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Employment Law E-Buzz

Easy-to-digest updates on emerging employer legal issues

Did You Know…SCOTUS Will Decide Gay Marriage Issue Once and For All

Posted in Court Decisions

It was bound to happen.  Sooner or later the U.S. Supreme Court would be put to the task of deciding whether a married couple from California are still married while visiting Elvis’ ghost at Graceland, in Tennessee.

That day has come.

By June 2015, the Court will decide whether the few remaining gay marriage bans must fall.  Currently, only fourteen states still refuse to allow gay couples to marry.  And until recently, when the Sixth Circuit Court bucked the trend of the other circuits who have weighed in on the issue, gay marriage seemed a foregone conclusion.  It still is, but a decision from the high court will speed things up.  And despite the Court’s conservative leanings, gay marriage will prevail.

The President of the United States supports gay marriage.  He has also instructed the U.S. Attorney General to urge the Court “to make marriage equality a reality for all Americans,” not just those Americans living in thirty-six states and the District of Columbia.

Though the Justices initially declined to hear appeals of gay marriage cases just three short months ago, the number of states that now allow gay marriage has nearly doubled since then.

Given the level of importance of the issue, the Court is extending to two-and-a-half hours the time allowed for oral argument in which it will consider two questions: first, does the U.S. Constitution require states to issue marriage licenses to same-sex couples, and second, whether states must fully adopt the comity clause; that is, must states must recognize same-sex marriages performed elsewhere.

The appeals granted review by the Court spring from gay marriages cases in Kentucky, Michigan, Ohio, and Tennessee.  The Sixth Circuit upheld bans in those states, reversing federal judicial rulings in support of gay marriage and making it the first federal appeals court to rule against gay marriage since the Supreme Court struck down DOMA in 2013.

Did You Know…Employers Must Reimburse Employees for Personal Cell Phone Use

Posted in Class Actions, Court Decisions

Last August, in Cochran v. Schwan’s Home Service, Inc., a California Court of Appeal held that employers must reimburse employees for required work-related use of personal cell phones, even if the employees incur no additional out-of-pocket expenses from that work-related use. The California Supreme Court has refused to grant review of the decision, so the Cochran case stands as established case law.

In Cochran, the plaintiff, Colin Cochran, was a customer service manager for a food delivery provider who was required to use his personal cell phone for work purposes. His employer did not reimburse him for this work-related personal cell phone use. Cochran filed a class action lawsuit on behalf all customer service managers who were not reimbursed for expenses relating to work-related use of their personal cell phones.  He argued that Labor Code 2802 required the employer to reimburse him, even though he had an unlimited service plan and incurred no additional out-of-pocket expenses for the business calls.

Labor Code section 2802 requires employers to reimburse an employee “for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties, or of his or her obedience to the directions of the employer.”

In addressing class certification, the trial court found the customer service managers lacked sufficient commonality with respect to the expenses necessarily incurred as a result of work-related use of personal cell phones.  Specifically, the trial court reasoned that differences in cell phone plans, including unlimited plans where no out-of-pocket expenses were incurred, raised too many individual questions and would require an inquiry into every class member’s cell phone plan.  As a result, the trial court denied class certification.

On appeal, however, the court dispensed with the trial court’s reasoning by finding that an employer always is required to reimburse an employee for the reasonable expense of the mandatory use of a personal cell phone, whether or not the employee incurred additional out-of-pocket expenses as a result of the work-related use.  Otherwise, the court found, the employer would receive a “windfall” by passing its operating expenses onto the employee.  Thus, the trial court’s ruling on certification was reversed.  This holding may require employers to reevaluate their policies and procedures related to personal cell phone use.

While Cochran made it clear that employers must reimburse employees for a “reasonable expense” of any necessary work-related use of their personal cell phones, it left open important practical questions.  Specifically, the court’s decision provides no guidance on when use of a personal cell phone will be considered necessary or how to calculate reimbursements.

Certainly a direct instruction would be considered necessary.  Arguably, however, personal cell phone use might also be considered necessary where employees are required to make work-related phone calls, or are otherwise expected to be available by phone, and a company-issued phone is not available.  The same could likely be argued for smartphones, tablets, or laptops where employees are expected to send or respond to work-related emails without a company-issued device.

