninth Circuit Court of Appeal's decision in this case is in conflict with a contrary decision of the Second Circuit Court of Appeals in In re Novartis Wage And Hour Litigation (2d Cir. 2010) 611 F.3d 141 holding the FLSA outside salespersons exemption does not apply to PSRs, which we suspect is one of the reasons the US Supreme Court granted the plaintiff's petition for certiorari of the Ninth Circuit Court of Appeal's decision in this case. 
In any event, we think the plaintiff's theory of liability based on their contention they do not engage in sales because they--as a matter of federal law--cannot actually transfer prescription medications to anyone is based on a rigid and hypertechnical reading of the pertinent regulations that is an example of the sort of "gotcha" wage and hour litigation plaguing employers not just in California but nationwide.  
The Supreme Court's decision in this case is expected in June, and we will report on that decision when it is issued.  Please stay tuned.   

Tuesday, April 24, 2012

California Court of Appeal Holds Attorney's Fees Awards In Wage And Hour Cases Belong To Attorneys Not Clients

By Christopher S. Andre and Scott K. Dauscher

In Henry Lee Law Corp. v. Superior Court, the California Court of Appeal held that attorney's fee awards made in wage and hour cases under Labor Code section 1194(a) and 226(e), which provide for an award of attorney's fees to the prevailing employee belong to the employee's attorney and not to the employee even though both statutes expressly state it is the employee who is entitled to recover attorney's fees when an employer fails to pay minimum wages or overtime compensation or fails to provide to the employee a wage statement that complies with all of the requirements of Labor Code section 226(a).  
In the trial court, Ok Song Chang, represented by attorney Henry M. Lee, obtained a judgment against A-Ju Tours for $30,150 in unpaid minimum wages, $1,920.00 in "waiting time" penalties, a $4,000.00 penalty for failure to provide compliant wage statements, $15,075 in liquidated damages, and $11,101.74 for prejudgment interest for a total damages award of $62,246.74.  The trial court also awarded Chang $300,000 in "reasonable attorney fees."  
After Lee obtained on behalf of Chang the $62,246.75 damages award and the $300,000 attorney's fees award and before either award was paid, Chang dismissed Lee as her attorney and filed in the court a substitution of attorney form substituting herself as her own attorney in place of Lee.  
Lee then filed an ex parte application seeking leave to intervene in the action and seeking an amendment of the post judgment order to make the attorney's fees award payable to him.
The trial court denied Lee's motion, ruling that Labor Code sections 1194(a) and 226(e) both unambiguously provide for an attorney's fees award to the employee.
On Appeal, the Court of Appeal held the term "employee" is "ambiguous" as used in Labor Code sections 1194(a) and 226(e) and concluded the Legislature intended such awards to be paid to plaintiff employee's attorneys rather than to the employees as stated in Labor Code section 1194(a) and 226(e) and concluded that public policy supports such an interpretation in that it is the public policy of this state to encourage attorneys to prosecute wage and hour lawsuits and to ensure that plaintiff's attorneys are paid when they do so successfully.  In so holding, the Court of Appeal followed and adopted the reasoning of the California Supreme Court in Flannery v. Prentice (2001) 26 Cal.4th 572, in which the Supreme Court similarly ruled that attorney's fees awards made under Government Code section 12965(b) for violations of the California Fair Employment and Housing Act belong to the plaintiff's attorney and not to the plaintiff even though Government Code section 12965(b) expressly states such attorney's fees awards are to be awarded "to the prevailing party."  
This case presents two important takeaways for California employers.  First, attorney's fees awards for wage and hour violations often greatly exceed the allegedly unpaid wages recovered by the employee.  Second, California courts do not always construe statutes using the plain, ordinary meaning of words used in statutes applicable to California employers. 

