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Employment Law E-Buzz

Easy-to-digest updates on emerging employer legal issues

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.


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.

Did You Know…California Supreme Court Holds Undocumented Workers Are Not Barred From All Relief

Posted in Court Decisions, Discrimination

In Salas v. Sierra Chemical Co. the California Supreme Court recently held that an undocumented worker who fraudulently obtained employment through use of someone else’s social security number may seek damages for employment discrimination and retaliation.  The Court reasoned that undocumented employees like Mr. Salas are entitled to pursue claims for retaliation and discrimination against their employers because preventing undocumented employees from seeking remedies when they are discharged due to discrimination or because they have applied for workers’ compensation would undermine the purpose of federal immigration law by making it less expensive for employers to hire undocumented immigrants than authorized workers, giving employers an incentive to violate federal law.  The Supreme Court rejected the employer’s arguments that the doctrines of after-acquired evidence and unclean hands barred the employee from any and all relief.  The Court held that although these doctrines may operate to reduce an employee’s damages and/or preclude reinstatement, they are not a complete bar/defense to an employee’s claims.  This means that these doctrines do not bar recovery of damages for the period of time prior to the employer’s discovery of the information (after- acquired evidence).  Here, the Court reasoned that an employer’s discovery that its employee was undocumented cannot provide a complete bar to a wrongful termination claim because permitting such a defense would eviscerate state law protections against discrimination and retaliation.

The Supreme Court also held that Senate Bill 1818 (“SB 1818”) (codified as Labor Code section 1171.5; Civil Code section 3339; Government Code section 7286; Health and Safety Code section 24000) which extends state law protections and remedies to all workers “regardless of immigration status,” is not preempted by the Federal Immigration Reform and Control Act of 1986 (8 U.S.C. §1101 et seq.) (IRCA), except to the extent it authorizes an award of lost pay damages for any period after the employer discovers the employee’s inability to work in the United States.**

According to the Supreme Court:

“Even if permitting [unauthorized aliens who have used false documents to secure employment] to obtain state remedies for violations of the state labor and employment laws provides an incentive for such federal law violations, the practical effect of such incentive is minimal because the typical unauthorized alien wage earner is not familiar with the state law remedies available for unlawful termination and because job seekers rarely contemplate being terminated in violation of the law. Thus, it is highly unlikely that an unauthorized alien’s decision to seek employment in this country would be based in any significant part on the availability of lost wages as a remedy for unlawful discharge. . . . Furthermore, not allowing unauthorized workers to obtain state remedies for unlawful discharge, including prediscovery period lost wages, would effectively immunize employers that, in violation of fundamental state policy, discriminate against their workers on grounds such as disability or race, retaliate against workers who seek compensation for disabling workplace injuries, or fail to pay the wages that state law requires.”

**SB 1818 was enacted in 2002 to limit the United States Supreme Court decision in Hoffman PlasticCompounds, Inc. v. NLRB which held that the policies underlying the IRCA prohibited the National Labor Relations Board from awarding backpay to illegal immigrants, who, in violation of the National Labor Relations Act, were terminated because of their participation in the organization of a union.  Indeed, SB 1818 makes explicit California’s public policy with regard to the irrelevance of immigration status in enforcement of state labor and employment laws.  If an employer hires an undocumented worker, that employer will bear the burden of complying with all laws related to the actual employment of the employee.  Thus, California passed SB 1818 to ensure that undocumented workers remain covered by all the rights and protections given to other workers in California.

Did You Know…California Supreme Court Approves Class-Action Waivers, But Disapproves PAGA Representative Claim Waivers

Posted in Class Actions, Court Decisions, Litigation

The California Supreme Court has issued its highly-anticipated opinion in Iskanian v. CLS Transportation Los Angeles, LLC (“Iskanian”).

The decision is mixed for employers: the Court ruled that arbitration agreements with mandatory class action waivers generally are enforceable.  However, the Court also concluded that representative actions under the Private Attorneys General Act (“PAGA”) cannot be waived.

In Iskanian, an employee sought to bring a class action lawsuit on behalf of himself and similarly situated employees for his employer’s alleged failure to compensate its employees for, among other things, overtime and meal and rest periods. The employee had entered into an arbitration agreement that waived the right to class proceedings. The Court considered, in part, whether a state’s refusal to enforce such a waiver on grounds of public policy or unconscionability is preempted by the Federal Arbitration Act (“FAA”), and concluded that it is.

Highlights from the opinion are below:

  1. An arbitration agreement with a class action waiver is enforceable.  The Court overruled its prior holding to the contrary in Gentry v. Superior Court (2007) 42 Cal. 4th 443 (“Gentry”) on the basis that Gentry has been preempted by the United States Supreme Court in AT&T Mobility LLC v. Concepcion (2011) 563 U.S. __ [131 S.Ct. 1740] (“Concepcion”).
  2. A class action waiver is not unlawful under the National Labor Relations Act (“NLRA”).  The Court declined to follow the National Labor Relations Board’s position in D.R. Horton Inc. & Cuda (2012) 357 NLRB No. 184 [2012 WL 36274] that the NLRA generally prohibits contracts that compel employees to waive their right to participate in class proceedings to resolve wage claims.  Rather, the Court agreed with the Fifth Circuit’s opinion in D.R. Horton, Inc. v. NLRB (5th Cir. 2013) 737 F.3d 344, rejecting the NLRB’s opinion.  The Court held that “in light of the FAA’s liberal federal policy favoring arbitration, sections 7 and 8 of the NLRA do not represent a contrary congressional command overriding the FAA’s mandate.”
  3. A waiver of representative claims under PAGA is contrary to public policy and unenforceable as a matter of state law.  “An agreement by employees to waive their right to bring a PAGA action serves to disable one of the primary mechanisms for enforcing the Labor Code.”  Because such an agreement exempts an employer from responsibility for violations of the law, the Court reasoned, it is against public policy.  Further, PAGA was “clearly established for a public reason,” so a waiver of PAGA rights would harm the state’s interests in enforcing the Labor Code and in receiving the proceeds of civil penalties.  The Court distinguished the FAA and the U.S. Supreme Court’s decision in Concepcion by concluding that “the FAA aims to ensure an efficient forum for private disputes, whereas a PAGA action is a dispute between an employer and the state Labor and Workforce Development Agency;” PAGA lies outside the FAA’s coverage because it is not a private dispute between an employer and an employee, but a dispute between an employer and the state.

Having concluded that the employer could not compel the waiver of Iskanian‘s representative PAGA claim, but that the arbitration agreement was otherwise enforceable according to its terms, the Court considered the parties’ next steps.  The Court noted that although the arbitration agreement could be read as requiring arbitration of individual claims but not of representative PAGA claims, neither party contemplated such a bifurcation.

Neither party got all that it wanted: although Iskanian sought to litigate all claims in court, the California Supreme Court required Iskanian to proceed with bilateral arbitration on his individual damages claims.  Although CLS sought to arbitrate the individual claims while barring the PAGA representative claim altogether, the Court required CLS to answer the representative PAGA claims in some forum.

The Court’s decision thus raises a number of questions: (1) Will the parties agree on a single forum for resolving the PAGA claim and the other claims? (2) If not, is it appropriate to bifurcate the claims, with individual claims going to arbitration and the representative PAGA claim to litigation? (3) If such bifurcation occurs, should the arbitration be stayed?  The Court invited the parties to address these issues on remand.

Due to the significance of the issues, it is anticipated that one or both parties will file a petition for certiorari in the United States Supreme Court.  Stay tuned………….