While it is uncertain exactly how employers should calculate the reimbursement, such as using a lump sum or other calculating based on individual use, they key will be to ensure that the reimbursement is sufficient to cover the employee’s actual expenses, and that the employee may request reimbursement for any actual costs incurred in excess of the calculated or lump sum reimbursement. (See Gattuso v. Harte-Hanks Shoppers, Inc., 42 Cal. 4th 554 (2007) (addressing mileage reimbursement calculations).)  To comply with Cochran, employers should pay close attention to their cell phone and device policies, and assess which employees need a mobile device to perform their duties and whether the company provides such device.

Did You Know…No Sleeping Time Exclusion During 24-Hour Shifts When Employer Exercises Significant Control

Posted in Court Decisions, Wage and Hour

In Mendiola v. CPS Security Solutions, Inc., the California Supreme Court held that security guards working 24-hour shifts have to be paid for all 24 hours without carving out eight hours of sleeping time – meaning the entire 24-hour shift was compensable time.

Security guards employed by CPS Security Solutions filed a wage and hour class action alleging CPS failed to pay them for all their on-call hours.  The security guards lived on the job site in CPS-provided residential trailers.  During the week, the security guards were scheduled for 16 hour shifts – an eight hour shift of “active” patrol and an eight hour shift of “on-call” time.  On the weekends, the security guards were scheduled for 24-hour shifts, 16 hours of “active” patrol and eight hours of “on-call time” (9 p.m. to 5 a.m.).  The security guards were not paid for on-call hours unless they were actually required to perform work during those hours.  However, CPS placed restrictions on the security guards’ activities during on-call hours; e.g., remain within a 30 minute radius of the job site; be available via pager/radio telephone; and no children/pets/alcohol on site.

In finding in favor of the security guards, the California Supreme Court rejected prior California case law which had relied upon 29 CFR 785.22, a federal regulation which permits employees who are required to be on duty for 24-hours to enter into agreements to exclude up to eight hours of regularly scheduled sleep time from hours worked.  See Seymore v. Metson Marinewhich we previously reported on.  The Court underscored that California law, unlike federal law, focuses on the extent of employer control over an employee to determine whether the employee’s time must be compensated.  Because the trailer guards were substantially restricted in their use of the on-call time for personal pursuits, they were under sufficient employer control to make all of the time compensable as hours worked.  The fact that the trailer guards were working a 24-hour shift and could sleep part of the time was basically irrelevant.

Caveat

This analysis was limited to Wage Order 4 which is silent as to on-call agreements; whereas other wage orders such as Wage Order 9 – applicable to ambulance drivers and attendants - would require a different result  because it allows for employers to exclude eight hours of sleep time from compensable hours worked in a 24-hour shift in certain circumstances.

What is also particularly painful here is that CPS had previously obtained an endorsement from a former California Labor Commissioner on the legality of their on-call policy and subsequently entered into a Memorandum of Understanding effectively agreeing that CPS’ policy was lawful.  However, the California Supreme Court held that the Labor Commissioner’s view was not entitled to deference.

Best Practices

Employers should audit/review their on-call policies, what they consider compensable time and their pay practices to ensure that their on-call policies comply with this new decision, particularly employers who exercise significant control.  Keep in mind that the Court did not reject or modify the multiple factor test for on-call employees who are not required to live or sleep on premises.

Did You Know…Security Time Is Not Compensable Time

Posted in Court Decisions, Wage and Hour

In Integrity Staffing Solutions, Inc. v. Busk, the United States Supreme Court addressed whether an employee is “working” when undergoing a security screening because he or she is required to do so by the employer.  In a unanimous (and pro-employer) decision, the Supreme Court held that the time spent by warehouse workers waiting to undergo and undergoing security screenings before leaving for the day is not compensable under the Fair Labor Standards Act.

At the end of each shift the employees were required to undergo a security screening before leaving the warehouses. The employees claimed that they were entitled to overtime as a result of the time (approximately 25 minutes per day) spent waiting for and undergoing the screenings.  The employees claimed that the time devoted to the screening was for the benefit of the employer or its customer, and therefore should have counted as part of their compensable workweeks.

The Supreme Court disagreed and held that the time spent for the screening was not compensable time because it was not an activity “integral and indispensable” to the job’s “principal activity” –  retrieving and packaging goods in the warehouse.  The fact that the screening was for the benefit of the employer was insufficient to call an activity “integral or indispensable.”

