AALRR Labor & Employment Law Blog

Ninth Circuit Rejects NLRB's Order Reinstating Insubordinate Employee

2012-03-13T17:00:00.000-07:00

The National Labor Relations Board (NLRB) has developed a test for determining whether an employee who is engaged in activities which are protected by the National Labor Relations Act loses that protection by engaging in overly confrontational and inappropriate conduct toward his or employer. In the recent case of Plaza Auto Center v. NLRB, the Ninth Circuit Court of Appeals held that the NLRB misapplied this test in ordering an employee who engaged in such conduct to be reinstated to his job as a used car salesman in Yuma, Arizona.

The employee, Nick Aguirre, complained to management during his brief two month tenure at the used car dealership that he could not use a restroom or take meals during three day weekend “tent sales,” and that he was shortchanged a commission on a sale he made. He also complained at a group meeting attended by managers and salespeople that it would be unfair to deduct the repair costs of a damaged vehicle from the commissions of those salespeople who had no access to it. He later asked to be paid a “minimum wage draw,” and was told by a manager that he should work elsewhere if that is what he wanted.

Aguirre was terminated at the conclusion of a meeting of three managers, including owner Tony Plaza, on October 28, 2008 after he inquired about vehicle costs in connection with the calculation of his commission. Plaza told Aguirre that he was “talking a lot of negative stuff” that would negatively affect the sales force and was asking too many questions, to which Aguirre responded that he did have questions about his pay and commissions. Plaza told him that he should not be complaining about his pay and that if he did not trust the company he shouldn’t work there -- at which point Aguirre lost his temper and said to Plaza in a raised voice that he was a “f’ing mother f’ing,” a “f’ing crook,” and an a--hole.” Aguirre also told Plaza that he was stupid, that nobody liked him, and that he would regret firing him, whereupon he left.

In determining whether an employee loses their protection under the statute in these circumstances, the NLRB looks into the place and subject matter of the discussion as well as the nature of the employee’s outburst and whether it was provoked by the employer’s unfair labor practice. The Board found that Aguirre did not lose the protection of the Act based on the application of all four factors. With respect to the third factor, the Board stated that although Aguirre’s conduct was personally denigrating, it was not accompanied by actual or threatened physical harm and therefore did not justify his discharge. However, the Ninth Circuit disagreed and remanded the case to the NLRB to reconsider its ruling, in light of the fact that obscene, degrading, and insubordinate comments may result in the loss of protection even in the absence of a threat of physical harm.

This case is a good reminder that although the law provides a great degree of protection to employees who complain of wages, hours and working conditions on behalf of themselves and co-workers, there is a limit to the kind of behavior they may legitimately engage in when making such complaints.

California Partners with Department of Labor to Combat Independent Contractor Misclassification

2012-03-06T15:54:00.000-08:00

By Jonathan Judge and Kristen N. Silverman

On February 9, 2012, the federal Department of Labor (“DOL”) and the California Secretary of Labor announced a collaborative relationship between the agencies to target independent contractor misclassification. The DOL and the California Secretary of Labor signed a memorandum of understanding that touts the agencies’ focused “efforts on protecting the rights of employees.”

As previously reported here, the misclassification of employees presents substantial consequences for employers and is a growing concern in light of the new law and ramped-up agency enforcement efforts. Misclassification of independent contractors may result in liability for failure to provide FMLA leave, liability for unpaid Unemployment Insurance contributions, and liability for failure to pay overtime and minimum wage pay, among other consequences. For example, in its press release, the DOL announced that in 2011, it collected more than $5 million in back wages for minimum wage and overtime violations under the Fair Labor Standards Act (“FLSA”) that resulted from employees being misclassified as independent contractors.

The agencies’ announcement comes at the heels of legislation recently promulgated that increases the penalties for independent contractor misclassification. As previously reported here, Governor Brown signed into law Senate Bill 459 last year which imposes significant penalties for willful misclassifications of independent contractors. Under the new law, penalties range from $5,000 to $25,000 for each violation, and increase to between $10,000 and $25,000 in cases where a pattern or practice of misclassification is found. In addition, employers who are found to have violated this new law may be ordered to post a notice (in the workplace or on its website) to employees and the public for up to one year informing them of the violation.

Employers should expect to see increased scrutiny of independent contractor agreements from government agencies, as California is just the latest state to partner up with the DOL. Colorado, Connecticut, Hawaii, Illinois, Maryland, Massachusetts, Minnesota, Missouri, Utah and Washington signed similar agreements with the DOL.

In light of these recent developments, employers should evaluate the use of independent contractors in an environment of heightened enforcement efforts by the government and increased scrutiny from plaintiffs’ attorneys, and review their independent contractor relationships for potential misclassifications

Proposed Rules To Implement Family And Medical Leave Act Amendments Would Effectively Make More Employees Eligible For Family And Medical Leave Act Leaves Of Absence

2012-02-24T10:42:00.000-08:00

By Kristen N. Silverman

Recently, the United States Department of Labor, Wage and Hour Division, approved a Notice of Proposed Rulemaking to implement Family and Medical Leave Act (FMLA) amendments that, among other things, broaden the military family leave provisions and incorporate new eligibility requirements for airline flight crew employees. Comments to the proposed rule are due 60 days after its publication in the Federal Register.

Under the FMLA, eligible employees of covered employers are entitled to take unpaid, job-protected leave for specified family and medical reasons. Recently, the FMLA was amended by the National Defense Authorization Act for Fiscal Year 2010 (FY 2010 NDAA) and the Airline Flight Crew Technical Corrections Act (AFCTCA). According to the Department of Labor, the proposed amendments attempt to align the existing FMLA regulations with these recent statutory amendments.

In effect, the amendments broaden the FMLA’s military family leave coverage. According to the notice of Proposed Rulemaking, eligible employees will be entitled to take FMLA leave to care for a covered veteran with a serious injury or illness, including any preexisting conditions. Also, eligible employees with family members serving in the Regular Armed Forces will be entitled to take qualifying exigency leave if such family member is deployed to a foreign country. Prior to these amendments, exigency leave was limited to family of Reserve and National Guard members.

Additionally, the amendments include new eligibility requirements for airline flight crewmembers and flight attendants. Under existing FMLA provisions, many pilots’ and flight attendants’ unique work schedules fail to qualify them for FMLA leave. Under the Notice of Proposed Rulemaking, an airline flight crew employee will now meet the FMLA hours of service eligibility requirement if he or she has worked or been paid for not less than 60 percent of the applicable total monthly guarantee and has worked or been paid not less than 504 hours during the previous 12 months.

In general, the proposed amendments effectively entitle more employees to FMLA leave. Employers should make certain their leave policies comply with current law to ensure that protected leaves are not inadvertently denied to eligible employees. For more information on the proposed rule, click here.

U.S. Supreme Court Allows Worker Retention Rules To Stand

2012-01-26T15:05:00.000-08:00

By Thomas A. Lenz

On January 23, 2012, the Supreme Court of the United States declined review of local ordinance language requiring supermarkets to keep their workforce for 90 days when a new owner takes over the business. Such ordinance language has become commonplace, for example, with hotel and other service industries specified by ordinance in some Bay Area cities. Contractors performing federal work face similar requirements when they take over a contract from another contractor and must inherit the predecessor's workforce.

Proponents of these rules assert continuity, efficiency, and experience of the workforce are beneficial to the community. Opponents of the measures argue that the rules are devices meant to protect unions and union members in the event of a sale. In particular, successorship rules under labor law apply and can force a purchaser into union obligations if the purchaser hires a majority of the seller's union-represented employees.

Expect that the Supreme Court's denial of certiorari in the case of California Grocers Association v. Los Angeles, Supreme Court Case Number 11-615, will prompt further local rules like the ordinances at issue and create heightened need for due diligence as businesses look at purchase and sale strategies.

Is Your Company Complying With The New Notice And Recordkeeping Requirements Of the California Wage Theft Prevention Act Of 2011?

2012-01-03T16:45:00.000-08:00

By Christopher S. Andre and Scott K. Dauscher

As we previously reported 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. Some of the new requirements now in effect that require action on the part of affected employers are as follows:

1. 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.

2. 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.

3. 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." A template of the required notice provided by the Division of Labor Standards Enforcement is available for downloading by clicking here.

We will continue to provide updates here regarding the new legislation affecting California employers.

California Supreme Court Delays Decision In Long Awaited Brinker Meal Period Case

2011-12-27T13:35:00.000-08:00

By Christopher S. Andre and Scott K. Dauscher

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.

We are continuing to monitor this important case, and will report on further developments as information becomes available.

National Labor Relations Board Postpones Required Notice Posting Date to April 30, 2012 at Request of Court

2011-12-23T12:02:00.000-08:00

By Jonathan Judge and Thomas A. Lenz

As previously reported here, in late August, the National Labor Relations Board confirmed the approval of a final rule which requires all employers under NLRB jurisdiction to post a Notice which will inform employees of their rights under the National Labor Relations Act. Today, the NLRB agreed to postpone the date employers will be required to post this notice from January 31, 2012 to April 30, 2012. The postponement came at the request of a federal court in Washington D.C. that is hearing legal challenges to the rule. The NLRB stated that the postponement should facilitate the resolution of such legal challenges that have been filed with respect to the rule.

The poster, which can be viewed here, notifies employees of their rights under the NLRA, which include:

The right to form and join unions;
The right to engage in concerted activities concerning employees' wages, hours, and working conditions;
The right to make requests for changes in wages, hours, and working conditions,
The right to strike and withhold services because of a dispute on wages, hours, and working conditions;
The right to make complaints or urge other employees to action on wages, hours, and working conditions (through workplace conversation or social media posts, for example); and
The right to refrain from such activities.

The NLRB's announcement buys more time for private sector employers to seek guidance on how this new rule will impact their business and communications with employees.

California Supreme Court Accepts Post Hearing Additional Briefing In Pending Brinker Meal Period Case: Will The Court Require "Rolling" Meal Periods?

2011-12-07T15:14:00.000-08:00

By Christopher S. Andre and Scott K. Dauscher

On November 8, 2011, over three years after granting review, the California Supreme Court conducted the long awaited oral argument.

Suffice it to say it would be a stunning development if the court holds employers are required to "provide" such "rolling" meal periods. Such a holding would potentially expose California employers to truly unanticipated potential liability for penalties for failing to "provide" a second meal period even when an employee does not work more than 10 hours in a workday and would further compromise employers' ability to provide employees flexibility as to when meal periods take place.

We are continuing to monitor this case, and will report on further developments as information becomes available.

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

2011-11-18T18:14:00.000-08:00

By Christopher S. Andre and Scott K. Dauscher

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.

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

2011-11-08T18:20:00.000-08:00

By Christopher S. Andre and Scott K. Dauscher

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."

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

2011-11-07T14:16:00.000-08:00

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.

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"?

2011-11-07T13:32:00.000-08:00

By Christopher S. Andre and Scott K. Dauscher

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.

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

2011-11-02T12:15:00.000-07:00

By Christopher S. Andre and Scott K. Dauscher

As we previously reported here, the 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.)

Fair Employment and Housing Commission Orders Airline To Pay Over $325,000 For Failing To Accomodate A Customer Service Agent's Disability

2011-10-26T13:59:00.000-07:00

By Christopher S. Andre and Scott K. Dauscher

Today, the California Department of Fair Employment and Housing issued a press release announcing the California Fair Employment and Housing Commission ordered an airline to pay over $325,000 to and to reinstate a former employee employed as a customer service agent based on the Commission's findings that the airline failed to reasonably accommodate the former employee's disability. A copy of the Commission's order stating its findings and determinations can be viewed by clicking here.

As previously reported here, in our experience, cases alleging an employer's failure to accommodate an employee's disability or medical condition are on the rise both administratively (i.e., DFEH actions like the one discussed above) and by way of private lawsuits filed by current or former employees. Employers should use caution when terminating or otherwise disciplining an employee with a known disability or medical condition to make certain that the termination or other discipline does not run afoul of applicable California law, which is often quite favorable to employees. Employees with disabilities or medical conditions can lawfully be disciplined or even terminated, but employers should proceed with caution.

California Labor Commissioner Issues $499,000 Citation For Non-Compliant Wage Statements

2011-10-21T14:42:00.000-07:00

By Christopher S. Andre and Scott K. Dauscher

As we previously reported here, failing to comply with the requirements of Labor Code section 226 regarding the information that must be contained on wage statements (aka check stubs) can create significant liability for California employers. In defending numerous wage and hour class action lawsuits, one thing is constant. Such lawsuits nearly always include allegations that the employer failed to provide employees with wage statements that comply with Labor Code section 226, which specifies nine items of information that must be stated on each wage statement. Such allegations take one or both of the following forms: (1) allegations that the employer did not pay employees for all hours worked and, therefore, failed to comply with the requirement of Labor Code section 226(a)(2) that wage statements show all hours worked and/or (2) allegations that the employer's wage statements fail to comply with the requirements of Labor Code section 226(a) in some other respect, such as failing to include the full name and address of the legal entity that is the employer as required by Labor Code section 226(a)(8).

It is not hard to understand why plaintiff attorneys pursue claims for allegedly non-compliant wage statements -- the awards of penalties and attorney's fees can be very substantial. Labor Code section 226(e) states that an employee "suffering injury as a result of a knowing and intentional failure by an employer" to comply with Labor Code section 226(a) is entitled to recover the greater of his or her actual damages or $50.00 for the initial pay period in which a violation takes place and $100 "per employee for each violation in a subsequent pay period" up to $4,000.00 per employee. Plaintiff attorneys typically also seek additional penalties under the California Labor Code Private Attorneys General Act of 2004, which provides for penalties of $100.00 "for each aggrieved employee per pay period for the initial violation" and $200.00 "for each aggrieved employee per pay period for each subsequent violation."

Further, it is not just private attorneys seeking such penalties. As we previously reported here, we think federal and state agencies charged with enforcement of federal and state employment laws have taken a more aggressive enforcement posture. For example, in a recent press release, the California Department of Industrial Relations announced that Labor Commissioner Julie Su issued a $499,000 citation to an employer of warehouse workers for allegedly failing to issue compliant wage statements. Among other things, Sue stated as follows in the press release: "California law also requires that all employees receive wage statements that explain the basis for their paycheck. This is to help workers identify if they've been cheated out of their hard-earned wages. Proper wage statements were not provided to these workers." Less than a week later, the companies targeted by the Department of Industrial Relations were served with a private class action lawsuit.

California employment law enforcement agencies have recently made it a point to tout such enforcement actions. As we previously reported here, in a press released issued September 12, 2011, the California Department of Fair Employment and Housing touts an administrative award of $846,300 against an employer for allegedly failing to accommodate an employee's medical condition and for allegedly terminating the employee "relying on [an] insufficient travel pretext." As previously reported here, on September 29, 2011, the Department of Industrial Relations issued a press release touting the filing of a lawsuit seeking damages and penalties in excess of $17 Million against ZipRealty for alleged wage and hour violations.

The good news is the risk of being subjected to such awards of penalties and attorney's fees on account of non-compliant wage statements is generally easily avoided. We recommend that employers consult competent employment counsel and take the appropriate steps to make certain that their employees are paid for all hours worked and that the wage statements issued to their employees comply with the requirements of Labor Code section 226.

California Supreme Court Denies Review Of Decision Holding PAGA Waivers Are Unenforceable

2011-10-20T15:27:00.000-07:00

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. Plaintiffs bringing class action wage and hour lawsuits now routinely include allegations that their claims fall under PAGA.

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 a provision of that arbitration agreement barring employees from pursuing representative actions under PAGA is unenforceable because, according to that court, the decision of Supreme Court of the United States in AT&T Mobility v. Concepcion does not apply to representative actions brought under PAGA. Further, the Court of Appeal remanded the case back to the trial court for a determination of whether the arbitration agreement is enforceable except for the PAGA waiver or is unenforceable in its entirety because of the PAGA waiver.

Yesterday, 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. We think this is a significant setback for California employers because, to date, the only reported decision by a California appellate court regarding the enforceability of a PAGA waiver is the Brown v. Ralph's Grocery Company decision holding that PAGA waivers are not enforceable.

Federal courts are currently split as to whether PAGA waivers are enforceable. For example, a number of United States District Courts have concluded PAGA waivers are enforceable. On June 16, 2011, in Quevedo v. Macy's, Inc., the United States District Court for the Western Division of the Central District of California concluded that PAGA waivers are enforceable. On August 18, 2011, in Nelson v. AT&T Mobility LLC., the United States District Court for the Northern District of California agreed with the conclusion of the court in Quevedo v. Macy's. On September 19, 2011, in Grabowski v. C.H. Robinson Company.the United States District Court for the Southern District of California likewise held PAGA waivers are enforceable. However, more recently, on October 5, 2011, in in Urbino v. Orkin Services of California, Inc., the United States District Court for the Southern Division of the Central District of California denied the employer's petition to compel the plaintiff former employee to arbitrate his claims, including his claims for penalties under PAGA on the ground the PAGA waiver contained in an arbitration agreement the former employee signed at the outset of his employment is unconscionable because it is contrary to California public policy and rendered the arbitration agreement unenforceable. The court explained its view that the right to bring a representative action on behalf some or all of an employer's allegedly "aggrieved" employees cannot be waived by an employee as part of an arbitration agreement or otherwise. The court concluded, also, that "the waiver in [arbitration] Agreement . . . taints the entirety of the Agreement with illegality" and renders the Agreement unenforceable in its entirety.

In light of the somewhat uncertain state of the law created by the split of authority on this issue, we think employers that have in place or are considering implementing arbitration agreements containing PAGA waivers should promptly consult competent employment law counsel.

Failure To Comply With California Workplace Seating Requirements Puts Employers At Risk

2011-10-18T14:05:00.000-07:00

By Christopher S. Andre and Scott K. Dauscher

Most employers in California are subject to the workplace seating requirements contained in the Industrial Welfare Commission Wage Orders, which regulate wages, hours, and working conditions in specified industries and as to specified occupations. Wage Orders 1-13 and 15 all contain the following seating requirements:

(A) All working employees shall be provided with suitable seats when the nature of the work reasonably permits the use of seats.

(B) When employees are not engaged in the active duties of their employment and the nature of the work requires standing, an adequate number of suitable seats shall be placed in reasonable proximity to the work area and employees shall be permitted to use such seats when it does not interfere with the performance of their duties.

Those requirements are somewhat relaxed as to employees employed in agricultural occupations and as to certain occupations in the construction, drilling, logging, and mining industries. Wage Order 14, which governs persons employed in an agricultural occupation, requires that "[w]hen the nature of the work reasonably permits the use of seats, suitable seats shall be provided for employees working on or at a machine." Wage Order 16, which governs certain occupations in the construction, drilling, logging, and mining industries, states, "[w]here practicable and consistent with applicable industry-wide standards, all working employees shall be provided with suitable seats when the nature of the process and the work performed reasonably permits the use of seats."

