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Employment Law E-Buzz

Easy-to-digest updates on emerging employer legal issues

Did You Know…PAGA Waivers Unenforceable in California Courts

Posted in Class Actions, Court Decisions

The United States Supreme Court recently declined to review the California Supreme Court’s decision in Iskanian v. CLS Transportation Los Angeles, LLC.  In Iskanian, the California Supreme Court held that the Federal Arbitration Act (FAA) preempted California’s policy against enforcement of class action waivers in arbitration agreements.  This means that class action waivers in employment arbitration agreements are generally enforceable.  However, the California Supreme Court also held that representative claims under the Private Attorneys General Act (PAGA) (an act which essentially deputized private citizens to seek penalties on behalf of California’s Labor and Workforce Development Agency and split any penalties recovered – 75% to the state and 25% to the employees) could not be waived in arbitration agreements.  The net effect of this holding is that any employment agreement that “compels the waiver of representative claims under the PAGA is contrary to public policy and unenforceable as a matter of state law.”  The California Supreme Court reasoned that the point of the PAGA was to expand California’s limited enforcement authority and that any agreement waiving a worker’s right to bring a PAGA action serves to disable one of the primary mechanisms for enforcing California’s Labor Code.

Notwithstanding, several California federal district court judges have rejected the Iskanian holding that workers cannot waive representative PAGA claims through arbitration agreements.  Thus, there is a split between state and federal courts in California.  The federal district courts disagree with Iskanian on the basis that (a) it is inconsistent with the United States Supreme Court decision in AT&T Mobility v. Concepcion which held that the FAA preempts any state laws that invalidate class action waivers and (b) the FAA preempts California’s rule prohibiting representative PAGA waivers because that rule treats arbitration agreements disfavorably.  The split between state and federal courts in California means that employees will want to litigate PAGA claims in state court and employers will want to proceed in federal court.

The Iskanian decision will most likely increase the number of PAGA claim filings and efforts to remove them to federal court.  The continuation of conflicting decisions by California state and federal courts may trigger another opportunity for the United States Supreme Court to address this issue.  In the meantime, Iskanian raises a host of procedural and strategic issues which will need to be addressed by employment counsel as PAGA claims proceed.

Notwithstanding, the uncertainty over the enforceability of representative class action waivers, employers should consider well-drafted arbitration agreements as an important tool for limiting and preventing class action employment litigation.

Did You Know…Second Meal Period Waivers Invalid for Health Care Workers When Working More Than 12 Hours

Posted in Court Decisions, Wage and Hour

In Jazmina Gerard v. Orange Coast Memorial Medical Center, the California Court of Appeal held that the wage orders health care companies have been following for years were wrong and contrary to the California Labor Code.

Three health care workers sued their hospital employer in this putative class and private attorney general enforcement action for alleged Labor Code violations and related claims.  Their primary contention was that the hospital’s policy illegally let health care employees waive their second meal periods on shifts longer than 12 hours.

Labor Code section 512(a) requires two meal periods for shifts longer than 12 hours.  On the other hand,  Industrial Welfare Commission (IWC) Wage Order No. 5 authorizes employees in the health care industry to waive one of those two required meal periods on shifts longer than 8 hours.  Thus, pursuant to Wage Order No.5  and meal period waivers, Plaintiffs all signed second meal period waivers and occasionally worked shifts longer than 12 hours without being provided a second meal period.

The principal issue was whether the IWC order was valid.  The Court concluded that the IWC exceeded its authority and declared section 11(D) of Wage Order No. 5 partially invalid to the extent it authorizes health care workers to waive their second meal periods on shifts longer than 12 hours because it was in direct conflict with Labor Code section 512(a).

The next issue the Court addressed was to what extent would its decision be retroactive.  [As a general rule, judicial decisions are given retroactive effect, even if they represent a clear change in the law.  However, there is an exception when considerations of fairness and public policy are so compelling that they outweigh the considerations that underlie the basic rule; e.g., when a party justifiably has relied on the former rule.]