Notwithstanding the Supreme Court’s elaboration of the definition of what is compensable activity, some pre-and post-shift activity will still remain compensable if integral and indispensable to the job such as donning and doffing certain protective gear for job performance.  Moreover, California employers need to remember that California state labor laws also look to employer control to determine whether an activity is compensable.

Stay tuned as California courts address this decision.

Did You Know…Sony Faces Class Action Lawsuit by Former Employees Over Data Breach

Posted in Class Actions, Litigation, Privacy

It’s happened. The first class action lawsuit has been filed against Sony for failing to prevent hackers from stealing its current and former employees’ social security numbers, medical records, and salary information.

The complaint brought by two former employees alleges that Sony failed to protect their private data and that it negligently ignored warnings from programs designed to provide advance notice of possible attack or vulnerability in the computer network. One employee also alleges that his reason for resigning from Sony was also disclosed.

Though these types of lawsuits are often unsuccessful because of the plaintiffs’ uphill battle to prove damages, this case may be different because Sony has a history of prior hacks into its system where customer data was exposed.  Evidence of multiple past failures may weigh against Sony in any attempt to dismiss this latest litigation. The fact that the employees’ medical information was exposed is also a problem for Sony, because California maintains strict privacy laws designed to protect such information.

What’s the lesson?  As an employer, you have a duty to be sure that the private information you collect and maintain about your employees remains secure at all times. Failure to recognize the importance of investing in robust security systems can result in liability down the road.  And in this day and age, there is no way to know how long that road will be, or where it will lead.

Did You Know…Cybersecurity Made More Complicated by the NLRB

Posted in National Labor Relations Board, Privacy

The National Labor Relations Board has recently inserted itself into the world of cybersecurity after the United States Postal Service suffered a security breach involving the personal data of several hundred thousand of its employees.  CNN reported that about 750,000 employees were affected; the FBI is investigating.

This is an interesting development for municipal entities and others who employ Union workers because it is the first time the NLRB has ventured into the cybersecurity area. In an effort to remediate the problem, the USPS offered the affected employees one year of free credit-monitoring.  But the NLRB characterized this offer as a unilateral change to wages, hours, and working conditions and took the position that the postal service could not make this offer without engaging in the collective bargaining process first.  The NLRB complaint can be found here.

If this complaint grows legs, it will only add to the already long list of things an employer must deal with when trying to mitigate the damage of a cybersecurity breach.  Now, in addition to the immediacy of the problem at hand, it must also negotiate with the Union representatives over any perceived change in their working conditions.

Companies who suffer cybersecurity breaches must respond quickly and effectively to alert the appropriate governmental authorities, the affected individuals, and the general public.  A rapid response is required because of various state breach notification laws that require breach alerts to be sent promptly.  Thus, a natural conflict arises between the expediency required and the NLRB’s demands that the employer talk to Union members before a resolution can be effectuated.  Stay tuned!

Did You Know…California Supreme Court Rules – No Franchisor Vicarious Liability

Posted in Court Decisions, Litigation

The California Supreme Court recently held in Patterson v. Domino’s Pizza, LLC, No. S204543 (Cal. Aug. 28, 2014) that a franchisor could not be held vicariously liable under the California Fair Employment and Housing Act (“FEHA”) for alleged sexual harassment in the franchisee’s workplace in the absence of evidence establishing that the franchisor “retained or assumed a general right of control” over employment decisions and the “day-to-day aspects of the workplace behavior of the franchisee’s employees.”

Critical to the Court’s decision was whether the franchisor “retained or assumed a general right of control over factors such as hiring, direction, supervision, discipline, discharge, and relevant day-to-day aspects of the workplace behavior of the franchisee’s employees.”  If the franchisor did not retain/assume this general right of control, then the franchisor cannot be held vicariously liable based only on “the imposition and enforcement of a uniform marketing and operational plan.”  Thus, the Court looked at Domino’s Pizza franchise agreement and found that “Domino’s had no right or duty to control employment or personnel matters for the franchisee.”

This case is important because:

  • Unless franchisors exercise control over the manner and means by which their franchisees hire, fire, discipline, or manage their employees, they will not be held vicariously liable for employment and tort claims brought by their franchisees’ employees.
  • Franchisors may impose a “comprehensive operating system” designed to protect their trademarks, trade names, and goodwill without becoming vicariously liable for employment and tort claims brought by their franchisees’ employees.
  • It is in stark contrast to the National Labor Relations Board’s position vis-à-vis McDonald’s USA that McDonald’s may be liable as a joint employer of its franchisees’ employees.