The penalties for seating violations can be very substantial. As we previously reported here, in Bright v. 99¢ Only Stores (2010) 189 Cal.App.4th 1472, the California Court of Appeal held an employee may seek California Labor Code Private Attorneys General Act of 2004 ("PAGA") penalties for alleged violations of an IWC wage order requirement that employers provide employees suitable seats. The court rejected the employer's argument that PAGA penalties are available only for violations of wage payment laws and concluded such penalties are available for violation of nonwage labor standards contained in the IWC's wage orders. The plaintiff in the case, Eugenia Bright, alleged 99¢ Only Stores violated Section 14 of Wage Order 7-2001 stating all working employees “shall be provided with suitable seats when the nature of the work reasonably permits” such use. She sought civil penalties under Labor Code section 1198, stating the employment of any employee “under conditions prohibited by” IWC wage orders is unlawful. The court held civil penalties available under PAGA, consisting of $100 per each "aggrieved employee" per pay period for the first violation and $200 per "aggrieved" employee per pay period for each subsequent violation, could be recovered because no other penalties for violating the seating requirements were provided by law. As we previously reported here, In Home Depot U.S.A., Inc. v. Superior Court (2010) 191 Cal.App.4th 210, which also involved the provisions of Wage Order 7-2001 stating the all working employees “shall be provided with suitable seats when the nature of the work reasonably permits” such use, the California Court of Appeal again held PAGA penalties can be awarded for violations of IWC wage orders. In so holding, the court rejected Home Depot's contention that PAGA penalties are not available for violation of the wage order because PAGA penalties are available for violations of the Labor Code "except those for which a civil penalty is specifically provided," and the wage order contains its own civil penalty provisions (in lesser amounts than those provided by PAGA). In response to that argument, the court held Wage Order 7-2001 does not specifically provide a civil penalty for violation of the wage order's seating requirements. Further, the court noted that the civil penalty provision of the wage order states its penalties are "'[i]n addition to any other civil penalties provided by law,'" which the court interprets to mean the the wage order "does not purport to establish a comprehensive scheme of penalties for violations of the wage order."

In light of the increasingly frequency of class action lawsuits alleging seating requirement violations, it is especially important that employers make certain they are in compliance with the seating requirements contained in the IWC wage orders. Such compliance review should include in most instances looking at both whether the nature of an employee's work would reasonably permit the use of a seat while working and whether the nature of the work would reasonably permit the employee to use a seat when not engaged in active duties during the workday. The penalties and attorney's fees can be quite substantial, and we believe most courts would conclude that the nature of the work reasonably permits the use of seats in many instances.

U.S. District Court Invalidates Arbitration Agreement Containing A PAGA Waiver

2011-10-13T13:55:00.000-07:00

By Christopher S. Andre and Scott K. Dauscher

As we previously reported here, on July 12, 2011, 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 the California Labor Code Private Attorneys General Act of 2004 ("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. Further, the Court of Appeal remanded the case back to the trial court for a determination of whether the arbitration agreement is enforceable except for the PAGA waiver or is unenforceable in its entirety because of the PAGA waiver.

On October 5, 2011, in in Urbino v. Orkin Services of California, Inc., the United States District Court for the Southern Division of the Central District of California denied the employer's petition to compel the plaintiff former employee to arbitrate his claims, including his claims for penalties under PAGA on the ground the PAGA waiver contained in an arbitration agreement the former employee signed at the outset of his employment is unconscionable because it is contrary to California public policy and rendered the arbitration agreement unenforceable. The court explained its view that the right to bring a representative action on behalf some or all of an employer's allegedly "aggrieved" employees cannot be waived by an employee as part of an arbitration agreement or otherwise. The court concluded, also, that "the waiver in [arbitration] Agreement . . . taints the entirety of the Agreement with illegality" and renders the Agreement unenforceable in its entirety.

The decision in Urbino if left undisturbed by higher courts is a further setback for California employers, particularly if other United States District Courts follow its reasoning. 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. 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. Further, as we previously reported here and here, California courts hold that PAGA penalties apply, also, to violations of Industrial Welfare Commission Wage Orders.

The issue of whether an employer can as part of an arbitration agreement require employees to waive their rights to bring PAGA claims seeking the substantial penalties available under PAGA for violations of the Labor Code and/or for violations of Industrial Welfare Commission wage orders seems destined to be further addressed by other appellate courts. Although California courts have not split on the issue, there is now a split among the United States District Courts. For example: on June 16, 2011, in Quevedo v. Macy's, Inc., the United States District Court for the Western Division of the Central District of California reached a different result and concluded that PAGA waivers are enforceable. On August 18, 2011, in Nelson v. AT& T Mobility LLC., the United States District Court for the Northern District of California agreed with the conclusion of the court in Quevedo v. Macy's. On September 19, 2011, in Grabowski v. C.H. Robinson Company, the United States District Court for the Southern District of California likewise held PAGA waivers are enforceable.

In the meantime, in light of the somewhat uncertain state of the law created by the split of authority on this issue, we think employers that have in place or are considering implementing arbitration agreements containing PAGA waivers should promptly consult competent employment law counsel.

Governor Brown Signs Bill Further Restricting Use Of Consumer Credit Checks For Employment Purposes

2011-10-12T14:39:00.000-07:00

By Andres C. Hurwitz and Christopher S. Andre

Many California employers conduct consumer credit checks as part of the applicant screening process. The federal Fair Credit Reporting Act and the California Consumer Reporting Agencies Act regulate that process by, among other things, requiring employers to notify job applicants in writing that the employer intends to conduct a consumer credit check, requiring employers to obtain from applicants written authorization to conduct the consumer credit check, and to provide applicants with a copy of any consumer credit reports obtained before taking any adverse action based on the contents of such a report.

On October 9, 2011, Governor Brown signed Assembly Bill 22, which will further restrict employers’ use of consumer credit checks for employment purposes beginning on January 1, 2012. The new law will amend section 1785.20.5 of the California Civil Code and add section 1024.5 to the California Labor Code.

Beginning January 1, 2012, unless the employer is a specified financial institution, an employer or prospective employer may not use a consumer credit report for any employment purpose unless the job position of the position for whom the report is sought is one of the following:

1. A “managerial position.” The new law defines that term as “an employee covered by the executive exemption set forth in Wage Order 4 of the Industrial Welfare Commission.” On its face, this permitted use appears to apply only to persons covered by Industrial Welfare Commission Wage Order 4-2001, which applies to “persons employed in professional, technical, clerical, mechanical, and similar occupations.” There are currently 17 IWC Wage Orders that, depending on the Wage Order, apply either to a specified industry or to specified occupations.

2. A position in the California Department of Justice.

3. A sworn peace officer or other law enforcement position.

4. “A position for which the information contained in the report is required by law to be disclosed or obtained.”

5. “A position that involves regular access, for any purpose other than the routine solicitation and processing of credit card applications in a retail establishment, to all of the following types of information of any one person: (A) Bank or credit card account information, (B) Social security number, (C) Date of birth.”

6. “A position in which the person is, or would be, any of the following: (A) A named signatory on the bank or credit card account of the employer. (B) Authorized to transfer money on behalf of the employer. (C) Authorized to enter into financial contracts on behalf of the employer.”

7. “A position that involves access to confidential or proprietary information. . . .”

8. “A position that involves regular access to cash totaling ten thousand dollars . . . during the workday.”

Beginning January 1, 2012, in order to use a consumer credit report for one of the seven permitted uses, the employer must also comply with the new disclosure requirements of the new law. Most notably, as part of the disclosure and authorization process, before requesting a consumer credit report for employment purposes, the employer must provide to the employee or job applicant written notice that a report will be used and identify specifically which of the seven permitted uses is the basis for obtaining the consumer credit report, must inform the employee or job applicant of the source of the report, and must include in the written notice a box the employee or job applicant can check to receive a copy of the report to be obtained.

Further, if employment is denied in whole or in part on account of information contained in a consumer credit report, the employer must so notify the person subject to the adverse decision and provide the name and the address of the consumer credit reporting agency that supplied the report.

Pro-employer groups have often resisted this type of legislation, taking the position that the information available in a credit report can prove valuable in assessing whether a prospective employee would be a good hire. The plaintiff bar and pro-employee groups, on the other hand, have often argued that the information in credit reports is invades rights to privacy, and in a challenging economy individuals may have credit blemishes unrelated to bad habits.

Regardless of the merits, AB 22 has been passed and will become effective January 1, 2012. Other than specified financial institutions, employers will not be permitted to obtain consumer credit checks for employment purposes unless the employer can specifically identify one of the seven permitted uses, and employers subject to AB 22 (i.e., most employers) must comply with the various written notice requirements. In light of the existing complexities associated with employers’ use of consumer credit reports and the new requirements of AB 22, employers should consider consulting with competent employment counsel before obtaining consumer credit reports for employment purposes.

GOVERNOR BROWN SIGNS EMPLOYMENT-RELATED BILLS ADDRESSING CREDIT REPORTS, GENDER DISCRIMINATION, E-VERIFY, AND PREGNANCY LEAVE TO CONCLUDE 2011 LEGISLATIVE SESSION

2011-10-10T13:49:00.000-07:00

by Jonathan Judge, Robert R. Roginson, and Paul S. Fleck

The 2011 California legislative season closed on October 9, 2011, with the Governor signing numerous bills affecting employers and employment law. Among the bills the Governor signed are bills greatly limiting the use of consumer credit reports by employers, expanding the definition of gender under state discrimination laws, prohibiting local governments from requiring use of E-Verify except were required by federal law, and requiring employers to pay for health insurance coverage during the entire period of pregnancy disability leave. The Governor also vetoed several bills, including those addressing pay cards and mandated bereavement leave. Below is a summary of the employment-law-related bills that were signed or vetoed by the Governor.

Signed bills:

AB 22 (Mendoza) Consumer Credit Reports - This bill prohibits an employer or prospective employer, with the exception of certain financial institutions, from obtaining a consumer credit report, for employment purposes unless the position of the person for whom the report is sought is (1) a position in the state Department of Justice, (2) a managerial position, (3) that of a sworn peace officer or other law enforcement position, (4) a position for which the information contained in the report is required by law to be disclosed or obtained, (5) a position that involves regular access to personal information for any purpose other than the routine solicitation and processing of credit card applications in a retail establishment, (6) a position in which the person is or would be a named signatory on the employer’s bank or credit card account, or authorized to transfer money or enter into financial contracts on the employer’s behalf, (7) a position that involves access to confidential or proprietary information, or (8) a position that involves regular access to $10,000 or more of cash.

AB 240 (Bonilla) Wage Recovery: Liquidated Damages - This bill permits an employee to recover liquidated damages pursuant to a complaint brought before the Labor Commissioner alleging payment of less than the minimum wage.

AB 243 (Alejo) Labor Contractors - This bill requires farm labor contractors to disclose in the itemized wage statement the name and address of the legal entity that secured the employer’s services.

AB 436 (Solorio) Prevailing Wages - This bill clarifies a law enacted in 2009 (SBX2-9), which funded prevailing wage enforcement at the Department of Industrial Relations with fees paid from bond proceeds used for public construction projects. AB 436 narrows SBX2-9, specifying that fees tied to projects can be used only to enforce and monitor prevailing wage laws on the specific project. In addition, the new law exempts projects operating under Project Labor Agreements (“PLAs”) from such fees, which may create an incentive for local governments to enter into PLAs.

AB 469 (Swanson) Wages: Civil Penalties - This bill provides that in addition to being subject to a civil penalty, any employer who pays or causes to be paid to any employee a wage less than the minimum fixed by an order of the Industrial Welfare Commission shall be subject to paying restitution of wages to the employee. This bill extends the period within which the Division of Labor Standards Enforcement may commence a collection action from one (1) year to three (3) years. This bill requires an employer to provide each employee, at the time of hiring, with a notice that specifies the rate and the basis of pay and to notify each employee in writing of any changes to the information set forth in the notice within seven (7) calendar days of the changes unless such changes are reflected on a timely wage statement or another writing.

AB 514 (Hernandez) Prevailing Wages: Hauling Refuse - This bill includes in the definition of “hauling of refuse” the hauling of specified materials other than certain recyclable metals, thereby expanding the definition of “public works” and thus requiring the payment of prevailing wages for that activity.

AB 551 (Campos) Prevailing Wages: Penalties - This bill increases the maximum penalty from $50 to $200 for each calendar day and increases the minimum penalty except in certain cases of a good faith mistake from $10 to no less than $40 for each calendar day for violations of prevailing wage provisions. The bill also increases the penalty assessed to contractors and subcontractors with prior violations from $20 to $80, and from $30 to $120 for willful violations. This bill increases the amount the penalty from $25 to $100 for each calendar day for each worker to provide certified payroll records following a written request for such records.

This bill provides that contractors or subcontractors on a public works project that are found to have committed two (2) or more separate willful violations within a three (3) year period be debarred up to three (3) years. The bill also subjects contractors and subcontractors to debarment of one (1) to three (3) years if certified payroll records are not produced within 30 days after receipt of the written notice from the Division of Apprenticeship Labor Standards Enforcement, Division of Apprenticeship Standards, or the awarding body.

AB 587 (Gordon) Public Works/Volunteers - This bill extends the repeal date to January 1, 2017, for the law that exempts specified work performed by a volunteer, a volunteer coordinator, or a member of the California Conservation Corps or a community conservation corps from public works provisions.

AB 592 (Lara) Leaves - This bill formally recognizes that it is an unlawful employment practice for an employer to interfere with any right provided to an employee under the California Family Rights Act or Pregnancy Disability Leave law.

AB 766 (Monning) Public Works - This bill requires nonredacted copies of certified payroll records to be provided, upon request, to any agency included in, and for the purposes of, the Joint Enforcement Strike Force on the Underground Economy, or to any law enforcement agency.

AB 887 (Atkins) Gender Discrimination - This bill makes changes to state discrimination law by refining the definition of gender to include a person’s gender identity and gender expression. Gender expression would be defined as meaning a person’s gender-related appearance and behavior whether or not stereotypically associated with the person’s assigned sex at birth.

AB 1236 (Fong) Use of E-Verify - The bill prohibits the state, a city, county, or special district, from requiring an employer other than one of those government entities to use an electronic employment verification system (E-Verify) except when required by federal law or as a condition of receiving federal funds.

AB 1396 (Committee On Labor & Employment) Commissions Agreements - This bill requires all employers, within the state, or from out-of-state, to enter into written contracts of employment where commissions are a method of payment with the employee for services rendered in the state.

SB 126 (Steinberg) Agricultural Labor Relations - This bill revises election, bargaining, and unfair labor practice procedures before the Agricultural Labor Relations Board.

SB 136 (Yee) Prevailing Wages: Energy - This expands the definition of “public works,” to include any construction, alteration, demolition, installation, or repair work done under private contract where the following conditions exist: (a) The work is performed in connection with the construction or maintenance of renewable energy generating capacity or energy efficiency improvements; (b) The work is performed on the property of the state or a political subdivision of the state; and (c) Either of the following conditions exists: (1) More than 50 percent of the energy generated is purchased or will be purchased by the state or a political subdivision of the state; or (2) The energy efficiency improvements are primarily intended to reduce energy costs that would otherwise be incurred by the state or a political subdivision of the state.

SB 272 (DeSaulnier) Leave of Absence: Organ Donation - This bill provides that the days of leave for purposes of bone marrow and organ donation leave are business days rather than calendar days, and that the one-year period is measured from the date the employee’s leave begins and consists of 12 consecutive months. This bill also provides that such a leave of absence is not a break in the employee’s continuous service for the purpose of his or her right to paid time off. This bill further provides that the employer may condition the initial receipt of leave upon the employee’s use of earned but unused days for paid time off. Additionally, the bill states that it is declaratory of existing law.

SB 299 (Evans) Pregnancy Leave - This bill prohibits an employer from refusing to maintain and pay for coverage under a group health plan for an employee who takes Pregnancy Disability Leave.

SB 459 (Corbett) Independent Contractors - This bill prohibits willful misclassification of individuals as independent contractors. The bill also authorizes the Labor Commissioner to assess civil and liquidated damages against a person or employer based on a determination that the person or employer violated these prohibitions.

SB 559 (Padilla) Discrimination: Genetic Information - This bill prohibits discrimination under the Fair Employment and Housing Act and Unruh Civil Rights Act on the basis of genetic information.

SB 757 (Lieu) Health Insurance Plan Discrimination - This bill prohibits group health insurance plans or policies from discriminating in coverage between spouses or domestic partners of a different sex and spouses or domestic partners of the same sex.

SB 922 (Steinberg) Project Labor Agreements - This bill requires local governments or public entities that have passed ordinances banning PLAs for public construction projects to repeal such rules or lose state funding for state-involved projects. This bill also establishes requirements for PLAs to include provisions addressing prohibitions against discrimination, open bidding for union and non-union contractors, drug testing, guarantees against strikes, lock-outs and other similar disruptions, and arbitration of disputes.

Vetoed bills:

AB 267 (Swanson) Employment Contracts - This bill would have made void and unenforceable as against public policy any provision in an employment contract that requires an employee, as a condition of obtaining or continuing employment, to use a forum other than California, or to agree to a choice of law other than California law, to resolve any dispute with an employer regarding employment-related issues that arise in California.

AB 325 (Lowenthal) Bereavement Leave - This bill would have allowed for four 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.

SB 104 (Steinberg) Labor Representatives: Elections - This bill would have permitted agricultural employees, as an alternative procedure, to select their labor representatives by submitting a petition to the board accompanied by representation cards signed by a majority of the bargaining unit.

SB 931 (Evans) Payroll Cards - This bill would have formally authorized employers to pay employees’ wages by means of payroll cards under the California Labor Code. According to the Governor’s veto message, while pay cards are used by thousands of California employees and employers, this bill would have imposed numerous and costly new requirements on pay card providers, which may likely have resulted in banks and employers stopping to offer such services.

Supreme Court of the United States Vacates $ 7.7 Million Class Action Verdict Against Employer Based On The Court's Decision In Wal-Mart Stores, Inc. v. Dukes

2011-10-06T14:33:00.000-07:00

By Christopher S. Andre and Scott K. Dauscher

Yesterday, the Supreme Court of the United States summarily disposed of the petition for a writ of certiori filed by Chinese Daily News, Inc., challenging the decision of the Ninth Circuit Court of Appeals affirming a $7.7 Million class action wage and hour verdict against Chinese Daily News. In a summary disposition, the Supreme Court granted the petition for certiori, vacated the judgment, and remained the case back to the Ninth Circuit for further consideration in light of the Supreme Court's landmark decision in Wal-Mart Stores, Inc. v. Dukes.

We will report further on this development once the Ninth Circuit Court of Appeals has acted.

California Supreme Court Sets Brinker Meal Period Case For Oral Argument

2011-10-06T14:28:00.000-07:00

By Christopher S. Andre and Scott K. Dauscher

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.

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 November 8, 2011.

NLRB Delays New Posting Requirement to January 31, 2012:

2011-10-05T12:52:00.000-07:00

By Jonathan Judge

As previously reported here, in late August, the National Labor Relations Board confirmed the approval of a final rule which requires all employers under NLRB jurisdiction to post a Notice which will inform employees of their rights. Today, the NLRB issued a press release announcing that the date employers will be required to post the notice will be postponed to January 31, 2012 from November 14, 2011. The postponement follows pushback from businesses and trade organizations after the final rule was published. The NLRB states that more time is needed for enhanced education and outreach to employers, especially small and medium sized businesses. The full press release may be read here.

The NLRB's announcement buys more time for private sector employers to seek guidance on how this new NLRB rule will impact their business and communications with employees.

NLRB Administrative Law Judge's Ruling on Employee Social Media Postings and Employer Policies A Sign of Things to Come

2011-10-03T12:04:00.000-07:00

By Jonathan Judge and Thomas A. Lenz

As previously reported here earlier this year, the National Labor Relations Board ("NLRB") issued a complaint against a Chicago car dealership alleging the dealership violated Section 7 of the National Labor Relations Act ("NLRA") when it terminated an employee for posting on his Facebook page photographs and comments criticizing the dealership for serving only hot dogs and water to customers at a dealership sales event promoting a new model, and for posting photos from an accident that occurred at an adjacent dealership. On Wednesday, September 28, 2011, an Administrative Law Judge ("ALJ") ruled that the dealership did not wrongfully terminate the employee for the Facebook postings. However, the ALJ found that the employer had several overly broad handbook policies that unlawfully restricted employees' Section 7 rights. The ALJ ordered the employer to post a notice informing employees of their rights to engage in protected activity. A copy of the decision may be accessed here.