Friday, April 20, 2012

U.S. Supreme Court Denies Review Of California Court of Appeal Decision Holding Arbitration Agreement Barring Enforcement Of PAGA Claims Is Unenforceable

By Christopher S. Andre and Scott K. Dauscher

The California Labor Code Private Attorneys General Act of 2004 ("PAGA") permits an "aggrieved" current or former employee to seek on behalf of all other "aggrieved" current and former employees very sizable penalties for violations of many provisions of the California Labor Code and for violations of Industrial Welfare Commission Wage Orders.  PAGA provides for penalties of $100 per employee per pay period for each initial violation and of $200 per employee per pay period for each subsequent violation. A successful PAGA plaintiff is entitled also to an award of his or her attorney's fees and costs, which can also be sizeable. 
When the Supreme Court of the United States issued its landmark decision in AT&T Mobility v. Concepcion we previously discussed here holding that the Federal Arbitration Act preempts contrary state law barring arbitration agreements requiring claimants to pursue their claims individually through arbitration and not by way of a class action lawsuit, many practitioners were optimistic that arbitration agreements could be used to require current or former employees to bring claims for PAGA penalties on an individual basis and not on behalf of other allegedly "aggrieved" current and former employees.
However, as we previously reported here, the California Court of Appeal held in Brown v. Ralph's Grocery Company that the decision of the trial court denying enforcement of a class action waiver contained in an arbitration agreement between Ralph's Grocery Company and its employees was not supported by substantial evidence but held, also, that a provision of that arbitration agreement barring employees from pursuing claims under PAGA is unenforceable because, according to that court, the recent decision of  Supreme Court of the United States in AT&T Mobility v. Concepcion, previously discussed here, does not apply to representative actions brought under PAGA.
As we previously reported here, on July 11, 2011, the California Supreme Court denied review of the Court of Appeal's decision in Brown v. Ralph's Grocery Company that PAGA waivers are not enforceable. 
On April 16, 2012, the United States Supreme Court likewise denied review of the Court of Appeal's decision holding PAGA waivers are unenforceable.
We think the decisions of the California Supreme Court and of the United States Supreme Court to leave undisturbed the decision of the Court of Appeal marks a significant setback California employers.  Plaintiffs bringing class action wage and hour lawsuits now routinely include allegations that their claims fall under PAGA, which provides for awards of very sizable penalties for violations of many provisions of the California Labor Code when aggregated to account for hundreds or even thousands of class members. Further, as we previously reported here and here, California courts hold that PAGA penalties apply, also, to violations of Industrial Welfare Commission Wage Orders.  
In light of this development, we think employers that have in place or are considering implementing arbitration agreements containing PAGA waivers should promptly consult competent employment law counsel.

Thursday, April 19, 2012

DLSE Issues Revised Template For Required Wage Theft Prevention Act Notice To Employees

By Christopher S. Andre and Scott K. Dauscher

As we previously reported here  and here, on November 7, 2011,  Governor Jerry Brown signed into law effective January 1, 2012, Assembly Bill 469, sponsored by State Assembly Member Sandre R Swanson (Dem. Oakland), known as the "Wage Theft Prevention Act of 2011."  Effective January 1, 2012, the Wage Theft Prevention Act of 2011 subjects 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.  
One of the new requirements now in effect is the Labor Code section 2810.5 requirement that 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."  
The Division of Labor Standards Enforcement ("DLSE") recently issued and made available for downloading by clicking here a revised notice template.  According to the DLSE's Frequently Asked Questions page regarding the new notice requirement, "employers can develop their own notices so long as they contain all the information required by the law, including all the information requested on DLSE’s template."  The template includes all required information, including that which the Labor Commissioner deems material and necessary for purposes of the notice.  The DLSE further states, "Employers should keep a record of the notices provided to their employees." 
Staffing agency employers should take note that the DLSE's new template specifically calls for staffing agency employers to identify themselves as the "hiring employer" and to also identify "the other entity for whom the employee will perform work."  This requirement may prove to be burdensome for some staffing agency employers in some instances in light of the requirement that employers must notify employees in writing within seven calendar days of any changes to the information required to be contained in the notice. 
We will continue to provide updates here regarding the new legislation affecting California employers.

