NY Government: Going to California...

We sent out an email blast to our clients with known NY Operations, but I'm reposting it here in case I missed anyone... If you don't care about NY wage and hour law, stop reading.  And I mean it.

The NY Legislature took a big step towards full employment for wage and hour lawyers with the passage of the Wage Theft Protection Act. This new law, signed by outgoing NY Governor David Patterson on December 13, 2010, will become effective on April 12, 2011. Employers should start preparing now.

To summarize, this new law requires employers to provide additional information regarding wage payments, and imposes stiff penalties for employers who fail to comply with their wage payment obligations.

Highlights of the New Legislation

Ø Enhanced Notice Requirements: New York wage law already requires employers to give new employees written notice of their rate(s) of pay, overtime rate (if applicable) and regularly scheduled paydays. Employers must also state whether the employee is paid by the hour, shift, day, week, piece, commission, etc., and any intent to claim allowances (e.g., tip, meal or lodging allowances) as part of the minimum wage. Additionally, the notice must include the employer's name, any "doing business as" name, and the employer's physical address, mailing address (if different) and telephone number.

The Act requires employers to give employees notice not only at the time of hire, but also annually, on or before February 1 of each year. Notice must be given in both English and the employee's native language, and employees must acknowledge receipt in writing. Also, employers must provide at least seven calendar days' notice of any changes to the information required to be disclosed, unless the changes are reflected in new wage statements accompanying employees' pay.

Employers must maintain employee notice and acknowledgment records for a period of six years. If notice is not provided to employees within 10 days of initial employment, employers will be subject to penalties of $50 per employee, per week (up to $2,500), in addition to costs and reasonable attorney's fees. The Act permits the New York Labor Commissioner to bring an enforcement action and to seek additional penalties for noncompliance with this requirement.

Ø Employee Wage Statements: The Act requires employers to provide wage statements to their employees with each paycheck specifying the: (1) dates of the applicable pay period; (2) employee's name; (3) employer's name, address and telephone number; (4) rate and basis of pay; and (5) allowances, if any, claimed as part of the minimum wage. For non-exempt employees, the statement must also include the applicable regular and overtime pay rates, in addition to the number of regular and overtime hours worked during the pay period. Payroll records containing this information must be maintained for six years (up from three years). Violations can result in civil damages of $100 for each workweek that the violation occurred (not exceeding $2,500), in addition to costs and reasonable attorney's fees. Additional penalties may be sought and awarded in actions for noncompliance brought by the New York Labor Commissioner on an employee's behalf.

Ø Increased Civil/Criminal Penalties: The Act provides for increasingly strict penalties against employers who fail to pay their employees properly. First, the Act permits liquidated damages against an employer of up to 100% of the total amount of wages found to be due (up from 25% under existing law), unless an employer can prove it had a good faith basis for believing that it was in compliance with the law. Additionally, employers found liable who fail to pay the amount owed pursuant to a final judgment within 90 days will now be assessed an additional 15% in damages. The Act provides for the employee's recovery of prejudgment interest and reasonable attorney's fees in any civil action to recover unpaid wages.

The Act also imposes more stringent criminal penalties for failure to pay minimum wage or overtime wages due. It provides that an employer (including the officers or agents of any corporation, partnership or limited liability company)found not to have paid an employee's wages is guilty of a misdemeanor and will be fined between $500 and $20,000 or be imprisoned for less than one year for each offense. The Act treats each failure to pay employee wages within any workweek as a separately actionable offense. Repeat offenses may result in felony charges, more fines, and up to one year in jail. The Act threatens similar criminal penalties against employers who fail to maintain adequate employee wage records. Initial violations will be deemed misdemeanors, with fines between $500 and $5,000, or up to one year of imprisonment. For subsequent record violations, employers may face felony fines of between $5,000 and $20,000, imprisonment for a period of not more than a year and one day, or both.

Ø Posting Requirement: Employers found liable under the Act may be ordered by the Labor Commissioner to conspicuously post documentation explaining the violation(s) for up to one year.

Ø Whistleblower Protections: The Act also strengthens protections for whistleblowers in cases involving wage violations. Significantly, the Act protects employees from unlawful reprisal (including threats of retaliation) who raise a complaint based upon a "reasonable" and "good faith" belief that their employer has violated the law--even if no violation actually occurred. It also protects employees who assist in the investigation of another employee's complaint, or who have otherwise exercised rights protected by the Act. Upon a finding of retaliation, the Labor Commissioner may award compensatory and liquidated damages (not to exceed $10,000), enjoin acts of retaliation, and order injunctive relief, which may include employee reinstatement. Employees also may make claims of retaliation in court, with similar remedies awarded. Retaliation claims must be made within two years of the alleged retaliatory act, although the two-year statute of limitation is tolled by the filing of an administrative charge with the Labor Department.