Section 7 of the NLRA protects employees' conversations and activity related to wages, hours, and working conditions. The ALJ found that while the Facebook postings involving the sales event and the subsequent exchange of complaints with other salespersons was protected activity, the postings involving the accident were not protected. Further, the ALJ found that the salesman was terminated for the accident postings, and therefore was not protected under the NLRA.

On the handbook policies, the NLRB's Complaint alleged that four policies were unlawful:

(a) Bad Attitude: Employees should display a positive attitude toward their job. A bad attitude creates a difficult working environment and prevents the Dealership from providing quality service to our customers.

(b) Courtesy: Courtesy is the responsibility of every employee. Everyone is expected to be courteous, polite and friendly to our customers, vendors and suppliers, as well as to their fellow employees. No one should be disrespectful or use profanity or any other language which injures the image or reputation of the Dealership.

(c) Unauthorized Interviews: As a means of protecting yourself and the Dealership, no unauthorized interviews are permitted to be conducted by individuals representing themselves as attorneys, peace officers, investigators, reporters, or someone who wants to "ask a few questions." If you are asked questions about the Dealership or its current or former employees, you are to refer that individual(s) to your supervisor. A decision will then be made as to whether that individual may conduct any interview and they will be introduced to you by your supervisor with a reason for the questioning. Similarly, if you are aware that an unauthorized interview is occurring at the Dealership, immediately notify the General Manager or the President.

(d) Outside Inquiries Concerning Employees: All inquiries concerning employees from outside sources should be directed to the Human Resource Department. No information should be given regarding any employee by any other employee or manager to an outside source.

The ALJ found that paragraphs (c) and (d) clearly "would be understood to restrict and limit employees in the exercise of their Section 7 rights," but found paragraphs (a) and (b) were not so obvious. Therefore, the test, among other factors, was whether the employees would reasonably construe the policies to restrict their Section 7 rights.

On paragraph (a), the ALJ dismissed the allegation, finding that the "one sentence prohibition would reasonably be read to protect the relationship between the []dealer and its customers, rather than restrict the employees' Section 7 rights." However, as to paragraph (b), the ALJ found that employees would reasonably believe that their protected rights were prohibited by the rule, focusing in on the subjectivity of the term "disrespectful."

It is important to note that this is an ALJ decision, as opposed to a Board decision that would establish binding Board law. The ALJ decision could be appealed to the Board for final review. However, the case illustrates a trend toward heightened investigation and enforcement by the NLRB of employee handbook policies. The case also represents the emergence of issues arising where laws, such as Section 7 of the NLRA, which have been in existence for decades, are applied to the workplace regulation of employees' social media activity, and then application of those laws to enforcement of employer policies, which may also have been in existence prior to the widespread use of Twitter, Facebook, and other social media.

California Supreme Court to Hear Oral Arguments on case concerning the scope of the Administrative Exemption from California's Overtime Requirements

2011-09-30T15:58:00.000-07:00

By Jonathan Judge

The California Supreme Court will hear oral arguments on Monday, October 3, 2011 in Harris v. Superior Court (Liberty Mutual Insurance). The California Supreme Court granted review of Harris almost four years ago on November 28, 2007, and 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?

Although the case concerns claims adjustors, it is expected that the Court's decision may affect millions of California employees working in administrative positions, and provide clarification when and under what circumstances such employees are exempt from California's overtime and other requirements. It has not always been clear when and to whom the exemption applies, which has lead to considerable class action litigation over the last several years.

In this case, the Court of Appeal held that claims adjusters were not exempt. Central to the Court of Appeal's holding was the so-called "administrative/production dichotomy." Under the administrative/production dichotomy, employees do not qualify for the administrative exemption if they are primarily engaged in work that is considered production, or in a retail or service establishment, sales work, as opposed to work that is directly related to management policies or the general operation of the business, i.e., running of the business. The Court of Appeal found that the adjusters' work, investigating and estimating claims, making settlement recommendations, and identifying fraud, among others, was not carried out on the level of management policy or general operations, but rather was part of the day-to-day operations of Liberty Mutual's business. Therefore, the work did not qualify for the administrative exemption, according to the Court of Appeal.

While Atkinson, Andelson, Loya, Ruud & Romo is not involved in this case, Robert R. Roginson, a Partner with the firm's Employment Services Practice Group, and former Chief Counsel for the California Division of Labor Standards Enforcement, commented on the significance of the Harris case in today's Daily Journal. Roginson noted that the administrative exemption has historically been difficult to understand, making clarification of the issues in Harris important because of the exemption's application to a broad category of employees. It is hoped that the court will provide some clarity on the application of the administrative/production dichotomy, because, according to Roginson, it seems unrealistic to expect employers and enforcing agencies to comply with or enforce the law when the rules are unclear.

Please check back next week for further analysis of this case following the conclusion of oral arguments.

Labor Commissioner Files Multi-Million Dollar Lawsuit Against Real Estate Brokerage For Alleged Wage And Hour Violations

2011-09-29T14:37:00.000-07:00

By Christopher S. Andre And Scott K. Dauscher

In a press release issued today, the California Department of Industrial Relations announced that Labor Commissioner Julie Su, filed in the Alameda County Superior Court a lawsuit seeking damages and penalties in excess of $17 Million against ZipRealty for alleged wage and hour violations. Click here to download and read a copy of the lawsuit.

The lawsuit Ms. Su filed in the Alameda County Superior Court falls on the heels of an action in Kern County Superior Court. In that case, Zip Realty filed an appeal of a Labor Commissioner administrative award of $75,000 based on wage claims filed by four former Zip Realty agents. On appeal, the court quadrupled the $75,000 administrative award and awarded the four agents over $330,000 for alleged damages and interest. As part of that proceeding, Zip Realty argued it was not required to pay its real estate agents minimum wages or overtime wages because the agents were outside salespersons. The court rejected that defense because the court ruled the agents did not qualify for the outside salespersons exemption because the court found the agents spent less than 50% of their working time working outside the office.

These developments provide two important takeaways for California employers:

First, we think federal and state agencies charged with enforcement of federal and state employment laws have taken a more aggressive enforcement posture.

Second, the developments serve as a reminder that the requirements of the exemptions for minimum wage, overtime, meal period, and rest period requirements generally applicable to non-exempt employees must be strictly complied with in order for the employer to rely on the exemption. For example, under California law, outside salespersons qualify for the exemption if the outside salespersons is at least 18 years old and "customarily and regularly works more than half the working time away from the employer's place of business selling tangible or intangible items or obtaining orders or contracts for products, services or use of facilities." Under federal law, outside salespersons qualify for the exemption if the employee's primary duty is making sales (as defined in the Fair Labor Standards Act) or obtaining orders or contracts for services for which the consideration will be paid by the client or customer and if the employees is "customarily and regularly engaged away from the employer's place or places of business in performing such primary duty."

Improperly classifying an employee as exempt when the requirements for the exemption are not met can create substantial exposure for the employer. For example, under California law, if an employee is improperly classified as exempt, the employer can be exposed to claims for unpaid premium pay (i.e., overtime pay) if the employee worked more than 8 hours in a day or more than 40 hours in a workweek, to claims for the employer's failure to provide required meal periods or failure to authorize and permit required rest periods, and to claims for non-compliant wage statement penalties, among other things. This can occur when the employer, because the employee is classified as exempt, does not pay the employee for all hours worked, does not record all hours worked, does not provide or record meal periods, does not authorize and permit rest periods, and does not include on the employee's wage statements all of the information an employer is required to provide on wage statements issued to non-exempt employees. Currently, such claims are predominantly brought as class actions, which raises the stakes even higher.

DFEH Launches Clinic To Train Students To Become DFEH Investigators

2011-09-29T11:27:00.000-07:00

By Christopher S. Andre and Thomas A. Lenz

As we previously reported here, in May, it was announced that the Department of Fair Employment and Housing ("DFEH") would begin a new collaborative effort with the University of California at Irvine School of Law to combat allegations of systemic discrimination. The DFEH and UC Irvine established a clinic in which law students will assist DFEH agents on tasks which include evaluation, investigation, and prosecution of discrimination claims.

On September 27, 2011, the DFEH announced a similar partnership with the California State University Bakersfield School of Business and Public Administration to establish a similar clinic for graduate students. The DFEH press release, available here, states "[t]he partnership's goals are closely aligned with the department's mission to train future professionals to investigate and resolve employment discrimination complaints and to develop a pipeline for students interested in serving the state with the DFEH and other related state agencies." The press release goes on to state: "In the DFEH-CSUB clinic, Master of Public Administration students will study legal theory and investigative techniques, and apply that knowledge to investigating individual employment discrimination complaints."

Employers facing DFEH or other administrative claims arising in the workplace may well see heightened activity on their cases through these partnerships with law schools and universities, which the DFEH describes as a means to develop the "civil rights leaders of the future."

Judge Orders Reinstatement of Employees Who Were Terminated For Facebook Postings

2011-09-29T11:26:00.000-07:00

By Christopher S. Andre and Scott K. Dauscher

As we previously reported here, the National Labor Relations Board has recently filed complaints against a number of employers alleging the employers unlawfully terminated or disciplined employees who posted on social media websites, such as Facebook, statements critical of their working conditions. In one press release, the NLRB states such discussions were "protected concerted activity within the meaning of Section 7 of the National Labor Relations Act, because it involved a conversation among coworkers about their terms and conditions of employment, including their job performance and staffing levels."

In a recent case against Hispanics Untied of Buffalo (HUB), an administrative law judge hearing the NLRB's complaint, in a ruling the NLRB described as "the first of its kind," ordered HUB to reinstate five employees who HUB terminated after the employees posted on Facebook statements critical of their working conditions. HUB is a nonprofit organization that provides social services to disadvantaged clients. Comments posted on Facebook in response to a Facebook posting by a co-worker regarding another co-worker's criticism of her work performance reportedly include, among others the following inflammatory statements:

I think we should give our paychecks to our clients so they can 'pay' the rent, also we can take them to their Dr's appts, and served as translators (oh! We do that). Also we can clean their houses, we can go to DSS for them and we can run all their errands and they can spend their day in their house watching tv, and also we can go to do their grocery ship and organized the food in their house pantries . . . (insert sarcasm here now).

The administrative law judge ruled the terminations violated Section 8(a)(a) of the National Labor Relations Act because the administrative law judge found that the employees' Facebook postings amounted to "protected concerted activity. Section 7 of the NLRA states "employees shall have the right to self-organization, to form, joint, or assist labor organizations, to bargain collectively through representation of their own choosing and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection. . ."

As we previously observed, employers should be aware that both the NLRA and the California Labor Code generally prohibit discipline of or discrimination against employees for disclosing to others the amount of their wages or information about the employees' working conditions. In light of those prohibitions and in light of the recent enforcement activity by the NLRB, employers should consult with experienced employment and labor law counsel when considering discipline of employees on account of communications related to or potentially related to employees' wages, hours, and/or working conditions.

Governor Brown Signs, Considers, Several Employment-Related Bills Passed by the California Legislature

2011-09-26T09:47:00.000-07:00

by Jonathan Judge and Robert R. Roginson

The 2011 California legislative season is coming to a close. Below is a summary of the employment-law-related bills that were signed or are pending before the Governor. The Governor has until October 9, 2011 to consider, and sign or veto the bills passed by the Legislature this year.

Bills Signed by Governor Brown

SB 272 (DeSaulnier) Leave of Absence: Organ Donation - This bill provides that the days of leave for purposes of bone marrow and organ donation leave are business days rather than calendar days, and that the one-year period is measured from the date the employee’s leave begins and consists of 12 consecutive months. This bill also provides that such a leave of absence is not a break in the employee’s continuous service for the purpose of his or her right to paid time off. This bill further provides that the employer may condition the initial receipt of leave upon the employee’s use of earned but unused days for paid time off. Additionally, the bill states that it is declaratory of existing law.

SB 559 (Padilla) Discrimination: Genetic Information - This bill prohibits discrimination under the Fair Employment and Housing Act and Unruh Civil Rights Act on the basis of genetic information. "Genetic information" means, with respect to any individual, information about any of the following: (i) the individual’s genetic tests; (ii) the genetic tests of family members of the individual; (iii) the manifestation of a disease or disorder in family members of the individual. Genetic information includes any request for, or receipt of, genetic services, or participation in clinical research that includes genetic services, by an individual or any family member of the individual. Genetic information does not include information about the sex or age of any individual.

AB 587 (Gordon) Public Works/Volunteers - This bill extends the repeal date from January 1, 2012, to January 1, 2017, for the law that exempts specified work performed by a volunteer, a volunteer coordinator, or a member of the California Conservation Corps or a community conservation corps from public works provisions.

AB 240 (Bonilla) Wage Recovery: Liquidated Damages - This bill permits an employee to recover liquidated damages pursuant to a complaint brought before the Labor Commissioner alleging payment of less than the minimum wage.

Bills Pending On Governor’s Desk

AB 22 (Mendoza) Consumer Credit Reports - This bill would greatly limit employers’ ability to obtain a consumer credit report for employment purposes, with exceptions for certain financial institutions, and a limited number of other job classifications.

AB 267 (Swanson) Employment Contracts - This bill would make void and unenforceable as against public policy any provision in an employment contract that requires an employee, as a condition of obtaining or continuing employment, to use a forum other than California, or to agree to a choice of law other than California law, to resolve any dispute with an employer regarding employment-related issues that arise in California.

AB 243 (Alejo) Labor Contractors - This bill would require an employer who is a farm labor contractor to disclose in the itemized wage statement the name and address of the legal entity that secured the employer’s services.

AB 325 (Lowenthal) Bereavement Leave - This bill would allow for four 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 apply to an employee who is covered by a valid CBA that provides for bereavement leave and other specified working conditions.

AB 436 (Solorio) Prevailing Wages - This bill would make revisions regarding the method by which the Department of Industrial Relations sets reimbursement rates and enforcement of public works projects financed in any part by the Water Security, Clean Drinking Water, Coastal and Beach Protection Act of 2002.

AB 469 (Swanson) Wages: Civil Penalties - This bill would provide that in addition to being subject to a civil penalty, any employer who pays or causes to be paid to any employee a wage less than the minimum fixed by an order of the Industrial Welfare Commission shall be subject to paying restitution of wages to the employee. This bill would extend the period within which the division may commence a collection action from 1 year to 3 years. This bill would require an employer to provide each employee, at the time of hiring, with a notice that specifies the rate and the basis of pay and to notify each employee in writing of any changes to the information set forth in the notice within 7 calendar days of the changes unless such changes are reflected on a timely wage statement or another writing.

AB 514 (Hernandez) Prevailing Wages: Hauling Refuse - This bill would include in the definition of "hauling of refuse" the hauling of specified materials other than certain recyclable metals, thereby expanding the definition of "public works" and thus requiring the payment of prevailing wages for that activity.

AB 551 (Campos) Prevailing Wages: Penalties - This bill would increase penalties assessed to contractors and subcontractors found to have violated prevailing wage laws.

AB 592 (Lara) Leaves - This bill would make it an unlawful employment practice for an employer to interfere with, or restrain the exercise or attempted exercise of, any right provided to an employee under the CFRA or Pregnancy Disability Leave law.

AB 766 (Monning) Public Works - This bill would require nonredacted copies of certified payroll records to be provided, upon request, to any agency included in, and for the purposes of, the Joint Enforcement Strike Force on the Underground Economy, or to any law enforcement agency.

AB 887 (Atkins) Gender Discrimination - This bill would make changes to state discrimination law by refining the definition of gender to include a person’s gender identity and gender expression. Gender expression would be defined as meaning a person’s gender-related appearance and behavior whether or not stereotypically associated with the person’s assigned sex at birth.

AB 1236 (Fong) Use of E-Verify - The bill would prohibit the state, a city, county, or special district, from requiring an employer other than one of those government entities to use an electronic employment verification system (E-Verify) except when required by federal law or as a condition of receiving federal funds.

AB 1396 (Committee on Labor & Employment) Commissions Agreements - This bill would require all employers, within the state, or from out-of-state, to enter into written contracts of employment where commissions are a method of payment with the employee for services rendered in the state.

SB 129 (Steinberg) Agricultural Labor Relations - This bill would revise election, bargaining, and unfair labor practice procedures before the Agricultural Labor Relations Board.

SB 299 (Evans) Pregnancy Leave - This bill would prohibit an employer from refusing to maintain and pay for coverage under a group health plan for an employee who takes Pregnancy Disability Leave.

SB 459 (Corbett) Independent Contractors - This bill would prohibit willful misclassification of individuals as independent contractors. The bill would also authorize the Labor Commissioner to assess civil and liquidated damages against a person or employer based on a determination that the person or employer violated these prohibitions.

SB 757 (Lieu) Health Insurance Plan Discrimination - This bill would prohibit group health insurance plans or policies from discriminating in coverage between spouses or domestic partners of a different sex and spouses or domestic partners of the same sex.

SB 922 (Steinberg) Project Labor Agreements - This bill would provide that if a charter provision, initiative, or ordinance of a charter city prohibits the governing board’s consideration of a project labor agreement for a project to be awarded by the city, or prohibits the governing board from considering whether to allocate funds to a city-funded project covered by such an agreement, then state funding or financial assistance may not be used to support that project.

Please check back in the coming weeks for updates on these bills as they face consideration by the Governor.

Required NLRB Notice Of Labor Rights Employers Must Post Beginning November 14, 2011, Is Now Available For Download

2011-09-21T19:05:00.000-07:00

By Thomas A. Lenz and Christopher S. Andre

As we previously reported here, in an announcement dated August 25, 2011 the National Labor Relations Board confirmed the approval of a final rule which requires all employers under NLRB jurisdiction to post a Notice which will inform employees of their rights. Those rights include the rights to form and join unions and to engage in concerted activities for mutual aid and protection, which may include group protests over working conditions or demands for workplace change through social media.

Employers will be required to post a hard copy Notice, which is now available from the NLRB, and which can be downloaded and viewed by clicking here. Where an employer communicates with its employees by electronic means, such as Internet or Intranet, the employer may have a duty to post the Notice electronically as well.

As we previously reported here, also, many employers who are unfamiliar with the NLRB or who have not dealt with it in many years may doubt that they are subject to NLRB jurisdiction. Those employers should consider carefully their course of action. NLRB has exercised a broad view of its jurisdiction, with dollar volume standards that have not changed in decades. Absent a detailed review with legal counsel establishing otherwise, the vast majority of private sector employers should consider themselves subject to NLRB and expect to have to comply with the rule.

Barring a court order preventing enforcement of the NLRB's final rule, all employers subject to the NLRB's jurisdiction must post as required the Notice beginning on November 14, 2011.

Private sector employers are encouraged to seek guidance on how this new NLRB rule will impact their business and communications with employees.

President Obama's Department of Labor Set to Significantly Expand Employers' Reporting Requirements Under Labor-Management Reporting and Disclosure Act

2011-09-20T18:10:00.000-07:00

By Scott K. Dauscher and Thomas A. Lenz

On June 21, 2011, the United States Department of Labor, Office of Labor-Management Standards, issued a little-known Notice of Proposed Rulemaking whereby the DOL seeks to expand the scope of and requirements of the Labor Management Reporting and Disclosure Act of 1959 (29.U.S.C. 433). The proposed rule reverses long-standing practices under the law and subjects employers and those who provide advice to employers regarding union activities, such as attorneys and labor consultants, to increased reporting requirements. The public comment period ends on September 21, 2011, and the new rule is expected to be adopted shortly thereafter. The proposed rule has been viewed by some in the business community as a political favor for unions designed to enhance their ability to unionize employees. A copy of the proposed rule and the opportunity to submit comments can be viewed by clicking here.