Wednesday, April 18, 2012

Federal Court of Appeals Enjoins NLRB From Requiring Employers To Post Notice Of Employee Rights Under Federal Labor Law

By Thomas A. Lenz

As we previously reported here, the National Labor Relations Board (NLRB) made rules which required private sector employers across the country to post a Notice of Rights.  This Notice provided a listing of employee rights under federal labor law including the right to form and join unions, to discuss and protest working conditions, and to refrain from such activity.  Management groups sued the NLRB in an effort to block the rules and stop the mandatory Notice posting.
The litigation delayed the initial posting deadline from November 30, 2011 to April 30, 2012.  A federal district court in Washington, DC ruled that the Notice posting requirement was lawful but that penalties for an employer's failure to post the Notice were not lawful.  Separately, a federal district court in South Carolina invalidated the NLRB rule in its entirety including the posting obligation.
With the April 30, 2012 posting deadline looming, and NLRB refusing to make a public statement about the South Carolina ruling, the federal Court of Appeals for the District of Columbia Circuit in Washington, DC had a request for an emergency injunction.  On April 17, the Court enjoined NLRB from requiring the Notice posting, thus invalidating the April 30, 2012 posting deadline.  The Court will review the NLRB Notice posting regulation in greater detail in late 2012.
As for now, employers need not post the NLRB's Notice of Rights.  Other NLRB notices may be required for employers or unions in case-specific situations such as elections or unfair labor practice cases.   The injunction against NLRB does not change the duty of federal government contractors to post notices of labor law rights required under Executive Order and implementing regulations
This is an election year with NLRB much in the spotlight based on rule making to expedite union organizing, cases extending legal protections to employees' use of social media, cases restricting employers' use of arbitration agreements, and cases challenging business decisions of employers like Boeing on where to locate work.  In this setting, the Notice of Rights is one more lightning rod for both labor law and politics.  Private sector employers should stay tuned to see whether NLRB and the courts speak further on the Notice of Rights later in the year.

Tuesday, April 17, 2012

What's Next From The California Supreme Court For California Employers?

By Christopher S. Andre and Scott K. Dauscher

The California Supreme Court's recent and eagerly awaited decision in Brinker Restaurant Corp. v. Superior Court we summarized here has received a great deal of deserved attention, but there are a number of other cases pending before the court of significance to California employers in a variety of industries  Those pending cases include the following:

Whether The Mixed-Motive Defense Applies To Employment Discrimination Claims Under The California Fair Employment And Housing Act.

In Harris v. City of Santa Monica, the California Court of Appeal held it was error for the trial court to refuse to instruct the jury regarding the city's mixed-motive defense to the plaintiff's claim she was terminated from her probationary position as a bus driver because she became pregnant.  The city identified the following reasons unrelated to the plaintiff's pregnancy for  its decision to terminate her employment: "two preventable accidents, two-miss-outs, and a performance evaluation warning 'further development needed," each of which the city identified before the city learned plaintiff was pregnant. The trial court refused the following proposed jury instruction, and the jury returned a verdict in favor of the plaintiff: 
If you find that the employer's action, which is the subject of plaintiff's claim, was actually motivated by both discriminatory and non-discriminatory reasons, the employer is not liable if it can establish by a preponderance of the evidence that its legitimate reason, standing alone, would have induced it to make the decision.  An employer may not, however, prevail in a mixed-motives case by offering a legitimate and sufficient reason for its decision if that reason did not motivate it at the time of the decision.  Neither may an employer meet its burden by merely showing that at the time of the decision it was motivated only in part by a legitimate reason.  The essential premise of this defense is that a legitimate reason was present, and standing alone, would have induced the employer to make the same decision.
The California Supreme Court granted on April 22, 2010, the plaintiff's petition for review, and will decide the following issue:  "Does the 'mixed-motive' defense apply to employment discrimination claims under the  California Fair Employment and Housing Act (Government Code section 12900, et seq.)?"  We think the court's decision on this issue has the potential to significantly affect the defensibility of claims of alleged employment discrimination under the Fair Employment and Housing Act.  The case has been fully briefed, but it has not yet been scheduled for oral argument.  