 

 

Did You Know…Bill Mandating Paid Sick Leave Signed By Governor

Posted in Legislation, Recordkeeping, Wage and Hour

Governor Edmund G. Brown Jr. just signed the Healthy Workplaces, Healthy Families Act of 2014, which takes effect on July 1, 2015.  The new law requires nearly every employer in California to provide any employee who has worked in California for 30 days with paid sick leave, at an accrual rate of one hour for every 30 hours worked.  Employers may cap available paid sick leave at 3 (8-hour) days per year and total accrual of paid sick days at six (8-hour work) days.  Employees can begin to use their accrued sick leave on the 90th day of their employment.  Employees may decide the amount of leave they need to use, although employers may set a reasonable minimum increment of two hours.  Accrued, but unused, sick days must carry over into the following year subject to the 48 hour/six-day accrual cap.

Paid sick days may be used for the diagnosis, care, or treatment of an existing health condition for, or the preventive care of an employee, or an employee’s immediate family member.  Covered family members include spouses, registered domestic partners, children (regardless of age), parents (including step-parents and parents-in-law), grandparents, and siblings.  Paid sick days are also available for employees who are the victims of domestic violence, sexual assault, or stalking.  Employees must provide “reasonable advance notification” of their need to use the leave as soon as practicable.  The law specifically permits these requests to be made orally or in writing.

Employees are not entitled to be paid for accrued but unused sick days upon resignation or termination of employment.  However, if the employee is rehired within a year of his/her separation, the employer must reinstate any unused sick leave that was previously accrued.

Employers must provide employees with written notice of their available amount of paid sick leave or PTO leave provided in lieu of sick leave.  This notice must be either on the employee’s itemized wage statement or in a separate writing provided on the employee’s pay date at the time wages are paid.  Employers must also record and retain employee usage and accrual for at least three years.  These records must be made available for employee inspection within 21 days of a written or oral request.  If an employer fails to keep adequate records, it will be presumed that the affected employee is entitled to the maximum number of accruable hours under the law.  At the time of hiring, new employees must be provided, as part of the Wage Theft Prevention Act notice, notice of their entitlement to paid sick leave and their right to file a complaint with the Labor Commissioner where violations occur.  Employers will also be required to post a workplace notice from the Labor Commissioner regarding this new law.

Under current state law, employers are not required to provide employees with paid sick days.  While many employers voluntarily offer sick leave for full-time employees, business groups argue that expanding the mandate to temporary, seasonal and part-time employees will create a huge burden on employers.  In addition, the bill threatens employers with statutory penalties and litigation under the state’s Private Attorney General Act for alleged violations.  The bill was initially considered a job killer bill by the California Chamber of Commerce.

Employers with existing sick leave or paid time off (PTO) policies do not have to provide additional leave, as long as their policies satisfy the requirements of this new law.  Of course, compliance with local requirements such as in San Francisco must also be met.  In other words, employers are to provide no less than what the applicable governing law requires.

Advocates, including bill author Assemblywoman Lorena Gonzalez (D-San Diego), claim that the lack of paid sick days in California is a public health hazard, as it forces sick workers to report to work and send their sick children to school.  The measure thus will prevent the spread of disease.  The bill’s sponsors further argue that the bill is necessary to ensure that workers can take time off to care for themselves or a sick loved one without worrying about losing pay or being fired.

With the Governor’s signature, California became only the second state in the nation to require employers to provide paid sick leave.

Best practices:

  • Review and update sick leave and record-retention policies
  • Review and update handbook
  • Review wage statements to comply with new notice requirements
  • Communicate any policy changes to employees
  • Post workplace notice

Sea Change: Ninth Circuit Holds That FedEx Drivers Are Employees — Not Independent Contractors

Posted in Court Decisions, Litigation, Wage and Hour

The Ninth Circuit recently addressed the nearly decade long misclassification dispute between FedEx and its drivers, holding that drivers in California (as well as in Oregon) are FedEx employees, not independent contractors.  Alexander et al. v. FedEx Ground Package Sys., Inc. (California); Slayman et al. v. FedEx Ground Package Sys., Inc. (Oregon).