Employers subject to union organizing campaigns or collective bargaining negotiations often retain the services of third-parties, whether they be attorneys, labor consultants or other advisors, to provide advice for responding to union organizing campaigns. Under the current LMRDA, employers and labor consultants must file public disclosure documents, including the amount paid to the consultant, with the Department of Labor when the consultant engages in activities to persuade employees whether and how to exercise their right to organize and collectively bargain. (29 U.S.C. 433(a)).

The LMRDA contains an exemption, however, from the reporting requirements for persons giving "advice" to the employer. This "advice exemption" has been interpreted to include advice that can be accepted or rejected by the employer and that is contained in a prepared speech or other written material, provided the employer, not the consultant, is the one interacting with the employees. In such circumstances, the consultant does not interact with the employees directly, but simply meets with the employer and advises on how to persuade the employees on the issues of unionization.

Under the new rule proposed by the DOL, the interpretation of the "advice exemption" is severely limited, thereby greatly expanding the scope of the LMRDA. The new rule, if adopted, would limit the "advice exemption" to an "oral or written recommendation regarding a decision or course of conduct." (NPRM, FR, June 21, 2011.) The narrow definition of "advice" proposed by the DOL would expand the scope of the LMRDA to cover activities historically considered exempt from the rule. Any other activity by a third party advisor would be subject to the disclosure requirements of the rule if that activity that has the "potential" to persuade employees regarding union representation.

This rule is so broad that it could include almost anything, such as writing or producing written materials for speeches made by the employer to its employees, crafting training materials, training supervisors and other management employees, and drafting employee policies or any other activity which could arguably be considered as "having the potential to persuade employees regarding union representation." Thus, even if a third party advisor's activity is wholly unrelated to unionization, if it indirectly could affect an employee's choice to become union or not, the activity would be subject to the reporting requirement of the new rule.

In addition to re-defining the "advice exemption" and expanding the scope of the LMRDA, the new rule would create new reporting requirements. Employers will be required to report internal costs, including wages paid, for these activities. The reports filed by the employer will be made public for all to see, including the employees and the union.

Under the LMRDA, officers of a company are personally responsible for filing the required reports and their accuracy. Penalties for failing to file an accurate disclosure statement include criminal prosecution and civil liability.

We will report here on any further developments. In any event, employers should seek counsel from experienced labor attorneys about potential LMRDA reporting obligations if and when employee relations advice is obtained.

The DOL, IRS, And 11 States Team Up To Battle Worker Misclassification

2011-09-19T16:50:00.000-07:00

By Robert R. Roginson

The Unites States Department of Labor (DOL) and Internal Revenue Service (IRS) have signed a memorandum of understanding to improve the agencies' coordination on employee misclassification compliance and education, according to a press release issued today by the Secretary of Labor, Hilda Solis. The DOL reports that 11 states have also agreed to sign similar memoranda. A copy of the press release is available here.

According to the DOL, the purpose of the coordinated effort is "to end the business practice of misclassifying employees in order to avoid providing employment protections." The labor commissioners and other agency leaders representing seven states have signed memoranda of understanding with the DOL. The signatory states are Connecticut, Maryland, Massachusetts, Minnesota, Missouri, Utah and Washington. The states of Hawaii, Illinois and Montana, as well as with New York's attorney general are also identified as states expected to sign similar agreements.

The DOL expects that the memoranda of understanding will enable the DOL to share information and coordinate law enforcement with the IRS and participating states in order “to level the playing field for law-abiding employers and ensure that employees receive the protections to which they are entitled under federal and state law.”

These memoranda of understanding arose as part of the department's Misclassification Initiative, which was launched under the auspices of Vice President Biden's Middle Class Task Force with the goal of preventing, detecting and remedying employee misclassification.

Although California is not listed among the states which have signed or intend to sign the memorandum, California employers should be aware that worker misclassification has long been a high priority for the California Labor Commissioner, Attorney General and Employment Development Department. Worker misclassification has also become a target for class action lawsuits. The consequences for misclassifying workers can be significant and include claims for unpaid wages and overtime, meal and rest period premiums, payroll taxes, and penalties among other things.

We will continue to bring you any developments in the increasingly important area of employment law.

President Obama's American Jobs Act Would Make It Illegal for Employers to Discriminate Against Someone Who Is Unemployed

2011-09-14T14:37:00.000-07:00

By Scott K. Dauscher and Christopher S. Andre

Last Thursday, President Obama addressed a joint session of Congress and announced his American Jobs Act. On Monday, President Obama formerly presented the Bill to Congress. Among the provisions included the 155-page Bill but which the President did not announce in his speech last week is the "Fair Employment Opportunity Act of 2011". This law, if passed, would make it an unlawful discrimination practice for an employer to deny employment (i.e., decline to hire) an individual on account of the applicant's unemployment. In short, President Obama's proposed law would make being unemployed a protected class on par with other protected classes such as race, color, religion, national original, age, and sex. Specifically, Section 374 of the Americans Jobs Act makes it unlawful for employers to:

        (1)    publish in print, on the internet, or in any other medium, an advertisement or announcement for en employee for any job that includes
            (A)    any provision stating or indicating that an individual's status as unemployed disqualifies the individual for any employment opportunity or
            (B)    any provision stating or indicating that an employer will not consider or hire an individual for any employment opportunity based on that individual's status as unemployed, or
        (2)     fail or refuse to consider for employment, or fail or refuse to hire, an individual as an employee because of the individual's status as unemployed; or
        (3)    direct or request that an employment agency take an individual's status as unemployed into account to disqualify an applicant for consideration, screening, or referral for employment as an employee.

The proposed law contains similar provisions specifically applicable to Employment Agencies.

The proposed law would provide various federal agencies the power to administer and enforce the Act. The proposed law provides that the Equal Employment Opportunity Commission shall have the same powers under the new law as it does under other non-discrimination laws. The procedures applicable to a claim by an individual for a violation of the new law are the same procedures that apply for a violation of Title VII of the Civil Rights Act of 1964.

Additionally, the American Jobs Act would allow individuals to file lawsuits against employers who they allege violated the Act. In any such lawsuit alleging violation of the advertising provision, the Bill provides that the individual, or any person acting on behalf of the individual, may obtain an injunction enjoining the unlawful employment practice, reimbursement of costs expended as a result of the unlawful employment practice, an amount equal to liquidated damages not to exceed $1,000 for each day of the violation, and reasonable attorney's fees, including expert fees, and costs attributable to the pursuit of the claim.

In any lawsuit alleging a violation of any other provision of the law, including the denial of employment due to one's unemployment status, the Bill provides that the individual bringing suit, or any person acting on behalf of the individual, may be awarded the same remedies as are available under the Civil Rights Act of 1964, such as front pay, injunctive relief, reasonable attorney's fees and costs, compensatory damages for pain and suffering, and punitive damages, except that in a case in which wages, salary, employment benefits, or other compensation have not been denied or lost to the individual, damages may be awarded in an amount not to exceed $5,000.

Representative Louie Gohmert (R-Texas) expressed concern about the Bill and the lawsuits which could result. Addressing the issue on the House floor, Rep. Gohmert stated "So if you're unemployed, and you go to apply for a job and you're not hired for that job, see a lawyer. You might be able to file a claim because you got discriminated against because you're unemployed." He said this Bill would discourage companies from interviewing unemployed individuals and would "help trial lawyers who are not having enough work. That's 14 million potential new clients that could go hire a lawyer and file a claim because they didn't get hired even though they were unemployed."

The Bill does provide that it is not intended to preclude an employer or employment agency from considering an individual's employment history, or from examining the reasons underlying an individual's status as unemployed, in assessing an individual's ability to perform a job or in otherwise making employment decisions about that individual. The Bill states that "Such consideration or examination may include an assessment of whether an individual's employment in a similar or related job for a period of time reasonably proximate to the consideration of such individual for employment is job-related or consistent with business necessity." However, in any lawsuit the burden will be on the employer to prove the non-discriminatory basis for denial of employment.

Employers and Employment Agencies should stayed tuned to the debate in Congress regarding the American Jobs Act and monitor whether the Fair Employment Opportunity Act of 2011 is included in whatever law is passed.

DFEH Touts $846,300 Administrative Award Against Employer For Allegedly Failing To Reasonably Accommodate Employee's Medical Condition

2011-09-12T18:00:00.000-07:00

By Christopher S. Andre and Scott K. Dauscher

In a press released issued today, the California Department of Fair Employment and Housing touts an administrative award of $846,300 against an employer for allegedly failing to accommodate an employee's medical condition and for allegedly terminating the employee "relying on [an] insufficient travel pretext." The DFEH press release states as follows:

ELK GROVE, CA - The California Department of Fair Employment and Housing (DFEH) today announced its largest-ever administrative award of $846,300 against electrical supplier Acme Electric Corporation for firing an employee because he had cancer. Headquartered in Lumberton, North Carolina, Acme Electric is a division of Actuant Corporation, a Wisconsin diversified industrial corporation that operates in more than 30 countries.

"This historic administrative victory underscores the Department’s commitment to vindicating the rights of Californians victimized by workplace discrimination,” said DFEH Director Phyllis Cheng.

Charles Richard Wideman worked for Acme Electric as western regional sales manager overseeing sales operations in the company’s largest territory from February 2004 to March 2008. He developed kidney cancer in 2006 and prostate cancer in 2007. Mr. Wideman’s cancers required two surgeries and numerous cancer-related outpatient appointments. The company immediately granted his two requests for time off for surgery and recuperative leave. However, Mr. Wideman requested further accommodation for the travel limitation his cancers caused from June 2006 through April 2007. Acme Electric refused to grant or even acknowledge these accommodation requests. Instead, in December 2007, Mr. Wideman’s supervisor gave him an unfavorable performance evaluation, criticizing him for insufficient travel. On February 28, 2008, ignoring Mr. Wideman's need for accommodation the preceding year and failing to take into account his dramatically improved job performance, Acme Electric fired Mr. Wideman, relying on the insufficient travel pretext.

“California’s Fair Employment and Housing Act (FEHA) provides that persons with disabilities, such as cancer, must be reasonably accommodated, so that they can continue to work productively,” added Director Cheng.

After a three-day hearing, the State's Fair Employment and Housing Commission found Acme Electrical violated the FEHA by failing to accomodate Mr. Wideman's known travel limitation due to his cancers, failing to engage in a good faith interactive process, discriminating against Mr. Wideman because of his disability, and failing to take all reasonable steps necessary to prevent discrimination from occurring. To compensate Mr. Wideman for his losses, the Commission awarded him $748,571 for lost wages, $22,729 for out-of-pocket expenses and $50,000 for the emotional distress he suffered. In addition, the Commission ordered Acme t pay $25,000 to the State's General Fund as an administrative fine. Acme must further comply with posting, policy changes, and training requirements ordered by the Commission.

In our experience, cases alleging an employer's failure to accommodate an employee's disability or medical condition are on the rise both administratively (i.e., DFEH actions like the one discussed above.) and by way of private lawsuits filed by current or former employees. Employers should use caution when terminating or otherwise disciplining an employee with a known disability or medical condition to make certain that the termination or other discipline does not run afoul of applicable California law, which is often quite favorable to employees. Employees with disabilities or medical conditions can lawfully be disciplined or even terminated, but employers should proceed with caution.

Goodwin Liu's Appointment To California Supreme Court Confirmed: Is The Califorina Supreme Court Now One Step Closer To Deciding The Long Pending Brinker Meal Period Decision?

2011-09-06T12:27:00.000-07:00

By Christopher S. Andre and Scott K. Dauscher

As we previously reported here, there was little doubt Governor Jerry Brown's appointment of UC Berkeley law professor Goodwin Liu to the California Supreme Court would be swiftly confirmed by the California Commission on Judicial Appointments, consisting of three members: California Supreme Court Presiding Justice Tani Cantil-Sakauye (appointed by former Governor Arnold Schwarzenegger), California Attorney General Kamala Harris (a Democrat elected in 2010 after serving as the District Attorney for the City and County of San Francisco), and Senior Presiding Justice of the California Court of Appeal Joan Dempsey Klein (appointed by Governor Brown during his first term as Governor of California).

As expected, last Wednesday, the Commission on Judicial Appointments unanimously confirmed Mr. Liu as a Justice to fill the seat vacated by former Justice Carlos R. Moreno, who stepped down to take a position in private practice.

Now that the court is once again fully-staffed with seven members, it remains to be seen when the court will schedule for oral argument and ultimately decide the long pending decision in Brinker Restaurant Corporation v. Superior Court.

As we previously reported here, the California Court of Appeals decided in Brinker Restaurant Corporation v. Superior Court that an employer's obligation to "provide" to non-exempt employees meal periods required by the Labor Code and the applicable Industrial Welfare Commission Wage Orders is to make those meal periods available and not to ensure that employees take the meal periods provided to them.

On October 22, 2008, the California Supreme Court granted review of the Court of Appeal's decision in Brinker to decide "the proper interpretation of California's statutes and regulations governing an employer's duty to provide meal and rest breaks to hourly workers." Nearly three years later, the case still has not been scheduled for oral argument, and it remains to be seen when the California Supreme Court will decide the case. Since that time, the California Supreme Court has granted review thereby rendering unciteable six Court of Appeal decisions holding as in Brinker that an employer's obligation to "provide" meal periods to non-exempt employees is to make the required meal periods available and not to ensure that non-exempt employees take the meal periods provided to them: Brinkley v. Public Storage, Faulkinbury v. Boyd & Associates, Brooker v. Radioshack Corporation, Hermandez v. Chipotle Mexican Grill, Tien v. Tenet Healthcare, and, most recently, Lamps Plus Overtime Cases.

Although it remains difficult to predict when the California Supreme Court will decide Brinker and difficult to predict how the California Supreme Court will rule on the case, we think Governor Brown's appointment of Mr. Liu increases the likelihood the Supreme Court will decide the case adversely to California employers.

AALRR Ranked Among The 50 Largest Law Firms In California

2011-09-06T11:27:00.000-07:00

AALRR was ranked the 36th largest law firm in California by California Lawyer in its annual survey of the state's largest law firms. AALRR moved up five places in this year's ranking. Click here to read the full article.

An "Exempt Professional Employee Is Defined By More Than Just A License"

2011-09-01T13:07:00.000-07:00

By Amber M. Solano and Jorge J. Luna

On August 17, 2011, the California Court of Appeal held an employee does not have to be licensed as an attorney to qualify as an exempt employee under "learned professions" exemption of Industrial Welfare Commission Wage Order 4-2001. This case is significant because it allows an employer to apply the learned professions exemption to individuals who may not be licensed. Employers can make individual determinations based on an individual's actual education, training, and duties. This permits a more flexible application of the exemption that takes into consideration the realities of a given situation.

Click here to read the entire alert.

Employers Must Post Notice of Labor Rights Under NLRB Rule Taking Effect November 14, 2011

2011-08-25T12:11:00.000-07:00

By Thomas A. Lenz

In an announcement dated August 25, 2011 the National Labor Relations Board confirmed the approval of a final rule which requires all employers under NLRB jurisdiction to post a Notice which will inform employees of their rights. Those rights include to form and join unions and to engage in concerted activities for mutual aid and protection, which may include group protests over working conditions or demands for workplace change through social media. A fact sheet with additional information about the rule can be downloaded by clicking here.

Employers will be required to post a hard copy Notice which they can obtain from NLRB offices or by download from www.nlrb.gov when the Notice becomes available. The NLRB indicates the Notice will be available "on or before November 1, 2011." Where an employer communicates with its employees by electronic means, such as Internet or Intranet, the employer may have a duty to post the Notice electronically as well.

The NLRB intends to view an employer's failure to post the Notice as an unfair labor practice. This is an important point, as failure to post the Notice could put an employer at an immediate disadvantage if the employer faces a union organizing campaign and the union makes an issue of the Notice during the campaign. Charges are often used as leverage points to put a targeted employer under additional scrutiny and threat of prosecution while an election case is in progress.

Many employers who are unfamiliar with the NLRB or who have not dealt with it in many years may doubt that they are subject to NLRB jurisdiction. Those employers should consider carefully their course of action. NLRB has exercised a broad view of its jurisdiction, with dollar volume standards that have not changed in decades. Absent a detailed review with legal counsel establishing otherwise, the vast majority of private sector employers should consider themselves subject to NLRB and expect to have to comply with the rule.

The rule will parallel in large part a Department of Labor rule implemented for contractors who work with the federal government.

It is expected that the NLRB rule will face legal challenge in the courts. Some employers may take the view that it is best not to post or educate a non-union workforce on the right to unionize. That approach will have risks. A safer approach may be to post the Notice pending an outcome on such challenges. Management retains its rights to educate employees, if and when it sees fit to do so, about union organizing and the pros and cons of doing so provided that the message does not violate NLRB standards through threats or coercion.

Private sector employers are encouraged to seek guidance on how this new NLRB rule will impact their business and communications with employees.

After Aquired Evidence Can Provide A Complete Defense To Claims For Wrongful Termination, For Refusal To Hire, And For Failing To Reasonably Accomodate An Alleged Disability

2011-08-19T19:06:00.000-07:00

By Ronald W. Novotny and Christopher S. Andre

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.

Vicente Salas began working for Sierra Chemical in 2003 as a seasonal production line worker. After being laid off and recalled to work several times during his first three years of work there, Salas sustained a back injury in 2006 and filed a workers’ compensation claim. After his supervisor allegedly told him he would have to be “100% healed” before being allowed to return to work, Salas filed suit "alleging disability discrimination in violation of the Fair Employment and Housing Act (FEHA) and denial of employment in violation of public policy."

During the litigation, Sierra Chemical discovered the social security number Salas repeatedly provided to Sierra Chemical belonged to a resident of North Carolina and not to Salas. Based on evidence showing Salas not only used a social security number that did not belong to him but also submitted to Sierra Chemical a counterfeit social security card and on evidence showing Sierra Chemical would not have hired Salas to begin with had Sierra Chemical known of Salas' misrepresentations and would have terminated Salas' employment if Sierra Chemical had learned of those things while Salas was employed by Sierra Chemical, Sierra Chemical moved for summary judgment contending that the after-acquired-evidence doctrine and the unclean hands doctrine barred Salas' claims as a matter of law. The trial court ultimately granted that motion.

On appeal, the Court of Appeal affirmed. The court explained "[t]he after-acquired-evidence doctrine operates as a complete or partial defense where, after an allegedly discriminatory termination or refusal to hire, the employer discovers employee or applicant wrongdoing that would have resulted in the challenged termination or refusal to hire." The court held Salas did not effectively rebut Sierra Chemical's showing it would not have hired Salas to begin with and would have terminated Salas' employment if Sierra Chemical had discovered Salas' use of a social security number that did not belong to him in order to obtain and maintain his employment by Sierra Chemical. The court held, also, that the same facts also gave rise to a defense based on the unclean hands doctrine, which "demands that a plaintiff act fairly in the matters for which he seeks a remedy. He must come into court with clean hands, and keep them clean, or he will be denied relief, regardless of the merits of this claim."

Notably, in so holding, the court expressly rejected Salas' contention that Senate Bill 1818, enacted in 2002, precluded application of the after-acquired-evidence doctrine and the unclean hands doctrine. Senate Bill 1818, which is codified at Labor Code 1171.5 and elsewhere, states, among other things, that "[f]or purposes of enforcing state labor, employment, civil rights and employee housing laws, a person's immigration status is irrelevant to the issue of liability." Salas argued Senate Bill 1818 "must allow him to recover backpay for the allegedly discriminatory failure to hire regardless of whether the after-acquired-evidence or unclean hands doctrines would otherwise preclude him from bringing claims tied to the failure to hire." The court rejected this argument and explained that application of the after-acquired-evidence doctrine and the unclean hands doctrine to Salas' case based on Salas' misrepresentation of his immigration status would not frustrate the purpose of Senate Bill 1818 because it would still allow "undocumented immigrants to bring a wide variety of claims against their employers as long as these claims are not tied to the wrongful discharge or failure to hire" a person who was not eligible for employment in the United States to begin with.