Whether The Prevailing Party Can Recover Attorney's Fees Incurred To Prosecute Or To Defend Against Alleged Meal And Rest Period Violations.

In Kirby v. Immoos Fire Protection, Inc., the plaintiff alleged a variety of wage and hour violations against his employer and sought to litigate his claims as a class action.  After the trial court denied the plaintiff's motion for class certification, the plaintiff, perhaps tellingly, dismissed the action, and the trial court awarded to Immoos attorney's fees under Labor Code section 218.5 based on its determination that Imoos was the prevailing party as to, among other claims, plaintiff's claim that Immoos failed to authorize and permit required rest periods.  On appeal, the Court of Appeal affirmed the award of attorney's fees as to plaintiff's rest period claim.
The California Supreme Court granted on November 17, 2010, plaintiff's petition for review and will decide the following issues: "(1) Does Labor Code section 1194 apply to a cause of action alleging meal and rest period violations (Labor Code section 226.7) or may attorney's fees be awarded under labor Code section 218.5 [to the prevailing party on a claim for alleged meal and/or rest period violations]?  (2) Is [the court's] analysis affected by whether the claims for meal and rest periods are brought alone or are accompanied by claims for minimum wage and overtime?"  In other words, the court will decide the important issue of whether the prevailing party on a claim for alleged rest period and/or meal period violations can recover attorney's fees.  Oral argument was conducted on March 6, 2012, and the court's decision is currently due on or before May 4, 2012.  

Whether The Federal Aviation Administration Authorization Act Preempts Certain California Wage And Hour Laws When Applied To Certain Truck Drivers.

In People ex rel. Harris v. Pac Anchor Transportation, the State of California filed a lawsuit alleging a litany of alleged violations of California law including numerous alleged wage and hour violations based on the employer's alleged misclassification of drivers as independent contractors.  The trial court granted the defendants' motion for judgment on the pleadings based on the trial court's determination that the State's lawsuit was preempted and barred by the Federal Aviation Administration Authorization Act ("FAAAA").  Generally speaking, the FAAAA preempts state and local regulations relating to the prices, the routes, or the services of motor carriers transporting property. However, the Court of Appeal reversed the trial court's decision.
The California Supreme Court granted on August 10, 2011, the defendants' petition for review and will decide the following issue: "Is an action under the Unfair Competition Law (Business and Professions Code section 17200, et seq.) that is based on a trucking company's alleged violation of state labor and insurance laws 'related to the price, route, or service' of the company and, therefore, preempted by the Federal Aviation Administration Authorization Act of 1994 (49 U.S.C. section 14501)?"  The case was deemed fully briefed on March 26, 2012, but on April 11, 2012, the  Los Angeles Alliance for a New Economy and the International Brotherhood of Teamsters filed a request for permission to file an amicus curiae brief in support of the plaintiff and appellant.  The court has not yet decided that request, and the case has not yet been scheduled for oral argument.  

Whether After-Acquired Evidence Of Employment Application Fraud Bars Certain Claims Under The Fair Employment And Housing Act.


In Salas v. Sierra Chemical Co., the California Court of Appeal held that evidence of employee or job applicant wrongdoing discovered after an allegedly discriminatory termination or refusal to hire that would have caused the employer to terminate the employee or to refuse to hire the employee can be a complete defense to claims for alleged wrongful termination, to claims for alleged discriminatory refusal to hire, and to claims for alleged failure to reasonably accommodate an alleged disability. 
The California Supreme Court granted on November 16, 2011, the plaintiff's petition for review of the Court of Appeal's decision and will decide the following issues:  "Did the trial court err in dismissing plaintiff's claims under the Fair Employment and Housing Act (Gov. Code section 12900, et seq.) on the grounds of after-acquired evidence and unclean hands, based on plaintiff's use of false documentation to obtain employment in the first instance?  Did Senate Bill No. 1818 (2001-2002 Reg. Session) preclude application of those doctrines in this case?  (See Civil Code section 3339; Government Code section 7285; Health & Safety code section 24000; Labor Code section 1171.5)."  In other words, the court will decide whether someone who obtained employment under false pretenses who was never entitled to be employed to begin with can nevertheless still sue his or her employer for alleged wrongful termination and for similar claims.  The case is not yet fully briefed, and the case has not yet been scheduled for oral argument.