Here, the Court held that with one exception, it would not opine on the potential liability of the hospital for violations of section 512(a) committed before its decision and remanded that issue to the trial court.  The one exception was that the hospital would have to pay plaintiffs’ premium wage claims based on Labor Code section 226.7(c) since the law was clear that employers were required to provide health care workers with a second meal period when they worked more than 12 hours in a day.

The issue, then, is not whether the hospital was on notice its failure to provide the required second meal periods was unlawful—it surely was—but whether it is somehow unfair to apply to hospital the particular remedy specified in section 226.7 for its actions prior to our decision today.

The Court concluded “[h]aving received the benefit of its employees working without the statutorily mandated second meal periods, there is nothing unfair about requiring hospital to compensate them for that time in accordance with the formula prescribed by the Legislature.”

Best Practices

Employers (especially those in the health care industry) should review their meal and rest period policies and ensure they are compliant with California statutes and court decisions as this one.

Did You Know…Court Confirms Employees on Medical Leave Must Still Comply With Existing Company Policies

Posted in Court Decisions, Leave Laws

In Richey v. Autonation, Inc., Case No. S207536 (January 29, 2015), the California Supreme Court confirmed that an employee who is on medical leave does not have a greater right to reinstatement or to other benefits and conditions of employment than if they were continuously employed, and they must comply with existing company policies regardless.

In Richey, a sales manager at Power Toyota Cerritos (“Power Toyota”), part of the AutoNation, Inc., consortium of automobile dealerships, was terminated while out on approved leave under the California Family Rights Act (“CFRA”) for violating company policy.  Power Toyota’s policy prohibited employees from engaging in other employment while on a leave of absence, and Toyota found out he was working at a restaurant he owned during this time.

Richey filed suit, alleging his termination violated CFRA and the case was ordered to arbitration.  The arbitrator denied Richey’s claim, finding that the employer was allowed to terminate if it had an “honest belief” that Richey was violating the policy, even if mistaken.  The trial court denied Richey’s request to vacate the arbitration award and Richey appealed.  The California Court of Appeal reversed the trial court’s decision, taking issue with the arbitrator’s reliance the “honest belief” defense because it had not yet been tested in the California Supreme Court and viable in California.

The California Supreme Court reversed, holding that Richey failed to show any prejudice from the arbitrator’s alleged error.  The Court explained that, regardless of whether this “honest belief” defense was a viable defense in California, the arbitrator nevertheless reached the correct conclusion.  The arbitrator expressly found that Richey was fired because he violated Power’s employment policy against outside work while on approved CFRA medical leave, not because he was on approved leave.  The award indicated Richey blatantly ignored his superiors’ clear instructions not to work at his restaurant while on CFRA leave.

The Court explained that, if it held that Power Toyota could not have fired Richey under any circumstances for violating company policy while on leave, it would be ignoring the rule set forth at C.F.R. §825.216(a) that an employee has no greater right to reinstatement or to other benefits and conditions of employment during medical or family leave than he or she would have if continuously employed during the same period.

The Court’s decision is significant because it confirms that employers are entitled enforce their existing policies and discipline employees for failing to follow them, regardless of whether their employees are out on a protected leave.  In addition, it underscores the importance of documented communications with employees regarding suspected violations.  In this case, the Court relied heavily on the fact that the employer explicitly warned the employee and tried to communicate with him about his outside employment and the employee ignored the employer’s overtures.  Finally, the Court provided an instructive explanation of the narrow grounds upon which an arbitrator’s decision can be reversed – decisions on the merits will be given significant deference and reversal will be limited to situations where procedural error results in the denial of a party’s opportunity to vindicate an otherwise unwaivable statutory right.

Of note, the Court did not address whether an employer’s honest belief that an employee was misrepresenting his or her medical condition is a viable defense to claims of disability discrimination in California, leaving issue open to be resolved in another case.

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.