This case serves as an important reminder that misrepresentations by employees or by unsuccessful job applicants can prove to be an effective defense to claims for wrongful termination and for claims for or related to a refusal to hire if the employer can effectively show it would not have hired the person to begin with or would have terminated the person had the employer known the true facts. In this case, the employer's defense was based in part on its ability to establish it had a policy that precluded the hiring of an applicant prohibited from working in the United States and a policy that precluded the hiring of applicants who submit false information or false documents. We think one of the best ways for an employer to make such showings is to have in place lawful written policies to that effect and to follow those policies consistently.

Court of Appeal Holds Employers Prevailing On Claims For Allegedly Unpaid Minimum Wages Or Overtime Are Entitled To Recover Their Costs

2011-08-15T17:57:00.000-07:00

By Christopher S. Andre and Scott K. Dauscher

Over ten years ago, in Earley v. Superior Court (2000) 79 Cal.App.4th 1420, the California Court of Appeal held that employers who defeat claims for allegedly unpaid overtime wages or minimum wages are not entitled to recover their attorneys fees. The court reasoned that Labor Code section 1194 is a one-way attorney's fees statute that permits prevailing employees but not prevailing employers to recover their attorney's fees. In that case, the court further held that permitting prevailing employers to recover their attorney's fees would be contrary to public policy in that it would have a chilling effect on the right of employees to sue for allegedly unpaid overtime wages or minimum wages.

On August 11, 2011, in Plancich v. United Parcel Service, Inc., the Court of Appeal held that Labor Code section 1194 does not bar an employer prevailing on a claim for allegedly unpaid overtime wages or minimum wages from recovering its costs (i.e., certain litigation expenses) pursuant to Code of Civil Procedure section 1032(b), which states: "Except as expressly provided by statute, a prevailing party is entitled as a matter of right to recover costs in any action or proceeding." The court explained that "the plain language of the statutes is unambiguous--Code of Civil Procedure section 1032, subdivision (b) requires express statutory language exempting a prevailing party from recovering his costs, and section 1194 does not contain language barring a prevailing employer from collecting his costs."

Although the deck remains stacked against California employers in many ways, this new decision provides employers with at least some welcome recourse when an employer is able to defeat a meritless claim for allegedly unpaid overtime wages or minimum wages, and it might discourage some employee litigants from needlessly running up an employer defendant's litigation costs in the pursuit of doubtful claims for allegedly unpaid overtime wages or minimum wages. Every little bit helps.

Governor Brown Approves Amendments Clarifying Provisions of Bone Marrow and Organ Donation Leave Law

2011-08-08T09:48:00.000-07:00

By Jonathan Judge

Last year the California Legislature passed SB 1304, providing employees an opportunity to take paid leaves of absence from work for bone marrow and organ donation, as previously reported here. The law took effect January 1, 2011 and applies to employers with 15 or more employees. The law allows for leaves for organ donation of up to 30 days and bone marrow donation of up to five days in a one-year period. The law also allows employers to 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.

This year, the Legislature passed SB 272 (DeSaulnier), and on August 1, Governor Brown approved the bill, which clarified key provisions of the law. SB 272 clarifies that for purposes of this law, the days of leave shall be business days rather than calendar days. The bill also clarifies that the one-year period is measured from the date the employee’s leave begins and consists of 12 consecutive months. Finally, the law was amended to include a reference to “paid time off” along with sick and vacation leave, which allows employers to require employees to take paid time off prior to taking the leave provided by the law, under the same conditions for sick and vacation leave outlined above.

SB 272 specifies that the amendments are declaratory of existing law. Accordingly, employers administering such leaves should apply the amendments as if they took effect January 1, 2011.

Please check back regularly for updates on California bills as we track legislation in 2011.

NLRB Finds Employer Acted Unlawfully When It Terminated Employees Who Disparaged Employer During Newscast

2011-07-27T16:44:00.000-07:00

By Thomas A. Lenz, Jonathan Judge, and Christopher S. Andre

As we previously reported here and here, in May, the National Labor Relations Board filed complaints against at least two employers alleging the employers violated the National Labor Relations Act ("NLRA") by disciplining employees on account of disparaging statements the employees posted on Facebook statements criticizing their employers. In one of those cases, the employer terminated an employee for posting on his Facebook page photographs and comments criticizing the dealership for serving only hot dogs and water to customers at a dealership sales event promoting a new model. Salespersons complained that serving only hot dogs and water could negatively impact their sales commissions. The NLRB alleges in both both of the cases that the employees statements posted on Facebook are protected concerted activity within the meaning of Section 7 of the NLRA because the statements involved a discussion among employees about their terms and conditions of their employment.

Consistent with the enforcement policy it adopted in the two cases the NLRB brought in May involving Facebook postings, on July 21, in MasTec Advanced Technologies, a division of Mas-Tech, Inc. and Joseph Guest and Direct TV, Inc. and Joseph Guest, Cases 12-CA-24979 and 12-CA-25055, the NLRB ruled that MasTec violated the NLRA when it terminated employees who appeared on a television newscast wearing their uniforms and made disparaging statements about MasTec. The NLRB ruled that employees who make disparaging statements about their employer are engaging in protected activity when the statements are related to a work-dispute and the statements are not disloyal, reckless or maliciously untrue.

According to the NLRB's decision: MasTec installs and maintains satellite television equipment for DirecTV. MasTec service technicians were encouraged to persuade customers to permit the DirectTV satellite receivers to be connected to the customers' telephone line, which provides customers additional features and provides DirectTV with a record of what customers are viewing, which assists DirecTV in making programming decisions. Many customers resist having the connection completed for various reasons.

In 2006, DirecTV reportedly informed MasTec that MasTec would be penalized if MasTec did not increase the percentage of telephone line connections. In turn, MasTec reportedly informed its service technicians they would be back-charged $5 for every non-phone-line-connected receiver installed if they failed to achieve a telephone line connection rate of at least 50 percent. The service technicians voiced opposition to the new policy at several employee meetings. MasTec supervisors reportedly suggested ways around customers’ reluctance to agree to connected receivers, with one manager reportedly telling them to do “whatever you have to tell them” and “whatever it takes” to make the connection.

After a number of service technicians were reportedly back charged in accordance with the new policy, one of the service technicians contacted a local television station, and a group of service technicians drove from the MasTec facility to the television station in their company vans. A reporter met with the workers and interviewed them on film as a group. The station broadcast a story concerning the technicians, in which the technicians recounted MasTec’s new policy and what their supervisors reportedly told them to tell customers to persuade customers to connect their DirectTV receivers to their telephone lines, insinuating they were asked to lie to customers.

After the story aired, MasTec terminated the employees who appeared on the broadcast. The employees filed an unfair labor practice charge with the NLRB. After the NLRB investigated the charge, the case went to hearing, and an administrative law judge ruled in favor of MasTec, finding MasTech did not violate the NLRA when it terminated the employees. The employees appealed the decision to the NLRB Panel in Washington, D.C.

The NLRB Panel began its analysis by citing Section 7 of the Act, which provides, in part, that employees “shall have the right … to engage in … concerted activities for the purpose of … mutual aid or protection.” The NLRB Panel noted that under Section 7, “employee communications to third parties in an effort to obtain their support are protected where the communication indicated it is related to an ongoing dispute between the employees and the employers and the communication is not so disloyal, reckless or maliciously untrue as to lose the Act’s protection.” Based on this standard, the NLRB Panel stated that it has held that the mere fact that statements are false, misleading or inaccurate is insufficient to demonstrate that they are maliciously untrue. Under this standard the NLRB Panel found that none of the technicians’ statements made during the newscast were maliciously untrue. The NLRB also found that the statements were not disloyal or reckless, reasoning, “[w]hile the technicians may have been aware that some consumers might cancel [DirecTV’s] services after listening to the newscast, there is no evidence that they intended to inflict such harm on [DirecTV], or that they acted recklessly without regard for the financial consequences to [DirectTV’s] businesses.”

These recent actions by the NLRB provide two important takeaways for employers:

First, the NLRA's reach is not confined to unionized workplaces. When communications by non-unionized employees are related to a work dispute, the communications may still qualify as protected activity under the NLRA even if the communications are false, misleading, inaccurate, or highly objectionable to management.

Second, these recent actions may signal a more aggressive enforcement posture by the NLRB, particularly given the rise of various forms of social media, such as Facebook and Twitter.

Governor Brown's Nomination Of Goodwin Liu May Bring The California Supreme Court One Step Closer To Deciding The Long Pending Brinker Meal Period Decision

2011-07-27T16:40:00.000-07:00

By Christopher S. Andre and Scott K. Dauscher

On October 22, 2008, the California Supreme Court granted review of the Court of Appeal's decision in Brinker to decide "the proper interpretation of California's statutes and regulations governing an employer's duty to provide meal and rest breaks to hourly workers." Over two years later, the case still has not been scheduled for oral argument, and it remains to be seen when the California Supreme Court will decide the case. Since that time, the California Supreme Court has granted review thereby rendering unciteable six Court of Appeal decisions holding as in Brinker that an employer's obligation to "provide" meal periods to non-exempt employees is to make the required meal periods available and not to ensure that non-exempt employees take the meal periods provided to them: Brinkley v. Public Storage, Faulkinbury v. Boyd & Associates, Brooker v. Radioshack Corporation, Hermandez v. Chipotle Mexican Grill, Tien v. Tenet Healthcare, and, most recently, Lamps Plus Overtime Cases.

During a recent interview reported by the Daily Journal, the recently appointed Chief Justice of the California Supreme Court, Tani Cantil-Sakauye, "declined to say when the court would hear argument, which is the only way to tell that a decision is forthcoming." The Daily Journal reported further that some commentators believe Justice Cantil-Sakauye will not schedule Brinker for oral argument until after Governor Jerry Brown appoints replacement for Justice Carlos R. Moreno, who stepped down to take a position in private practice in order to ensure that the deciding vote in Brinker is not made by a temporary justice.

Yesterday, Governor Brown may have brought the court one step closer to deciding the long pending Brinker meal period decision by nominating UC Berkeley law professor Goodwin Liu to fill the seat vacated by former Justice Moreno. Although Mr. Liu's nomination to the United States Ninth Circuit Court of Appeals by President Barrack Obama was effectively blocked by Senate Republicans who criticized Mr. Liu on various grounds, it is generally expected that his nomination to the California Supreme Court will be swiftly confirmed by the California Commission on Judicial Appointments, consisting of three members: California Supreme Court Presiding Justice Tani Cantil-Sakauye (appointed by former Governor Arnold Schwarzenegger), California Attorney General Kamala Harris (a Democrat elected in 2010 after serving as the District Attorney for the City and County of San Francisco), and Senior Presiding Justice of the California Court of Appeal Joan Dempsey Klein (appointed by Governor Brown during his first term as Governor of California).

California Supreme Court Gives No Clues About When It Will Decide The Long Pending Brinker Meal Period Case

2011-07-20T14:28:00.000-07:00

By Christopher S. Andre and Scott K. Dauscher

During a recent interview reported by the Daily Journal, the recently appointed Chief Justice of the California Supreme Court, Tani Cantil-Sakauye, "declined to say when the court would hear argument, which is the only way to tell that a decision is forthcoming." The Daily Journal reports further that some commentators believe Justice Cantil-Sakauye will not schedule Brinker for oral argument until after Governor Jerry Brown appoints replacement for Judice Carlos R. Moreno, who stepped down to take a position in private practice in order to ensure that the deciding vote in Brinker is not made by a temporary justice.

Currently, the court appears to be more focused on a pending Proposition 8 case in which the court is called upon to decide whether proponents of the Proposition 8 same-sex marriage ban have standing to defend that ballot initiative in federal court. When asked about that case, Justice Cantil-Sakauye reiterated her decision to conduct oral argument of that case in early September, stating, '"It needs to get going. It needs to move forward.'"

Meanwhile, as we previously reported here, also, the California Supreme Court has repeatedly granted review of subsequent Court of Appeal decisions holding as in Brinker that an employer's obligation to "provide" meal periods to non-exempt employees is to make the required meal periods available and not to ensure that non-exempt employees take the meal periods provided to them: Brinkley v. Public Storage, Faulkinbury v. Boyd & Associates, Brooker v. Radioshack Corporation, Hermandez v. Chipotle Mexican Grill, and, most recently, on May 18, 2011, Tien v. Tenet Healthcare. As a result, those favorable decisions can no longer be cited to and are no longer binding precedent, and employers' obligations regarding meal periods for non-exempt employees remain uncertain as it is difficult to predict how the California Supreme Court will decide the issue.

Court Of Appeal Decision Gives Employers Basis For Resisting Fishing Expeditions Seeking Records Of Non-Party Current And Former Employees

2011-07-15T18:24:00.000-07:00

By Christopher S. Andre and Scott K. Dauscher

Employment litigation often gives rise to discovery demands by the plaintiff(s) seeking information about the employer's other current and former employees who are not parties to the litigation and, often, employment records of such non-party employees. This occurs in both class action cases and in non-class action cases. In many cases, such discovery demands are little more than thinly disguised fishing expeditions at the employer's expense. Although existing case law recognizes the privacy rights of non-party current and former employees and generally requires courts to balance those privacy rights against the legitimate discovery needs of plaintiffs in employment cases and to employ certain safeguards, those laws are not always consistently applied by trial courts.

Yesterday, in Life Technologies Corporation v. Superior Court, the California Court of Appeal issued a decision reversing a trial court order requiring the defendant employer to provide to the plaintiff alleging he was discriminated against because of his age detailed information about the employer's current and former employees and set forth steps trial courts must take to protect the privacy rights of current and former employees who are not parties to the lawsuit.

In the decision, the Court of Appeal first recognized and reiterated current and former employees have a recognizable privacy interest in their personal contact information and, to an even greater degree, in their employment records. Although in some circumstances a plaintiff's legitimate need to obtain certain information will outweigh the recognized rights to privacy, "the balance will favor privacy for confidential information in third party personnel files unless the litigant can show a compelling need for the particular documents and that the information cannot reasonably be obtained through depositions or from nonconfidential sources." Emphasis in original. Further, "Even when the balance does weigh in favor of disclosure, the scope of disclosure must be narrowly circumscribed." Emphasis in original.

The court went on to articulate the steps trial courts must take to determine whether information about non-party current and former employees must be disclosed or not and, if so, what safe guards should be used.

Trial courts must first balance the privacy rights of non-party current and former employees against, again, the legitimate discovery needs of the plaintiff(s). Each separate category of documents or information sought must be separately analyzed. For example, with respect to personal contact information of current and former employees, the court noted that such information is not always discoverable, particularly when the party seeking that information does not show that the persons whose personal contact information is being sought are percipient witnesses to relevant events.

When a trial court determines that information about non-party current or former employees is discoverable, the trial court must then provide such non-parties the opportunity to object to the disclosure of documents or information before the documents or information is released. The Court of Appeal explained that such safeguards exist when such documents and information is sought by way of a subpoena and states: "We do not believe a nonparty employee/former employee should be deprived of such protections simply because the discovery vehicle used is a set of special interrogatories, rather than a subpoena. . . ."

When a trial court determines that information about non-party current or former employees is discoverable, the trial court must also take steps "for maintaining the confidentiality of any disclosed information, by sealing it and/or limiting its use and dissemination."

We are pleased by today's decision. We think it likely provides employers a much needed basis for resisting the sort of fishing expeditions that have become all too common in employment litigation in California.

Court Of Appeal Holds Employer-Employee Arbitration Agreement Is Unconscionable And Therefore Unenforceable

2011-07-14T11:33:00.000-07:00

By Christopher S. Andre and Scott K. Dauscher

In Zullo v. Superior Court, the California Court of Appeal once again struck down an employer-employee arbitration agreement based on the court's conclusion that the arbitration agreement was both procedurally and substantively unconscionable and therefore unenforceable. The decision serves as a reminder to employers that arbitration provisions considered to be overly one-sided in favor of the employer are likely to be struck down by California courts.

The arbitration agreement at issue contained terms providing: (1) that employment related claims by employees must be resolved by binding arbitration (excepting only certain claims) but permitted the employer to bring claims against employees in court, (2) that claims by employees would be arbitrated according to American Arbitration Association Employment Dispute Resolution rules, which were apparently not provided to employees, (3) that employees must request arbitration within one year of the date a dispute occurred or the claim(s) are waived, and (4) that employees must respond within ten calendar days to communications regarding selection of an arbitrator and scheduling the arbitration hearing or the claim(s) are waived.

Relying heavily on the California Supreme Court's decision in Armendariz v. Foundation Health Psyschcare Services, Inc. (2000) 24 Cal.4th 83, the Court of Appeal held the arbitration agreement at issue is both procedurally and substantively unconscionable. In that case, the California Supreme Court held, among other things, that the agreements at issue impermissibly required employees to submit claims to arbitration while permitting the employer to bring suit in court and impermissibly limited the damages available to aggrieved employees.

Taking its guidance from the Supreme Court's decision and from subsequent decisions applying it, the court in Zullo concluded the arbitration agreement at issue "is a contract of adhesion, fails to give adequate notice of the arbitration rules that will apply, and allows [the employer] the full range of remedies and forums for resolution of whatever claims it might have against [its employees] while limiting [its employees] to binding arbitration of [their] claims against [the employer]. It also imposes strict time limits within which petitioner must respond to any arbitration-related communication without imposing similar requirements on [the employer]."

The court in Zullo held, also, that the arbitration agreement at issue was so "permeated by unconscionability" that the provisions of the arbitration agreement the court found unconscionable could not be stricken ,and the remainder of the agreement could not be enforced according to the remaining permissible terms. The court states: "The illegality cannot be excised here. Striking the forfeiture provision would not cure the other problem, which is that the agreement applies only to the [employee]. There is no single provision we can strike in order to remove that unconscionable taint."

Two AALRR Attorneys Named To The Daily Journal Annual List Of Leading California Labor And Employment Law Attorneys

2011-07-13T16:30:00.000-07:00

The Daily Journal issued today its annual list of leading California Labor and Employment Law attorneys. We are pleased to report that two AALRR attorneys were recognized on this year's list, Nate J. Kowolski, a partner in the Firm's Employer Services Practice Group, and Howard A. Sagaser, also a partner in the Firm's Employer Services Practice Group. Click here to read more.

California Court of Appeal Holds Arbitration Agreements Waiving Right To Pursue California Labor Code Private Attorneys General Act Claims Are Unenforceable

2011-07-12T18:10:00.000-07:00

By Christopher S. Andre and Scott K. Dauscher

Today, 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 the California Labor Code Private Attorneys General Act of 2004 ("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. Further, the Court of Appeal remanded the case back to the trial court for a determination of whether the arbitration agreement is enforceable except for the PAGA waiver or is unenforceable in its entirety because of the PAGA waiver.

Notably, one member of the three justice panel that decided the case dissented from that part of the decision holding that that waiver of the right to file a representative action under PAGA is unenforceable and expressed the view that "[t]he preemptive effect of the Federal Arbitration Act (FAA) requires enforcement of the PAGA waiver in the employment arbitration agreement [at issue in the case] under the holding of AT&T v. Concepcion." That dissenting opinion suggests reasons why a higher court might later disagree with the Court of Appeal and hold that PAGA waivers are enforceable under the FAA despite contrary state law.

Today's decision if left undisturbed by higher courts is a significant setback for 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. 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. Further, as we previously reported here and here, California courts hold that PAGA penalties apply, also, to violations of Industrial Welfare Commission Wage Orders.

Given the significance of the issues involved in today's decision, we anticipate further developments, regarding those issues, which we will report on here.

In the meantime, in light of today's decision, we think employers that have in place or are considering implementing arbitration agreements containing PAGA waivers should promptly consult competent employment law counsel.