Applicability of California's Prevailing Wage Law To Charter Cities Using Municipal Funds For Public Works Projects.

In State Building & Construction Trades Council of California v. City of Vista, the plaintiff labor organization, State Building & Construction Trades Council of California, filed suit against the City of Vista seeking a peremptory writ of mandate requiring the City of Vista pay "prevailing wages" on public works projects funded by municipal funds despite the city's status as a charter city.  The trial court denied the petition, and the Court of Appeal affirmed, holding that  the prevailing wage law  "does not address matters of statewide concern and therefore Vista, as a charter city, is not required to comply with the [previling wage law] with respect to public works contracts which are financed soley from city revienues.  Rather, such contrcts are municipal affiars over which Vista has paramount power under article XI, section 5, subdivision (a) of the California Constitution."  
The California Supreme Court granted on August 19, 2009, the labor organization's petition for review and will decide the following issue:  Does California's prevailing wage law (Labor Code section 1720, et seq.) apply to a charter city when it contracts to construct public works projects with municipal funds?  Oral argument was conducted on April 4, 2012, and the court's decision is currently due on or before July 3, 2012.

Enforceability of Employer-Employee Arbitration Agreement.

In Wisdom v. Accentcare, Inc., the plaintiffs filed suit alleging a variety of alleged wage and hour violations, and the defendants moved to compel the plaintiffs to arbitrate their claims pursuant to an arbitration agreement and acknowledgment form included as part of the employment application the plaintiffs each initialed and signed.  The trial court denied the motion to compel arbitration based on its determination that the arbitration agreement was both procedurally and substantively unconscionable, and the Court of Appeal affirmed.  
The California Supreme Court granted on March 28, 2012, the defendants' petition for review and will decide the following issue: "Is an arbitration clause in an employment application that provides 'I agree to submit to binding arbitration all disputes and claims arising out of the submission of this application' unenforceable as substantively unconscionable for lack of mutuality, or does the language create a mutual agreement to arbitrate all such disputes?  (See Roman v. Superior Court (2009) 172 Cal.App.4th 1462.)"  The case is not yet fully briefed, and the court has not yet scheduled oral argument. 
We are monitoring each of the above cases, and we will report here any significant developments in those cases.

Thursday, April 12, 2012

What The California Supreme Court Decision In Brinker Likely Means For California Employers