In December 2010, the Northern District of Indiana issued a summary judgment opinion, evaluating the standards for independent contractor misclassification under multiple laws across 26 states, including California. It ruled that FedEx drivers were independent contractors in 23 of the states – including California and Oregon – and employees in three states.

In reversing the Indiana District Court’s decision as to FedEx drivers in California and Oregon and holding that the drivers were in fact employees, the Ninth Circuit placed heavy emphasis on the Operating Agreement that governed the relationship between FedEx and the drivers.  The Operating Agreement provided: (1) FedEx retained the right to control the physical appearance of drivers, including hair and facial hair requirements; (2) vehicle equipment and appearance requirements, including the color, logo, and internal shelf arrangements; (3)  the drivers use their vehicles when not delivering FedEx packages; (4) the drivers’ workloads, which defined and constrained the hours the drivers worked; and (5) the reconfiguration of drivers’ territories.  Although the Court conceded that there were other factors that weighed in favor of  independent contractor classification, the Court  decided that under both California and Oregon law, the rights that FedEx retained under the Operating Agreement  to control multiple aspects of the drivers’ work were sufficient to render the drivers as employees under the applicable California and Oregon tests.

With respect to California, the Ninth Circuit applied the multi-factor S.G. Borello* test with its primary right-to-control factors and its list of secondary indicia.  With respect to Oregon, the Ninth Circuit applied Oregon’s state law version of the right-to-control test for illegal wage deduction claims and a separate economic-realities test for unpaid overtime claims.

The Ninth Circuit decision is a reminder to all employers that any workers treated as independent contractors are open to challenge.  The decision is a wake-up call to conduct internal audits regarding worker classification.

*S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal. 3d 341.

Did You Know…California Supreme Court Holds That a Challenge to Independent Contractor Status Is Class Certifiable

Posted in Class Actions, Wage and Hour

In Ayala v. Antelope Valley Newspapers the California Supreme Court held that the critical factor in determining whether a worker is an employee or an independent contractor is “the degree of a hirer’s right to control how the end result is achieved.”  Notably, even if that right is not exercised, the hirer will be deemed the employer of the worker and will be subject to all California laws governing employment relationships.  The Supreme Court also held that with respect to class certification, the issue is whether there is a common way to show the employer “possessed essentially the same legal right of control” with each plaintiff.

The plaintiffs in this case worked as newspaper home delivery carriers for Antelope Valley Newspapers, Inc. and each carrier had signed an “Independent Contractor Distribution Agreement” with Antelope Valley.  The plaintiffs filed a class action against Antelope Valley alleging they had been misclassified as independent contractors and were entitled to damages because they had not been, inter alia, paid overtime and provided meal and rest breaks in violation of California wage and hour laws.

The trial court denied class certification on the basis that common issues did not predominate because determining the carriers’ employee status would require “heavily individualized inquiries” into Antelope Valley’s control over the carriers’ work.  The California Court of Appeal agreed with the trial court that the carriers had not shown that their claims for overtime pay and missed meal and rest periods could be managed on a class-wide basis, but reversed the trial court’s denial of class certification on the issue of whether the carriers had been misclassified as independent contractors.  The Court of Appeal noted that the key issue  – “how much right does Antelope Valley have to control what its carriers do” – could be addressed on a class-wide basis.

The California Supreme Court agreed with the Court of Appeal and held that the trial court will need to address whether Antelope Valley’s right of control over its carriers is “sufficiently uniform” such that the issue of the carriers’ employment status can be addressed on a class basis.

Specifically, the California Supreme  Court stated (1) whether a common law employer-employee relationship exists turns principally on the degree of a hirer’s right to control how the end result is achieved; (2) whether the hirer’s right to control can be shown on a class-wide basis will depend on the extent to which individual variations in the hirer’s rights concerning each putative class member exist, and whether such variations, if any, are manageable; and (3) the trial court in this case erred in rejecting certification based not on differences in Antelope Valley’s right to exercise control, but on variations in how that right was exercised.

Class certification of wage and hour related issues will continue to be a hotly debated topic.  Likewise, classifying workers as employees or independent contractors will also continue to be a closely monitored issue on a state and federal level.  Employers are encouraged to audit their worker classifications to ensure legal compliance.