Court Of Appeal Affirms Denial Of Class Certification In Wage And Hour Case Brought By Accountants

2011-07-11T17:43:00.000-07:00

By Ronald W. Novotny

In another of several recent decisions in class action cases issued by California appellate courts, the Second District Court of Appeal last week upheld the denial of class certification in a case brought on behalf of accountants for unpaid overtime. (Soderstedt v. CBIZ, July 7, 2011). The court found that because the responsibilities of each of the alleged class members differed with their levels of experience, the particular engagements they worked on, the clients and clients’ industries, and the other accountants they worked with, common questions of law and fact did not predominate and the proposed class could not be certified.

The plaintiffs who brought the suit were employed by an accounting and financial services firm that provided tax, attest, and litigation support in the greater Southern California area. The firm maintained an office with 55 accountants in Los Angeles who mainly performed audits for public companies, a Bakersfield office of 43 accountants who served a diverse client base including non-profits and government clients, and an Oxnard office of 21 accountants who mainly performed services for construction industry clients. The firm submitted 38 declarations establishing that each assignment was different and required the accountants to utilize their accounting knowledge and judgment in performing the services required for the engagement. Evidence was also submitted demonstrating how the level of client contact differed based on the accountants’ ability and experience, and establishing that their level of supervision normally decreased with each further engagement.

The firm relied upon the administrative exemption to justify the non-payment of overtime, based on the assertion that they performed “under only general supervision work along specialized or technical lines requiring special training, experience, or knowledge.” The appeals court stated that if the issues presented by this defense predominated over common issues, class certification could be defeated on this basis. Finding that the evidence presented on the motion for class certification showed a wide degree of variance in the amount of independent judgment and discretion exercised by the accountants on any given assignment, the court held that class treatment was not appropriate because of the individualized inquiries that would be required to determine if the exemption applied on a case-by-case basis.

Although not essential to its decision, the court also found that class certification was properly denied because the plaintiffs had submitted absolutely no evidence as to how numerous the class was or how they qualified as adequate class representatives. As to the latter point, the court noted that there was no statement by the plaintiffs that they understood the obligations of being a class representative, or any recognition of the “substantial burden that they would be undertaking” to represent absent class members. These findings will also likely prove helpful to employers in defending future class certification motions in wage and hour cases.

AALRR Named To The National Law Journal 2011 Midsize Hot List

2011-07-11T16:08:00.000-07:00

By Christopher S. Andre and Scott K. Dauscher

The National Law Journal announced today it named Atkinson, Andelson, Loya, Ruud & Romo to The National Law Journal's 2011 Midsize Hot List. The National Law Journal reports it "settled on 20 firms that demonstrated excellence in the courtroom or boardroom; that spotted a niche that eluded their competitors or that excelled on many fronts . . . firms that clearly stand apart from your everyday law firm."

Proposed Department Of Labor And National Labor Relations Board Rule Changes Will Likely Energize Labor Unions

2011-06-23T12:48:00.000-07:00

By Thomas A. Lenz

This week proposed changes in the rules affecting labor relations have come from two federal agencies.

The Department of Labor (DOL) has, for many years, enforced the Labor Management Reporting and Disclosure Act. That law requires reporting by unions on their financial health and business transactions. It also requires reporting by employers and management consultants on arrangements by which management communicates to employees on labor relations issues. The management obligations have not extended to attorney-client relationships or otherwise invaded attorney-client privilege. The proposed regulations would expand the reporting obligations to include arrangements that employers enter into for direct or indirect communication with employees about labor issues. The DOL will receive comments on the proposed regulations in the weeks ahead. The debate is likely to be quite intense, particularly as questions arise on the scope of the reporting obligation and the potential invasion of attorney-client privilege.

A prior effort to expand management reporting obligations was attempted during the Clinton Administration, but it failed. An expanded reporting obligation for management has long been a goal of the current Administration.

The day after DOL announced its proposals, the National Labor Relations Board (NLRB) announced that it would pursue changes to its representation election process. NLRB has typically held workplace elections, for employees to decide on union representation, within 42 days of the filing of an election petition. The 42 days period became the norm during the Clinton Administration, shortening the period that had previously existed. There has been much speculation over what the NLRB's changes would mean for the election process. Basic points include that the pre-election period would be shorter than 42 days and that the Labor Board would try to eliminate pre-election hearings and litigation over voter eligibility, saving such issues for a post-election review phase. Much remains to be clarified. The Labor Board will be receiving public comments in the weeks ahead. Debate is already quite intense on these issues.

Since proposed legislation to stimulate union organizing in the Employee Free Choice Act failed during the 2008-2009 period, the Labor Board's internal regulatory process has gained attention from advocates of labor law reform as the next best vehicle to promote organizing and to restore labor's reliance on the NLRB and its processes.

Debate, developments, and media attention are likely to follow through the summer. Employers should, at minimum, stay tuned and, consider whether it is in their interest to make public comment on these issues before new rules take effect.

U.S. Supreme Court Reverses Ninth Circuit Court of Appeals And Holds Lower Court's Certification Of Class Of Approximately 1.6 Million Women Employees In Alleged Discrimination Case Was Error

2011-06-20T11:58:00.000-07:00

By Christopher S. Andre and Scott K. Dauscher

As we previously reported here, 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.

As we previously reported here, on December 23, 2010, only 17 days after it granted Wal-Mart's petition for review on December 6, 2010, the Supreme Court set the case for oral argument on March 29, 2011.

Today, the Supreme Court of the United States reversed the decision of the Ninth Circuit Court of Appeals and held, among other things, the trial court decision to certify a class was error because common issues of law and fact do not predominate. Click here to download and read a copy of the decision, which we are analyzing and will comment about further soon. In the meantime, suffice it to say today's decision is a terrific decision for employers nationwide.

Appellate Court Afirms $187 Million Verdict Against Wal-Mart In Meal And Rest Period Case

2011-06-13T15:08:00.000-07:00

By Christopher S. Andre and Scott K. Dauscher

MSNBC reports today that a Pennsylvania appellate court affirmed a $187.6 Million verdict against Wal-Mart Stores, Inc., in a class action lawsuit for allegedly denying hourly employees meal and rest breaks. Although the appellate court affirmed the damages verdict, it did order the trial court to recalculate the $45.6 Million award of attorneys fees to the employees' attorneys, indicating the trial court erred by "double-counting" some factors when calculating the attorney's fees award. Click here to read the story.

Meal and rest period cases continue to be a significant source of potential exposure for employers large and small. Employers concerned about such potential exposure should consider consulting experienced employment law counsel about strategies for reducing potential meal and rest period liability. Among other things, having in place appropriate written meal and rest period policies and documenting the company's adherence to those policies is often the best defense to meal and rest period claims.

NLRB Issues A Complaint Against Another Employer Over Employee Facebook Postings

2011-05-24T15:05:00.000-07:00

By Christopher S. Andre and Thomas A. Lenz

As we previously reported here, the National Labor Relations Board (NLRB) issued on May 18, 2011, a press release announcing the NLRB issued a complaint against a non-profit employer for allegedly violating the National Labor Relations Act (NLRA) by terminating five employees who posted on a co-worker's Facebook page comments critical of their working conditions. According to the NLRB's press release, "The complaint alleges that the Facebook discussion was protected concerted activity within the meaning of Section 7 of the National Labor Relations Act, because it involved a conversation among coworkers about their terms and conditions of employment, including their job performance and staffing levels." Click here to download and read the press release.

Today, the NLRB issued another press release stating it issued a complaint against a Chicago car dealership alleging the dealership violated Section 7 of the National Labor Relations Act when it terminated an employee for posting on his Facebook page photographs and comments criticizing the dealership for serving only hot dogs and water to customers at a dealership sales event promoting a new model. Salespersons complained that serving only hot dogs and water could negatively impact their sales commissions. According to the NLRB's press release, "[t]he complaint alleges that the employee’s Facebook posting was protected concerted activity within the meaning of Section 7 of the National Labor Relations Act, because it involved a discussion among employees about their terms and conditions of employment, and did not lose protection based on the nature of the comments." Click here to download and read the press release.

Employers should be aware that both the NLRA and the California Labor Code generally prohibit discipline of or discrimination against employees for disclosing to others the amount of their wages or information about the employees' working conditions. In light of those prohibitions and in light of the recent enforcement activity by the NLRB over employee Facebook postings, employers should consult with experienced employment and labor law counsel when considering discipline of employees for postings on social media websites, such as Facebook.

California Supreme Court Grants Review Of Another Meal Period Decision Favorable To Employers

2011-05-20T15:03:00.000-07:00

By Christopher S. Andre and Scott K. Dauscher

As many of our readers know, the California Court of Appeals decided in Brinker Restaurant Corporation v. Superior Court that an employer's obligation to "provide" to non-exempt employees meal periods required by the Labor Code and the applicable Industrial Welfare Commission Wage Orders is to make those meal periods available and not to ensure that employees take the meal periods provided to them.

Meanwhile, the California Supreme Court has repeatedly granted review of subsequent Court of Appeal decisions holding as in Brinker that an employer's obligation to "provide" meal periods to non-exempt employees is to make the required meal periods available and not to ensure that non-exempt employees take the meal periods provided to them: Brinkley v. Public Storage, Faulkinbury v. Boyd & Associates, Brooker v. Radioshack Corporation, Hermandez v. Chipotle Mexican Grill, and, most recently, on May 18, 2011, Tien v. Tenet Healthcare. As a result, those favorable decisions can no longer be cited to and are no longer binding precedent, and employers' obligations regarding meal periods for non-exempt employees remain uncertain as it is difficult to predict how the California Supreme Court will decide the issue. We will continue to monitor these issues and will report on further developments when they occur.

NLRB Issues Complaint Against Non-Profit Employer For Disciplining Employees For Facebook Posts Critical Of The Employees' Working Conditions

2011-05-18T15:02:00.000-07:00

By Christopher S. Andre, Scott K. Dauscher and Thomas A. Lenz

The National Labor Relations Board (NLRB) issued today a press release announcing the NLRB issued a complaint against a non-profit employer for allegedly violating the National Labor Relations Act (NLRA) by terminating five employees who posted on a co-worker's Facebook page comments critical of their working conditions. According to the NLRB's press release, "The complaint alleges that the Facebook discussion was protected concerted activity within the meaning of Section 7 of the National Labor Relations Act, because it involved a conversation among coworkers about their terms and conditions of employment, including their job performance and staffing levels." Click here to download and read the press release.

California Supreme Court Declines To Review Or Depublish Court of Appeal Decision Upholding Explicit Mutual Wage Agreement Doctrine Permitting Non-Exempt Employees To Be Paid A "Salary" If Certain Requirements Are Met

2011-05-17T13:26:00.000-07:00

By Christopher S. Andre and Andres C. Hurwitz

As we previously reported here, on February 7, 2011, in Arechiga v. Dolores Press, Inc., the California Court of Appeal upheld California’s “explicit mutual wage agreement” doctrine. “Under that doctrine,” said the court, “an employer and [non-exempt] employee may lawfully agree to a guaranteed fixed salary so long as the employer pays the employee for all overtime at least one and one-half times the employee’s basic rate” so long as the employer and the employee enter into an agreement specifying: (1) the days the employee will work each workweek, (2) the number of hours the employee will work each workday, (3) the specific amount of the salary the employee is guaranteed to be paid, (4) the employee is informed and agrees to the basic hourly rate of pay upon which the salary will be based, (5) the employee is informed and agrees the agreed-upon salary covers the employees straight-time hours and overtime hours, and (6) the agreement is reached before the work is performed.

Last week, the California Supreme Court denied requests to review and to depublish the Court of Appeal's decision. This means the Court of Appeal's decision stands and explicit mutual wage agreements meeting the six requirements stated above and otherwise complying with the court's holding in Arechiga v. Kores Press, Inc., remain lawful. We recommend that employers wishing to maintain or adopt such mutual explicit wage agreements consult with experienced employment law counsel.

Department of Labor Rolls Out Smart Phone Application That Enables Employees To Track Hours Worked And Submit Complaints

2011-05-17T12:46:00.000-07:00

By Christopher S. Andre, Scott K. Dauscher, and Thomas A. Lenz

The United States Department of Labor ("DOL") recently announced the release of a free smart phone application available in English and Spanish that will enable employees to "independently track the hours they work and determine the wages they are owed." According to the DOL, "users conveniently can track regular work hours, break time and any overtime hours for one or more employers." The DOL goes on to state, "[t]his new technology is significant because, instead of relying on their employers’ records, workers now can keep their own records. This information could prove invaluable during a Wage and Hour Division investigation when an employer has failed to maintain accurate employment records." In addition, the application "includes easy-to-understand information about workers’ rights and how to file a wage violation complaint." Click here to learn more. Click here to download the iPhone version of the application.

Whether the DOL's new smart phone application will become widely used by employees remains to be seen. However, the release of the application reflects what we believe is a more aggressive enforcement posture by the DOL and underscores the need for employers to keep accurate, contemporaneous records of hours worked by employees.

California Supreme Court Declines To Review Helpful Court of Appeal Decision Regarding Penalties For Wage Statement Violations

2011-05-13T18:11:00.000-07:00

By Scott K. Dauscher and Christopher S. Andre

As we previously reported here, in in Drake Price v. Starbucks Corporation,, the Court of Appeal held, among other things, that a plaintiff does not state a viable claim for Labor Code Section 226.7 penalties merely because a wage statement does not contain all of the required information.

Labor Code Section 226(a) requires employers to provide to employees with their paychecks a wage statement (sometimes referred to as a check stub) accurately stating the following nine items of information: (1) gross wages earned, (2) total hours worked by the employee (except exempt salaried employees), (3) the number of piece-rate units earned and any applicable piece-rate(s) if the employee is paid on a piece-rate basis, (4) all deductions, (5) net wages earned, (6) inclusive dates of the pay period, (7) the name of the employee and the last four digits of the employee's social security number or the employee's identification number other than the social security number, (8) the name and address of the legal entity that is the employer, and (9) all applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate.

When an employee suffers injury as a result of an employer's knowing and intentional failure to provide a compliant wage statement, the employee can recover the greater of either the employee's actual damages or $50.00 "for the initial pay period in which a violation occurs" and $100 "per employee for each violation in a subsequent pay period, not exceeding an aggregate penalty of four thousand dollars, and is entitled to an award of costs and reasonable attorney's fees." See Labor Code section 226(e).

Drake Price, who was employed by Starbucks for a total of 13 shifts before he was fired after failing to report to work for a scheduled shift, alleged, among other things, that Starbucks was liable to him and to each member of the purported class for Labor Code section 226.1 damages because, according to Mr. Price, the wage statements Starbucks issued do not list total hours worked, net wages earned, and all applicable hourly rates." Mr. Price contended "'total' means grand total, the sum of the regular and overtime rates." Price contended Starbucks' use of the words "'amount paid' following gross pay and deductions does not comply with the requirement to show 'net wages.'" Mr. Price contended, also, that the wage statements "lists the regular rate of pay, but fails to list the overtime rate of pay, requiring him to ensure that the overtime rate is one and one-half his regular rate of pay."

Recognizing that a non-compliant wage statement is not actionable without injury, Mr. Price contended he was injured because, according to him, "[t]his lack of information 'caused confusion and possible underpayment of wages due,' required the putative class to file [suit], and forced the putative class to attempt to reconstruct their time and pay records."

Notably, the Court of Appeal distinguished a troublesome decision of the United States District Court for the Central District of California in Wang v. Chinese Daily News, Inc. (C.D. Cal. 2006) 435 F.Supp.2d 1042 essentially holding that injury occurs if the employee must perform mathematical calculations to determine whether he or she was paid correctly. Distinguishing Wang v. Chinese Daily News, the court explained: "Price alleged a 'mathematical injury,' that required him to add up his overtime and regular hours and to ensure his overtime rate of pay is correct, but the allegedly missing information from Price's wage statement is not the type of mathematical injury that requires 'computations to analyze whether the wages paid in fact compensated [him] for all hours worked.'" Simply put, "[t]he injury requirement in section 226, subdivision (e), cannot be satisfied simply if one of the nine itemized requirements in section 226, subdivision (a) is missing from a wage statement."

On May 12, 2011, the California Supreme Court denied the plaintiff's petition for review of the Court of Appeal's helpful decision. This means the Court of Appeal's decision stands, and it means the District Court's troublesome decision in Wang v. Chinese Daily News now has even less persuasive value than it previously had.

Although the Court of Appeal's decision makes California employers less vulnerable to claims for Labor Code section 226.7 penalties based on essentially non-material violations of the requirements of Labor Code section 226.7, the best defense to claims for such penalties is to make certain wage statements are fully compliant with all of the requirements of Labor Code section 226.7.

DFEH Clinic Partners With UC Irvine Law School To Combat Workplace Discrimination

2011-05-10T19:17:00.000-07:00

By Thomas A. Lenz

In a memo dated May 3, 2011, it was announced that the Department of Fair Employment and Housing ("DFEH") would begin a new collaborative effort with the University of California at Irvine Law School to combat allegations of systemic discrimination. DFEH and UC Irvine have established a clinic in which law students will assist DFEH agents on tasks which include evaluation, investigation, and prosecution of discrimination claims. The clinic is prompted by a $6+ million class action settlement of discrimination claims against Verizon and can expand into other cases. In this time of tightened public budgets and a difficult hiring market for new law graduates, we are likely to see additional efforts by public agencies and law schools to enhance training and future employment opportunities in government service. Employers facing DFEH or other administrative claims arising in the workplace may well see heightened activity on their cases through this partnership and law students the DFEH describes as the "civil rights leaders of the future."

Landmark Supreme Court Decision Likely Permits Employers To Require Employees To Pursue Claims Individually And Not By Way Of Class Action Lawsuits

2011-05-05T17:23:00.000-07:00

By Christopher S. Andre, and Scott K. Dauscher

As we previously reported here, a report issued by the Judicial Council of California, Administrative Office of the Courts, Office of Court Research, shows that employment cases were the most frequently filed class actions, representing 29.3% of the class actions filed, and that over half of the employment cases filed alleged violations of Labor Code provisions governing payment of wages, rest and meal periods, and related claims. This is consistent with our experience representing numerous employers against such class action lawsuits.

Many employers have attempted to require current and former employees to pursue claims individually and not by way of class action lawsuits by requiring employees to agree to arbitrate individually whatever claims they might have. California courts repeatedly struck down such arbitration agreements in whole or in part by finding such agreements to be "unconscionable" or "contrary to public policy." Those courts have declined to apply the Federal Arbitration Act ("FAA") to such arbitration agreements. Among other things, the FAA states:

A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.

However, a recent decision by the Supreme Court of the United States has the real potential to change all that for many if not most California employers. In AT&T Mobility LLC v. Vincent Concepcion, the Supreme Court reversed a decision of the United States Court of Appeals for the Ninth Circuit holding (1) that an arbitration agreement between AT&T and its cell phone customers requiring customers to bring claims in their "'individual capacity, and not as a plaintiff or class member in any purported class or representative proceeding'" is unconscionable and therefore unenforceable because,"AT&T had not shown that . . . arbitration adequately substituted for the deterrent effect of class actions" and (2) that the basis for the finding of unconscionability "was not preempted by the [FAA]." In other words, the Supreme Court rejected lower courts' analyses of the issue and held that arbitration agreements are generally enforceable according to their terms under the FAA, and neither California courts nor other courts can evade the FAA merely by declaring an arbitration agreement to be "unconcionable" in whole or in part. The Court explained "the judicial hostility towards arbitration that prompted the FAA had manifested itself in 'a great variety' of devices and formulas' declaring arbitration against public policy."