By Christopher S. Andre and Scott K. Dauscher

Today, the California Supreme Court issued its long awaited decision in Brinker Restaurant Corporation v. Superior Court addressing employers' obligations to authorize and permit non-exempt employees to take required rest periods, employers' obligations  to provide to non-exempt employees required meal periods, and related issues concerning class action litigation of rest period claims, of meal period claims, and of "off-the-clock" work claims.  While the decision does bring welcome clarity to some of the issues, we think the decision leaves unanswered the important question of precisely what an employer must do to meet its obligation to "provide" required meal periods, and we think the decision is a mixed bag for employers in some respects. 
Rest Periods.
The decision provides welcome clarity regarding an employer's obligation to authorize and permit non-exempt employees to take at least one rest period of 10 minutes for each four hours of work "or major fraction thereof."  The court states, "[t]hough not defined in the [Industrial Welfare Commission] wage order[s], a 'major fraction' long has been understood--legally, mathematically, and linguistically--to mean a fraction greater than one-half."  According to the court, this means "[e]mployees are entitled to 10 minutes' rest for shifts from three and one-half to six hours in length, 20 minutes for shifts of more than six hours up to 10 hours, 30 minutes for shifts of more than 10 hours up to 14 hours, and so on."  
With respect to the timing of the 10-minute rest periods an employer must authorize and permit non-exempt employees to take, the court states, "[t]he only constraint on timing is that rest breaks must fall in the middle of work periods 'insofar as practicable."  The court goes on to explain "[e]mployers are thus subject to a duty to make a good faith effort to authorize and permit rest breaks in the middle of each work period, but may deviate from that preferred course where practical considerations render it unfeasible."  The court declined to state for purposes of a trial court's decision whether or not to certify for class treatment a rest period claim "what considerations might be legally sufficient to justify such a departure" from the general requirement "that rest breaks must fall in the middle of work periods."
Meal Periods. 
One of the core issues in the case was the issue of whether an employer's obligation to "provide" meal periods means an employer must make required meals periods available to non-exempt employees or means an employer must ensure non-exempt employees take the required meal periods made available to them.  The court concluded "an employer must relieve the employee of all duty for the designated period, but need not ensure that the employee does no work."  While that aspect of the decision is certainly welcome news for employers, the decision leaves unanswered what an employer must do to satisfy the employer's obligation to "relieve the employee of all duty."  The court states what must occur:  "Employers must afford employees uninterrupted half-hour periods in which they are relieved of any duty or employer control and are free to come and go as they please," but the court did not explain beyond that what an employer must do in the first instance in order to "relieve the employee of all duty." Indeed, the court states: "What will suffice may vary from industry to industry, and we cannot in the context of this class certification proceeding delineate the full range of approaches that in each instance might be sufficient to satisfy the law."
Core issues in the case related to an employer's obligation to "provide" required meal periods were the issues of when during the workday employers must "provide" the first meal period and whether, and if so, when during the workday employers must "provide" a second meal period. It has been widely believed that an employer is required to "provide" a second meal period only when a non-exempt employee works more than 10 hours in a workday and only after the tenth hour of work.  However, on account of language in the Industrial Welfare CommissionWage Orders stating "[n]o employer shall employ any person for a work period of more than five (5) hours without a meal period of not less than 30 minutes," the court considered  whether an employee who takes a meal period relatively early in his or her workday is entitled to a second meal period if an employee works 5 hours after taking an "early" meal period, even if the employee's workday does not exceed 10 hours.   In another welcome aspect of the decision, the court rejected the notion that employers are required to "provide" such "rolling" meal periods.  The court concluded Labor Code section 512 "requires a first meal period no later than the end of an employee's fifth hour of work, and a second meal period no later than the end of an employee's 10th hour of work," if an employee works more than 10 hours in a workday.  
"Off-The-Clock" Work.
Meal period claims are often accompanied by claims that employees worked "off-the-clock" and were not paid for time spent working before clocking in at the beginning of the workday, for time spent working during meal periods, and/or for time spent working after clocking out at the end of the workday. While the court's decision is in some ways not as favorable to employers as we would like regarding class certification issues related to meal and rest period claims, the court affirmed the Court of Appeal's decision to vacate the trial court's certification of the "off-the-clock" subclass because the court determined there was insufficient evidence presented to the trial court of a common policy or of a common method of proving the employer required or suffered or permitted employees to work "off-the-clock."  The court states:  On a record such as this, where no substantial evidence points to a uniform, companywide policy, proof of off-the-clock liability would have had to continue in an employee-by-employee fashion, demonstrating who worked off the clock, how long they worked, and whether [the employer] knew or should have known of their work."  Notably, the court states, also:  "[T]hat employees are clocked out creates a presumption they are doing no work, a presumption [plaintiff] and the putative class members have the burden to rebut." 
Today's decision further reinforces our belief that California employers can help to reduce their potential exposure to wage and hour liability and to defend against such claims by adopting and maintaining clear written policies consistent with California law, by requiring that non-exempt employees perform no work before clocking in or after clocking out, and by requiring that employees clock out during all required meal periods.

Wednesday, April 11, 2012

Long Awaited Decision In Brinker Meal Period Will Be Issued Tomorrow, April 12, At 10:00 A.M.