Although the Supreme Court's landmark ruling concerned an arbitration provision of a consumer contract and not an arbitration agreement between and employer and an employee, we think the holding and the reasoning of the decision applies with equal or nearly equal force to arbitration agreements between employers and employees. In Southland Corp., v. Keating, the Supreme Court held the FAA applies to state courts and is intended to preempt state anti-arbitration laws to the contrary, and in Circuit City Stores, Inc., v. Saint Clair Adams, the Supreme Court held the FAA generally applies to employment contracts.

Unfortunately, not all employers will be able to take advantage of this landmark decision. The FAA expressly exempts from its reach "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce," which the Supreme Court held in Circuit City Stores, Inc., v. Saint Clair Adams applies to and is limited to "transportation workers, defined, for instance, as those workers 'actually engaged in the movement of goods in interstate commerce," such as truck drivers. In other words, the FAA cannot be used as a basis for requiring such employees to arbitrate employment claims on an individual basis and not by way of a class action lawsuit.

Also, and predictably, there are already moves afoot to unwind legislatively the effect of Supreme Court's ruling.. The day the decision came down, United States Senators Al Franken (D-Minn.), (of Saturday Night Live fame) and Richard Blumenthal (D-Conn.), and Representative Hank Johnson (D-Ga.) announced they will introduce legislation called the "Arbitration Fairness Act," which would eliminate "forced arbitration clauses in employment, consumer, and civil rights cases. . . ." Click here to see the press release. Whether such moves will prove to be successful given the present constitution of the Congress and the present political and economic climate remain to be seen.

In any event, based on this landmark ruling and its potential to effectively immunize many employers against class action lawsuits by current or former employees, we think employers should promptly consult competent employment law counsel about either revising existing employer-employee arbitration agreements to require arbitration of employment claims on an individual basis and not on a class basis or about requesting or requiring employees to now enter into such arbitration agreements.

We are continuing to study this important decision and what other impact it might have on California employers and will likely post further commentary.

Court of Appeal Clarifies Rules Regarding "Workweeks" And Compensability Of Off-Duty On-Call Or Standby Time

2011-04-20T23:20:00.000-07:00

By Sun Hi Ahn and Christopher S. Andre

In Symore v. Metson Marine, Inc., the California Court of Appeal once again reversed a trial court decision in favor of the employer and, construing liberally the statutes and regulations at issue "with an eye toward promoting" protection and benefit of employees, held (1) an employer cannot avoid obligations to pay overtime by designating a workweek in order to deprive employees of overtime compensation they would be entitled to and (2) that off-duty on-call or standby time was compensable time based on the facts of the case.

Labor Code section 500 defines a "workweek" as "any seven consecutive days, starting with the same calendar day each week. 'Workweek' is a fixed and regularly recurring period of 168 hours, seven consecutive 24-hour periods." Emphasis added.

Metson's employees worked 14-day hitches on Metson's ships, which handle emergency clean up of oils spills and other hazardous materials off the California coast. Metson established for all of its employees a workweek beginning on Monday at 12:00 a.m., and ending on Sunday at 11:59 p.m., which is a relatively common workweek. However, all of Metson's employees assigned to ships worked alternating 14-day hitches beginning on Tuesday at 12:00 noon and ending at 12:00 noon 14 days later. Under Metson's workweek, the employees worked six days in the first workweek, seven days in the second workweek, and two days in a third workweek. Accordingly, Metson paid the employees the required premium pay for the seventh consecutive day worked only for the seventh consecutive day worked during the second workweek. The trial court determined that Metson's workweek was lawful and that Metson properly paid its employees.

Although the text of Labor Code section 500 permits an employer to designate "any seven consecutive days starting with the same calendar day each week" as a workweek and seeming grants to employers complete discretion to designate the workweek as the employer sees fit, on appeal, the Court of Appeal held an employer does not have such complete discretion. The court held "an employer may not designate its workweek in a manner that is designed primarily to evade overtime compensation." The court went on to explain: "[F]or all employees working aboard its vessels Metson has established a single work schedule that begins on a Tuesday, while designating the 'workweek' to begin on a Monday, accomplishing nothing apparent in the record other than the elimination of overtime." Thus, "an employer may designate a workweek used to calculate compensation that differs from the work schedule of its employees only if there is a bona fide business reason for doing so, which does not include the primary objective of avoiding the obligation to pay overtime."

During their 14-day hitches, Metson's employees were paid 12 hours each day for on-duty time regardless of whether the employees performed work for the full 12 hours, four of which were paid at the overtime rate. Metson deemed the remaining 12 hours as standby time and allowed 8 hours for sleep on Metson's ships and the remaining 4 hours as meal or free time. During that time, employees were free to leave their ships, but they were not permitted to consume alcohol and were required to return to their ships within a maximum of 45 minutes when necessary. The trial court determined that Metson was not required to pay its employees for any of the 12 off-duty hours each workday.

On appeal, the Court of Appeal held Metson was not required to compensate its employees for any of the 8 hours each day allowed for sleeping because the employees worked 24 hour shifts and because the employees entered into a non-written agreement with Metson that the time allowed for sleeping would not be considered compensable time.

As for the 4 hours designated as meal or free time, the Court of Appeal held this time is compensable time because of the restrictions Metson placed on how the employees could spend that time. Applying a previous California Supreme Court decision stating "'[t]he level of the employer's control over its employees, rather than the mere fact that the employer requires the employees' activity, is determinative' of whether particular hours constitute hours worked,'" the Court of Appeal reversed the trial court and held the 4 hours designated as meal or free time is compensable time because "[t]he required response time [45 minutes] (and perhaps the alcohol ban) precluded plaintiffs from going places and pursing activities in which they might otherwise have engaged" and is compensable time even though "the undisputed evidence is that emergencies were rare and that plaintiffs were seldom called back to the ship during their off-duty hours."

In light of this decision by the Court of Appeal, employers should be mindful that courts will scrutinize designated workweeks that differ from employees' actual work schedules to determine (a) whether a designated workweek deprives employees of overtime pay the employees would otherwise be entitled to and (b) whether the designated workweek is supported by a bona fide business reason for doing so apart from reducing or eliminating the payment of overtime compensation.

Employers should be mindful, also, that courts will often deem non-work-time as compensable time if the employer places significant restrictions on how employees may use non-work-time based on the following seven factors: "(1) whether there was an on-premises living requirement; (2) whether there were excessive geographical restrictions on employee's [sic] movements; (3) whether the frequency of calls was unduly restrictive; (4) whether a fixed time limit for response was unduly restrictive; (5) whether the on-call employee could easily trade on-call responsibilities; (6) whether use of a pager could ease restrictions; and (7) whether the employee had actually engaged in personal activities during call-in time."

Court of Appeal Holds Employer Does Not Violate FEHA By Terminating Bipolar Employee Who Violated Employer's Policy Against Making Threats Of Violence Against Co-Workers

2011-04-18T17:38:00.000-07:00

By Andres C. Hurwitz and Christopher S. Andre

Can an employer terminate an employee whose physician-diagnosed disability (bipolar disorder) caused her to make threats of violence against co-workers without violating the provisions of California's Fair Employment and Housing Act ("FEHA") forbidding discrimination against employees because of a disability or a medical condition?

During the beginning stages of a manic episode, Linda Wills arrived for work and after waiting a few minutes to be admitted to a secured police department facility she was assigned to, Wills became angry, swore, and told police department employees at the facility she added them to her "Kill Bill" list for leaving her out in the heat. A few days later, Wills' physician placed her on a medical leave to treat her manic episode.

Other incidents followed. While on medical leave, Wills forwarded to at least one co-worker a ring tone containing video who a coworker complained disturbed her on account of the tenor and the content of the angry ring tone culminating "in a shrieking directive: 'I'm going to blow this [explicative] up if you don't check your messages right now! . . . [explicative]." Other email messages followed, including one which stated "I say that because I'm covering my [explicative], just in case one of you evil [explicative] feel like punishing me again by calling the police or showing them my numerous 'so called hate' emails."

After placing Wills on administrative leave and conducting an investigation, including an investigation of Wills' complaints that she was harassed, the Orange County Superior Court terminated Wills' employment for violating various policies, including a policy forbidding workplace violence or making threats of workplace violence.

The trial court granted summary judgment in favor of the Orange County Superior Court and against Wills on all of her claims that the Orange County Superior Court discriminated against her on account of her disability (bipolar disorder) and violated the FEHA in various ways when it terminated her employment on two grounds: (1) Wills failed to exhaust her administrative remedies by first submitting to the Department of Fair Employment and Housing a complaint identifying the alleged conduct that later formed the basis for her lawsuit, and (2) the Orange County Superior Court met its burden of showing a non-pretextual, non-discriminatory reason for terminating Wills' employment.

On appeal, in a narrowly drawn decision distinguishing between misconduct involving violence or threats of violence from other types of misconduct, in Wills v. Superior Court of Orange County the Court of Appeal held on the facts of the case before it that "Wills's disability discrimination claim fails because an employer may reasonably distinguish between disability caused misconduct and the disability itself when the misconduct includes threats or violence against coworkers." In so holding the Court of Appeal expressly rejected Wills' contention that the FEHA "prohibits an employer from terminating or disciplining an employee for workplace misconduct caused by a disability in the same manner as it prevents an employer from discriminating against an employee for having a disability."

On appeal, the Court of Appeal held, also, that all but one of Wills' claims failed for the additional reason she did not identify in the complaint she submitted to the DFEH before filing suit the alleged discrimination and marked the box stating she was denied family/medical leave, which is not what she later sued for.

As welcome as this decision is, employers should remain mindful of what the Court of Appeal did not decide. While the Court clearly holds misconduct in the form of violence or threats of violence can be the subject of discipline without violating the FEHA, the Court of Appeal did not reach the question of what other types of misconduct would be subject to a similar rule. Employers should therefore exercise caution when deciding whether to terminate or discipline employees for other types of misconduct when the misconduct is the result of a disability or a medical condition.

Governor Brown Signs AB 36, Which Conforms California Law to Federal Law To Allow Tax Deductions For Employers Providing Health Care Coverage To Dependents Under Age 27

2011-04-08T12:01:00.000-07:00

By Christopher S. Andre and Scott K. Dauscher

Yesterday, Governor Edmund G. Brown, Jr., signed Assembly Bill 36, which conforms California law to federal law to allow tax exclusions or deductions for employers that provide health care coverage to employee dependents who are under age 27. The Legislative Counsel's Digest states:

AB 36, Perea. Income and employment taxes: federal conformity: Health Care and Education Reconciliation Act of 2010. The Personal Income Tax Law and the Corporation Tax Law, in specified conformity with federal income tax laws, provide certain gross income exclusions, as specified. This bill would, under both laws, provide additional conformity with federal income tax laws by adopting specified provisions of the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 relating to gross income exclusions for reimbursements for medical care expenses under specified plans for dependents, as specified. Existing law excludes from the definition of "wages," for purposes of the unemployment insurance law, remuneration in excess of $7,000 paid to an individual by an employer during any calendar year, with respect to employment. That law also excludes from the definition of "wages" the amount paid by an employer for insurance or annuities, or into a fund to provide for any payment made to or on behalf of an employee or any of his or her dependents under a plan or system, as specified, on account of sickness or accident disability, medical or hospitalization expenses in connection with sickness or accident disability, or death. This bill would, under the unemployment insurance law, provide additional conformity with federal law by adopting specified provisions of the Health Care and Education Reconciliation Act of 2010 relating to an exclusion from wages for amounts expended for medical care. This bill would take effect immediately as a tax levy.

Click here to download and read the text of this new law.

We recommend employers that provide such health care benefits or that are considering providing such health care benefits consult with competent tax professions to determine how to best take advantage of this new law that takes effect immediately.

Employer Tip: Be Sure To Comply With California's Sexual Harassment Avoidance Training Requirements

2011-04-01T16:55:00.000-07:00

By Mathew S. D'Abusco

The State of California requires employers with 50 or more employees to provide their supervisors a minimum of two hours of sexual harassment prevention training every two years. Mandated sexual harassment training must address, among other key topics, California and Federal statutes and cases prohibiting sexual harassment, the types of conduct typically found to constitute sexual harassment, information about the complaint process, investigation techniques, policy implementation, strategies to prevent sexual harassment in the workplace, as well as a discussion about liability and potential remedies available to a complainant. To be sufficient, training must include questions, hypotheticals, and skill-building activities to ensure supervisors gain an understanding of their legal obligations. Covered employers must also document and maintain records of sexual harassment training provided to supervisors for each two year cycle.

Sexual harassment training is not only required by law, it is critical for California employers. Effective sexual harassment training can help supervisors identify and prevent sexual harassment before it becomes a serious issue or civil lawsuit and, most importantly, can help employers limit liability in the workplace. For those reasons, all employers, not just those with 50 or more employees, should conduct regular sexual harassment training consistent with the law.

AALRR provides comprehensive sexual harassment prevention training to employers throughout the State of California. Depending on circumstance and need, AALRR offers personalized, on-site group training and also conducts monthly trainings at our Cerritos office on the second Thursday of each month. All trainings include two (2) hours of instruction, detailed materials, certificates of completions, and company verification and policy acknowledgement forms. For more information please contact Jane Guesnon at jguesnon@aalrr.com.

Employers Can Be Held Liable For Violating Uniformed Services and Reemployment Rights Act of 1994 Based On Discriminatory Animus of Non-Decision Making Supervisors

2011-03-31T13:01:00.000-07:00

By Andres C. Hurwitz and Christopher S. Andre

In Staub v. Proctor Hospital. the Supreme Court of the United States affirmed a lower court's application of what is known as the "cat's paw" theory of liability whereby an employer can be held liable for discrimination in violation of the Uniformed Services Employment and Reemployment Rights Act of 1994 ("USERRA") when an otherwise non-discriminatory adverse employment decision made by a decision maker is influenced by discriminatory animus toward military service on the part of a non-decision making suprvisor of the employee in question

Vincent Staub worked as a hospital technician, and was a member of the United States Army Reserves. Staub’s military service required him to attend military training a few days each month, and two weeks per year, and he was required to be prepared to be called to active duty. Two of Staub’s supervisors were overtly unsympathetic to his military commitments and,displayed hostility towards it. After Staub failed to comply with a requirement that he be at a certain location at a specific point in time, his supervisors reported this to the Vice-President of HR, who made the decision to terminate Staub. The Vice-President’s decision was unrelated to Staub’s military service but had been prompted by the supervisors who were found to be hostile to Staub's military service

Staub brought an action pursuant USERRA which prohibits discrimination against employees who serve in the military. Staub prevailed at trial, establishing that the discriminatory animus of the supervisors influenced the decision maker, who was herself not acting in a discriminatory manner. The Seventh Circuit Court of Appeals reversed the verdict based upon what it determined to be improper consideration of discrimination by the non-decision-making supervisors, neither of whom were the decision maker.

The Supreme Court disagreed with the Seventh Circuit, holding that “if a supervisor performs an act motivated by antimilitary animus that is intended by the supervisor to cause an adverse employment action,[] and if that act is a proximate cause of the ultimate employment action, then the employer is liable under USERRA.” As the Court noted, “it is axiomatic under tort law that the exercise of judgment by the decisionmaker does not prevent the earlier agent’s action (and hence the earlier agent’s discriminatory animus) from being the proximate cause of the harm.” The supervisor’s biased reports had been taken into account by the Vice-President, which was sufficient to establish liability. “An employer’s authority to reward, punish, or dismiss…” the Court pointed out, “is often allocated among multiple agents.” The Supreme Court sent the matter back to the District Court to either reinstate the verdict or to proceed with a new trial consistent with its opinion.

While lawsuits alleging discrimination against employees on account of military service in violation of USERRA have not yet become as commonplace in our experience as other types of discrimination claims, we think such lawsuits will be filed more frequently as more plaintiff's attorneys learn about the USERRA. Employers with employees who serve in the military reserves in particular should consider training supervisors at all levels to be mindful of the employer's obligations under USERRA. Such training could be incorporated into other types of discrimination and harassment training.

Disability Discrimination Claims Are On The Rise: Some Steps Employers Can Take To Help Reduce Potential Exposure

2011-03-30T11:25:00.000-07:00

By Christopher S. Andre and Scott K. Dauscher

The Los Angeles Daily Journal, a leading legal newspaper, reports that claims of alleged disability discrimination and claims for alleged failure to reasonably accommodate persons with disabilities and/or medical conditions are being filed in record numbers as the job market in California continues to falter. The Daily Journal reports that "[t]he prolonged recession and high unemployment prompted terminated workers to go after their former employers in higher numbers, because they have a harder time finding new jobs after getting fired or laid off."

Such cases can be time consuming and expensive to defend. There are, however, steps employers can take to reduce the chances of becoming a target and to reduce the expense associated with defending against such a case should the employer be targeted:

1. Have in place sound policies for complying with applicable federal and state laws. Employers are generally required to reasonably accommodate workers with disabilities or medical conditions when it is reasonably possible to do so.

2. Apply policies consistently. Inconsistent application of policies, and, especially inconsistent discipline of employees can create a situation where a disgruntled current or former employee is able to allege he or she was discriminated against on account of a disability or on account of a medical condition.

3. Document contemporaneously performance deficiencies and any steps the employer takes to improve the employee's performance. Good documentation or the lack of it can sometimes make or break the defense of a case.

4. Make adverse employment decisions carefully. When deciding whether to discipline an employee who has a disability or a medical condition, an employer should carefully consider whether the proposed discipline would take place near in time to, among other things, an employee reporting a he or she has a disability or a medical condition, near in time to an employee taking a protected leave related to a disability or a medical condition, or near in time to an employee experiencing an episode associated with his or her disability or medical condition. When an adverse employment action takes place close in time to such events, a judge or a jury might view that as evidence of a discriminatory motive on the part of the employer.

5. Consider providing the employee a detailed, written explanation of the reasons for any adverse employment decision, particularly if the adverse employment decision is a termination. Attorneys interviewing a terminated employee as a prospective client will usually ask the employee to show the attorney any letters or other documents the employee received from his or her employer regarding the termination. A detailed, accurate written explanation of the reason(s) for the termination decision might cause such an attorney to conclude that a lawsuit against the employer would not succeed and prevent a lawsuit!

6. In some circumstances, it might be prudent to consider offering the employee a severance payment in exchange for a release of liability and covenant not to sue.

7. If the employer has an employment practices liability insurance policy, the employer should consider providing notice to the insurer as soon as the employer is aware that a current or a former employee might or will assert such a claim. Failing to provide timely and proper notice of claims can jeopardize insurance coverage altogether.

Supreme Court Conducts Oral Argument In Wal-Mart Stores v. Dukes

2011-03-29T14:25:00.000-07:00

By Christopher S. Andre

Today, the Supreme Court conducted the oral argument of the case. The issues on review are (1) whether claims for monetary relief can be certified as a class action under Federal Rule of Civil Procedure 23(b)(2) and (2) whether the class certification ordered under rule 23(b)(2) is consistent with rule 23(a). Click here to download and read transcripts of the oral argument.

This case has the potential to have broad impact on class action litigation nationwide, and will report the Court's decision when it is issued.

Off-Duty Employees Given Expanded Rights for Union Organizing on Employer's Property

2011-03-28T13:41:00.000-07:00

By Thomas A. Lenz

On March 25, 2011 the National Labor Relations Board ruled in the New York New York ruling that off-duty employees of a restaurant, a contractor doing business on hotel property, can distribute flyers on hotel property regarding their union organizing campaign. The hotel sought to exclude the off-duty employees and their distribution of flyers from hotel premises.

The five members of the NLRB, appointed by President Obama, ruled on the case. The majority wrote in favor of changing the rules for workplace access by off-duty employees. Rather than looking to whether the off-duty employees had a reasonable means other than direct property access to disseminate their message about organizing to the on-site employees, the NLRB essentially cut away at employer property rights.. The NLRB's new standard looks to whether the off-duty employees interfered with or disrupted the property owner's business. Finding no such disruption, the NLRB ruled that the New York New York hotel violated the National Labor Relations Act by removing the off-duty employees from inside the hotel and the sidewalk just outside the hotel.

A dissenting opinion, by Republican Board Member Brian Hayes, would have found removal from the private property at the interior of the hotel to be lawful but from the public sidewalk, due to its public use, unlawful.

Union organizing activity should be expected to increase in an improving economy, particularly as the political campaign season approaches. Employers working in a contractor capacity on multi-employer work sites, including a hotel or resort like the New York New York case, the multi-crafted multi-employer construction environment, or elsewhere, should take time to review policy and practice for workplace access by employees and non-employees to ensure compliance with the new legal standard.

Thanks For Helping Us To Make The 12th Annual AALRR Employment Law Conference A Success

2011-03-28T13:18:00.000-07:00

By Christopher S. Andre

On March 24, 2011, we conducted our 12th Annual Employment Law Conference at the Cerritos Center for Performing Arts and the Cerritos Sheraton.

We thank each of our guest speakers and each of the more than 600 attendees who helped us make this annual full day event a success.

Next year's conference is scheduled for March 29, 2012. Please be sure to save the date.

Shopping Mall is Prohibited from Differentiating Between Labor and Non-Labor Protests

2011-03-20T16:43:00.000-07:00

By Ronald W. Novotny

In the case of Best Friends Animal Society v. Macerich Westside Pavilion Property, LLC decided March 2, 2011, the California Court of Appeal addressed the question of whether a privately owned shopping mall can enforce rules that give preferential treatment to persons engaged in labor speech on their premises. The court held that it could not, and that such rules violate the state Constitution by discriminating against other types of speech.

The dispute arose when an animal rights group named “Puppies Aren’t Products” sought permission to protest every Saturday and Sunday in front of a Barkworks store on the third floor of the Westside Pavilion in Los Angeles. The mall granted permission to the group to congregate in two areas, one on the ground floor and one on a pedestrian bridge on the third level that was not within sight or earshot of the store. The mall also prohibited the group from protesting on designated “blackout days” on which shopping traffic was the heaviest.

A suit was filed to enjoin the implementation of the rules based on Article I, section 2 of the Constitution, which provides that “Every person may freely speak, write, and publish his or her sentiments on all subjects” and prohibits the abridgment of liberty of speech. A lower court denied an injunction on the ground that the mall had imposed reasonable “time, place and manner” restrictions for protesting in a public forum, even though the mall afforded persons engaged in labor speech the right to protest on blackout days and in less confined areas. The appellate court held that the mall’s interest in maximizing profits for its tenants was not sufficiently compelling to justify discrimination against speech based on its content in these circumstances.

Along with the recent Ralphs Grocery Co. v. U.F.C.W. Local 8 case reported here on February 1, 2011, this case is part of a trend in which the courts have begun questioning the favoritism that has historically been afforded to speech engaged in by labor unions in public places. The effect of the ruling could be to not only expand the rights of non-labor groups to protest in public forums, but to also justify greater restrictions on labor protests so long as they are reasonable and imposed on all other persons regardless of the message sought to be conveyed.

Court Of Appeal Holds Arbitration Agreement Covering Independent Contractors To The Same Standards Applied To Arbitration Agreements Covering Employees

2011-03-03T23:25:00.000-08:00

By Christopher S. Andre and Ronald W. Novotny

In Karena Wherry v. Award, Inc., Division Three of the Fourth Appellate District of the California Court of appeal held that the standards applicable to arbitration agreements between an employee and an employer apply also to arbitration agreements between an independent contractor and the contracting “employer.”

The plaintiffs entered into an Independent Contractor Agreement with Award, Inc., to perform real estate sales. That Independent Contractor Agreement required, among other things, that disputes arising out of the Independent Contractor Agreement be resolved by binding arbitration by the California Association of REALTORS (“CAR”) and incorporated by reference the Bylaws of CAR.

After the relationship between plaintiffs and Award, Inc., terminated approximately one year later, plaintiffs filed suit alleging Award, Inc., and other co-defendants engaged in gender discrimination, sexual harassment, and retaliation in violation of the California Fair Employment Housing Act (“FEHA”).

The trial court granted the defendants’ petition to compel the plaintiffs to arbitrate their claims. The plaintiffs then filed with the Court of Appeal a petition for writ of mandate requiring the trial court to vacate its order compelling arbitration.

The Court of Appeal granted that petition, holding that the arbitration provisions of the Independent Contractor Agreement were procedurally and substantively “unconscionable” and therefore unenforceable. The Court of Appeal concluded the arbitration provisions of the Independent Contractor Agreement were procedurally unconscionable because the Independent Contractor Agreement was presented on a “take it or leave it basis” (as many contracts are), and the plaintiffs were reportedly not provided an opportunity to ask questions or to have it reviewed by counsel. The Court of Appeal held also that the arbitration provisions of the Independent Contractor Agreement were substantively unconscionable because some of those terms were inconsistent with the requirements the California Supreme Court held in Armendariz v. Foundation Health Psychcare Services, Inc., must be satisfied before a claim for alleged violation of the FEHA by an employer can be made subject to an employment arbitration agreement.

Without any analysis or explanation, the Court of Appeal states “[t]hat plaintiffs are independent contractors and not employees makes no difference in this context. The contract by which they were to work for defendants contained a mandatory arbitration provision.” We believe this represents a remarkable expansion of the jurisprudence heretofore applicable only to arbitration agreements between employees and employers and, potentially, a remarkable expansion of the FEHA and its jurisprudence to independent contractors.

The Court of Appeal’s decision in this case presents two important take-aways:

First, businesses should consider consulting competent counsel to determine whether an arbitration agreement covering independent contractors would be enforceable under the Court of Appeal’s decision in this case.

Second, businesses with arbitration agreements, whether applicable to employees or to independent contractors or both, should bear in mind the risks associated with incorporating by reference arbitration provisions or arbitration procedures published by some other person or entity and not presume that such arbitration provisions incorporated by reference will necessarily withstand scrutiny by California courts. In this case, the arbitration provisions the Court of Appeal found offending were contained in the Bylaws of CAR incorporated by reference into the Independent Contractor Agreement between the plaintiffs and Award, Inc.

California Supreme Court Finds Another Employment Arbitration Agreement Unenforceable As Drafted

2011-03-01T21:30:00.000-08:00

By Yona Conzevoy and Christopher S. Andre

Despite the Federal Arbitration Act and the California Arbitration Act, both of which provide essentially that arbitration agreements are valid and enforceable, it can scarcely be gainsaid that California courts will for the foreseeable future continue to closely scrutinize pre-dispute arbitration agreements between employers and employees. Such arbitration agreements have frequently been struck down as contrary to public policy, unconscionable substantively, and/or unconscionable procedurally on account of various features of such agreements.

In Sonic-Calabasas, Inc. v. Moreno, the California Supreme Court again found an arbitration agreement to be unenforceable as written. The court held arbitration agreement at issue in effect impermissibly required employees to waive their right to pursue claims for allegedly unpaid wages by submitting such claims to the California Labor Commissioner by a process sometimes referred to as a "Berman hearing" whereby claims are addressed at an informal hearing conducted by the Labor Commissioner. That process permits either an employee or an employer dissatisfied with the results of the Berman hearing to "appeal" the result to the Superior Court for a new trial conducted by the court.

In finding the arbitration agreement unenforceable as written, the Supreme Court held that requiring employees to waive their statutory rights to pursue wage claims via a Berman hearing is contrary to public policy and conscionable and therefore unenforceable. However, the Court held also that an employer can require employees to arbitrate such disputes after a Berman hearing has been conducted. In other words, the Court held the arbitration agreement would be enforceable after a Berman hearing is conducted if either side is unsatisfied with the result of the Berman hearing.

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. However, the law regarding what provisions of an employment arbitration agreement will be enforced and what provisions will not be enforced frequently changes as California appellate courts issue reported decisions regarding the enforceability of such arbitration agreements. Employers therefore should have such agreements reviewed periodically by competent employment counsel.

Court of Appeal Holds Attorney's Fees Are Not Recoverable For Claims For Meal Or Rest Period Violations

2011-02-25T14:03:00.000-08:00

By Christopher S. Andre and Scott K. Dauscher

Not every cloud has a silver lining, but some do, and the California Court of Appeal's decision today in Thomas McGann v. United Parcel Service, Inc., contains a terrific silver lining for employers. Thomas McGann was employed by United Parcel Service, Inc., ("UPS") for a number of years and worked as an On Road Supervisor. UPS classified Mr. McGann as an exempt employee and therefore did not pay Mr. McGann premium pay (i.e., overtime pay) for hours worked in excess of eight hours in a workday.

Mr. McGann filed suit against UPS alleging six causes of action: (1) failure to pay overtime pursuant to Labor Code sections 510 and 1194, (2) failure to provide meal periods and rest periods pursuant to Labor Code section 226.7, (3) failure to provide compliance wage statements pursuant to Labor Code sections 226 and 226.3, (4) common law conversion premised on the theory Mr. McGann had a property interest in the premium pay he alleged UPS owed to him but failed to pay to him, (5) injunctive and other equitable relief, and (6) unfair competition pursuant to Business and Professions Code section 17200, et seq.

UPS prevailed on all six of Mr. McGann's causes of action, and the trial court made an award of attorney's fees and costs in favor of UPS. Mr. McGann appealed the award of attorney's fees and costs.

On appeal, in a somewhat paradoxical decision, the court reversed the trial court's award of attorney's fees in favor of UPS and affirmed the trial's court's award of costs to UPS. The Court of Appeal held UPS was not entitled to an award of prevailing party attorney's fees because Labor Code section 1194 permits only an award of attorney's fees to an employee who prevails on a claim for alleged unpaid minimum wages or overtime compensation and does not permit an award of prevailing party attorney's fees to an employer that defeats such a claim. The Court of Appeal held, also, that there was no basis for the trial court to award prevailing party attorney's fees to UPS as to Mr. McGann's other claims because no statute permits such an award.

The Court of Appeal's decision to affirm the award of costs to UPS is good news for employers, but it is not the silver lining alluded to above. The silver lining alluded to above is the court's holding the prevailing party attorney's fees provisions of Labor Code section 218.5 do not apply to claims for additional compensation under Labor Code 226.7 for an employer's alleged failure to provide required meal periods and/or rest periods. In Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, the California Supreme Court held the additional compensation to be awarded to employees under Labor Code section 226.7 when an employer fails to provide required meal periods and/or rest periods is more akin to a wage than a penalty and was therefore subject to a three-year statute of limitations and not the one-year statute of limitations applicable to statutory penalties. Based on that decision, it was widely believed that the prevailing party attorney's fees provisions of Labor Code section 218.5 for claims for unpaid wages other than minimum wages or overtime wages applied to claims for additional compensation under Labor Code section 226.7 for meal and/or rest period violations. However, in today's decision, the Court of Appeal held the additional compensation payable under Labor Code section 226.7 is more like a wage than a penalty for purposes of determining which statute of limitations applies to such claims, as the Supreme Court held in Murphy, but not sufficiently like a wage to be subject to the prevailing party attorney's fees provisions of Labor Code section 218.5.

This is a terrific silver lining for employers. It means employees who are determined to be the prevailing parties on claims for an employer's failure to provide required meal periods and/or rest periods are likewise not entitled to an award of attorney's fees based on such claims and such claims are very, very commonly asserted in wage and hour class action lawsuits. But there is more. Because the Court of Appeal held the additional compensation payable under Labor Code section 226.7 is not sufficiently like a wage to be subject to the prevailing party attorney's fees provisions of Labor Code section 218.5, it follows that claims for such non-wage additional compensation cannot be the basis for an award of "waiting time" penalties under Labor Code section 203 because section 203 provides for an award of "waiting time" penalties only when there has been a "willful" failure to pay wages due and owing at the time of termination.

Given the amount of the attorney's fees award at state (approximately $100,000) and other considerations, we doubt UPS will petition the California Supreme Court for review of today's decision, and it is not immediately clear that there would be a viable basis for Mr. McGann to petition for review of today's decision. The more likely risk to today's decision would be a request by the plaintiff's bar or by labor unions to depublish the decision so it becomes unciteable. We will monitor this issue and will report any further significant developments.

California Supreme Court Denies Review Of Decision Holding PAGA Penalties Are Available For Seating Requirment Violations

2011-02-18T15:44:00.000-08:00

By Scott K. Dauscher and Christopher S. Andre

As we previously reported here and here, two recent decisions of the California Court of Appeal hold an employee may seek Private Attorney General Act ("PAGA") penalties for alleged violations of an Industrial Welfare Commission ("IWC") wage order requirement that employers provide employees suitable seats in the workplace when the nature of the work reasonably permits the use of seats. For example, in Bright v. 99¢ Only Stores (2010) 189 Cal.App.4th 1472, the court held civil penalties available under PAGA, consisting of $100 per each "aggrieved employee" per pay period for the first violation and $200 per "aggrieved" employee per pay period for each subsequent violation, could be recovered because no other penalties for violating the seating requirements were provided by law.

This week, during the California Supreme Court's (usually) weekly conference, the court declined the petition for review of the Court of Appeal's decision in Bright v. 99¢ Only Stores. Review by the California Supreme Court is nearly always discretionary, meaning the court can simply decline to review a lower court decision if it chooses to within its discretion.

Now that the Supreme Court has declined review of Bright v. 99¢ Only Stores, it is especially important that employers make certain they are in compliance with the seating requirements contained in the IWC wage orders. The penalties can be quite substantial, and we believe most courts would conclude that the nature of the work reasonably permits the use of seats in many instances.

Court of Appeal Clarifies What Must Be Proven To Recover Damages For Non-Compliant Wage Statements And Clarifies Reporting Pay Requirements

2011-02-18T15:18:00.000-08:00

By Christopher S. Andre and Scott K. Dauscher

On February 17, 2011, the California Court of Appeal ordered published (and therefore citable) its previously unpublished (and therefore not citable) decision in Drake Price v. Starbucks Corporation, a decision that should prove helpful to employers defending against claims for allegedly non-compliant wage statements, which are nearly always included in wage and hour class action lawsuits.

The Court of Appeal affirmed the trial court's decision that Mr. Price failed to allege a cognizable injury. Notably, the court distinguished a troublesome decision of the United States District Court for the Central District of California in Wang v. Chinese Daily News, Inc. (C.D. Cal. 2006) 435 F.Supp.2d 1042 essentially holding that injury occurs if the employee must perform mathematical calculations to determine whether he or she was paid correctly. Distinguishing Wang v. Chinese Daily News, the court explained: "Price alleged a 'mathematical injury,' that required him to add up his overtime and regular hours and to ensure his overtime rate of pay is correct, but the allegedly missing information from Price's wage statement is not the type of mathematical injury that requires 'computations to analyze whether the wages paid in fact compensated [him] for all hours worked.'" Simply put, "[t]he injury requirement in section 226, subdivision (e), cannot be satisfied simply if one of the nine itemized requirements in section 226, subdivision (a) is missing from a wage statement."

As part of its decision, the Court of Appeal clarified, also, the requirements for reporting time pay. The court rejected Mr. Price's contention Starbucks was required to pay him the one-half of the average of the 13 scheduled shifts he worked as reporting time pay for reporting to his place of work for a brief meeting with his supervisor during which Mr. Price's supervisor informed Mr. Price his employment was terminated effective that date. The court held because Mr. Price was not scheduled to work that day, Starbucks did not violate Industrial Welfare Commission Wage Order 5-2001 by paying him two hours pay to report for that meeting (which lasted approximately 45 seconds, according to Mr. Price).

9th Circuit Holds Pharmaceutical Salespersons Qualify As Exempt Employees Under The FLSA Outside Salesperson Exemption

2011-02-17T13:59:00.000-08:00

By Yona Conzevoy

In Christopher v. SmithKline Beecham Corporation, an overtime case brought by pharmaceutical sales representatives (“PSR’s”), the United States Court of Appeals for the Ninth Circuit affirmed the District Court’s summary judgment for the employer, holding the plaintiffs were outside salespersons and therefore exempt from the overtime pay requirements of the Fair Labor Standards Act ("FLSA").

SmithKline Beecham Corporation (“Glaxo”) hired plaintiffs in 2003 to meet with physicians and encourage them to prescribe Glaxo pharmaceuticals. Plaintiffs spent most of their time traveling to the offices of physicians within their assigned territories. Plaintiffs claimed they worked between 10 and 20 hours each week outside of normal business hours, for which they received no overtime wages. Plaintiffs did not sell the drugs or negotiate prices or contracts with physicians, rather, they attempted to, and did obtain commitments from physicians to use Glaxo products when appropriate. Plaintiffs received a salary and incentive-based compensation, which was paid if market share, sales volume, revenue, or dose volume increased in their sales territory.

Plaintiffs, and the Secretary of the Department of Labor ("DOL") appearing as amicus curiae (friends of the court) in a similar case in the United States Court of Appeals for the Second Circuit, In re Novartis Wage & Hour Litig., 611 F.3d 141 (2d Cir. 2010), claimed that the PSR’s did not meet the FLSA Outside Sales Exemption for overtime because they did not “make sales” as defined by the Department of Labor regulations 29 C.F.R. §541.501(b). The Novartis court held: “Where the employee promotes a pharmaceutical product to a physician but can transfer to the physician nothing more than free samples and cannot lawfully transfer ownership of any quantity of the drug in exchange for anything of value, cannot lawfully take an order for its purchase, and cannot lawfully even obtain from the physician a binding commitment to prescribe it, we conclude that it is not plainly erroneous to conclude that the employee has not in any sense, within the meaning of the statute or the regulations, made a sale.” Id. at 154.

However, the Ninth Circuit court rejected the reasoning of the Secretary and the Novartis court on the grounds the Secretary of Labor's interpretation of the FLSA was merely a restatement of the statutory language, and the Secretary of Labor's position was inconsistent with the DOL’s own regulations and prior practices. Since 1940, the Secretary has defined the phrase “other disposition” in the statute’s definition of “sale” as a broad catch-all category, and has allowed PSR’s to fall under the outside salesmen exemption. Because salespersons in the pharmaceutical industry are not selling to patients (who cannot legally choose which drug to use and therefore cannot be characterized as buyers) and are instead obtaining commitment from physicians to prescribe Glaxo's products, the PSR's are in effect making sales. Further, even though the commitments to prescribe pharmaceuticals is not binding on the physicians, the pharmaceutical manufacturers value these commitments enough to reward pay to PSRs sales commissions based on those non-binding commitments. Finally, the Court applied the paradigm outside salesperson case Jewel Tea Co. v. Williams 118 F.2d 202 (10^th Cir. 1941), which justified the application of the outside sales exemption to the Glaxo PSR's because the activities of the PSR’s were substantially the same as the outside salespersons in Jewel Tea. . . .

While this case establishes that PSR's qualify for the outside sales exemption under Federal law, under California State law, it is not quite as clear whether the PSR's qualify for the outside salespersons exemption under Labor Code section 1171 Industrial Welfare Commission wage orders. While federal law focuses on whether the employee's primary function is making sales, California law focuses exclusively on whether the individual works more than half the working time selling or obtaining orders or contracts. The language of the wage orders define an Outside Salesperson as "any person . . . who customarily and regularly works more than half the working time away from the employer's place of business selling tangible . . . items or obtaining orders or contracts for products . . ." The PSR's in this case clearly spent more than half their working time obtaining commitments from physicians, but it is unclear whether California would interpret the language of the Wage Orders broadly enough to allow the PSR's to be considered outside salespersons given that PSRs typically do not make actual sales. Furthermore, now that the Ninth Circuit's ruling conflicts with the Second Circuit's holding in Novartis, it is possible that the United States Supreme Court will address this issue.