As we previously reported here, on July 22, 2008, in Brinker v. Superior Court, the California 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.  
Today, the California Supreme Court announced it will issue tomorrow, April 12, at 10:00 a.m., the Court's long awaited decision.
We expect the Court's decision will address at least two major issues: (1) whether an employer's obligation to "provide" required meal periods means to make required meal periods available to eligible employees (i.e., non-exempt employees) or to ensure that eligible employees take all required meal periods, and (2) whether "rolling" meal periods are required such that an employer that requires or permits an employee to take a meal period relatively early in the workday is required to "provide" a second meal period within 5 hours of the conclusion of the employee's first meal period even if the employee does not work more than 10 hours in a workday.
We will report on the decision shortly after it is issued tomorrow.  Stay tuned.  

Tuesday, April 3, 2012

Long Awaited Decision In Brinker Meal Period Case Appears To Be Immiment

As we previously reported here, on July 22, 2008, in Brinker v. Superior Court, the California 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 November 8, 2011, over three years after granting review, the California Supreme Court conducted the long awaited oral argument.  
In an unusual turn of events, on December 2, 2011, the court granted the request of the California Employment Law Council to submit an additional post-hearing amicus curiae or "friend of the court" brief addressing the issue of "rolling" meal breaks, which was raised during the November 8, 2011 oral argument.  The issue concerns when during the workday employers must "provide" the first meal period and whether, and if so, when during the workday employers must "provide" a second meal period.  It has been widely believed that an employer is required to "provide" a second meal period only when a non-exempt employee works more than 10 hours in a workday and only after the tenth hour of work.  However, on account of language in the Industrial Welfare Commission Wage Orders stating "[n]o employer shall employ any person for a work period of more than five (5) hours without a meal period of not less than 30 minutes," the court is now considering whether an employee who takes a meal period relatively early in his or her workday is entitled to a second meal period if an employee works 5 hours after taking an "early" meal period, even if the employee's workday does not exceed 10 hours. 
On December 14, 2011, the California Supreme Court issued an order permitting the parties to the case to file no later than January 13, 2012, answers to the  additional post-hearing amicus curiae brief submitted by the California Employment Law Council and permitting replies to any such answers to be filed no later than January 13, 2012.  In that same order, the California Supreme Court vacating "submission of the cause" and stating the case will be deemed resubmitted on January 13, 2012.  By that order, the court effectively extended the 90 day deadline for the court to issue its decision in the case from February 6, 2011 (i.e., 90 days after the close of the November 8, 2011 oral argument) to April 11, 2012.  
On January 13, 2012, the the California Supreme Court issued an order indicating the matter was submitted, meaning that a decision would issue within 90 days (i.e., on or before April 11, 2012).
To date, the Court has not taken any action suggesting a further delay of the decision.  It therefore appears the Court will issue its decision on April 11, 2012, or perhaps sooner.  
By way of a recap, we expect the Court's decision will address at least two major issues: (1) whether an employer's obligation to "provide" required meal periods means to make required meal periods available to eligible employees (i.e., non-exempt employees) or to ensure that eligible employees take all required meal periods, and (2) whether "rolling" meal periods are required such that an employer that requires or permits an employee to take a meal period relatively early in the workday is required to "provide" a second meal period within 5 hours of the conclusion of the employee's first meal period even if the employee does not work more than 10 hours in a workday.
Like many Californians, we are eagerly awaiting the Court's decision, and we will report on the decision very likely the day it is issued.  Stay tuned.  

Monday, April 2, 2012

AALRR Attorney Thomas Lenz’s Article on Social Media Featured in California Lawyer Magazine

AALRR Partner Thomas Lenz’s Article, ’Occupy’ at the Workplace, was featured in the April 2012 issue of California Lawyer in the magazine’s column on social media.  The article may be read here

Mr. Lenz heads the firm's Traditional Labor Law Department and has written here regularly regarding social media, the National Labor Relations Act, and other issues.