To ensure compliance, and avoid the significant penalties for violations, employers with New York operations should carefully review the full text of the New York Wage Theft Prevention Act, which can be found here: . Employers must also review and revise their pay practices by the Act's April 12, 2011, effective date.

Thanks to my pal and competitor Tony Rao for pointing this out and thanks to Alex Sperry of our Sacramento office for drafting the analysis.


NLRB Going Wild

The National Labor Relations Board is proposing a regulation that requires all employers under the NLRB's jurisdiction - both union and non-union- to post a notice explaining to employees their rights under the National Labor Relations Act.  That notice will include helpful information like how to file an unfair labor practice complaint, the right to collectively bargain and elect a union, etc. The entire contents of the notice is posted below.  The proposed regulations currently require qualifying employers to post the notice on paper with the other millions of government posters, and also send the notice out by email or put it on a company intranet. Multiple languages, etc. too.

The proposed regulations are here.  A "fact sheet" is here.  Read the whole proposed poster below. 

This NLRB is on a tear and it won't be long before private sector employers will have to wake up and smell the union. This time I may have to dust off my copy of The Developing Labor Law. My competitors may have to dust off their labor lawyers. OK, I kid! I had too many cookies.



“The National Labor Relations Act (NLRA) guarantees the right of employees to organize and bargain collectively with their employers, and to engage in other protected concerted activity. Employees covered by the NLRA* are protected from certain types of employer and union misconduct. This Notice gives you general information about your rights, and about the obligations of employers and unions under the NLRA. Contact the National Labor Relations Board (NLRB), the Federal agency that investigates and resolves complaints under the NLRA, using the contact information supplied below, if you have any questions about specific rights that may apply in your particular workplace.

“Under the NLRA, you have the right to:

• Organize a union to negotiate with your employer concerning your wages, hours, and other terms and conditions of employment.
• Form, join or assist a union.
• Bargain collectively through representatives of employees’ own choosing for a contract with your employer setting your wages, benefits, hours, and other working conditions.
• Discuss your terms and conditions of employment or union organizing with your co-workers or a union.
• Take action with one or more co-workers to improve your working conditions by, among other means, raising work-related complaints directly with your employer or with a government agency, and seeking help from a union.
• Strike and picket, depending on the purpose or means of the strike or the picketing.
• Choose not to do any of these activities, including joining or remaining a member of a union.

“Under the NLRA, it is illegal for your employer to:

• Prohibit you from soliciting for a union during non-work time, such as before or after work or during break times; or from distributing union literature during non-work time, in non-work areas, such as parking lots or break rooms.
• Question you about your union support or activities in a manner that discourages you from engaging in that activity.
• Fire, demote, or transfer you, or reduce your hours or change your shift, or otherwise take adverse action against you, or threaten to take any of these actions, because you join or support a union, or because you
engage in concerted activity for mutual aid and protection, or because you choose not to engage in any such activity.
• Threaten to close your workplace if workers choose a union to represent them.
• Promise or grant promotions, pay raises, or other benefits to discourage or encourage union support.
• Prohibit you from wearing union hats, buttons, t-shirts, and pins in the workplace except under special circumstances.
• Spy on or videotape peaceful union activities and gatherings or pretend to do so.

“Under the NLRA, it is illegal for a union or for the union that represents you in bargaining with your employer to:
• Threaten you that you will lose your job unless you support the union.
• Refuse to process a grievance because you have criticized union officials or because you are not a member of the union.
• Use or maintain discriminatory standards or procedures in making job referrals from a hiring hall.
• Cause or attempt to cause an employer to discriminate against you because of your union-related activity.
• Take other adverse action against you based on whether you have joined or support the union.

“If you and your co-workers select a union to act as your collective bargaining representative, your employer and the union are required to bargain in good faith in a genuine effort to reach a written, binding agreement setting your terms and conditions of employment. The union is required to fairly represent you in bargaining and enforcing the agreement.

“Illegal conduct will not be permitted. If you believe your rights or the rights of others have been violated, you should contact the NLRB promptly to protect your rights, generally within six months of the unlawful activity. You may inquire about possible violations without your employer or anyone else being informed of the inquiry. Charges may be filed by any person and need not be filed by the employee directly affected by the
violation. The NLRB may order an employer to rehire a worker fired in violation of the law and to pay lost wages and benefits, and may order an employer or union to cease violating the law. Employees should seek assistance from the nearest regional NLRB office, which can be found on the Agency’s website:

You can also contact the NLRB by calling toll-free: 1-866-667-NLRB (6572) or (TTY) 1-866-315-NLRB (1-866-315-6572) for hearing impaired.
“*The National Labor Relations Act covers most private-sector employers. Excluded from coverage under the NLRA are public-sector employees, agricultural and domestic workers, independent contractors, workers employed by a parent or spouse, employees of air and rail carriers covered by the Railway Labor Act, and supervisors (although supervisors that have been discriminated against for refusing to violate the
NLRA may be covered).

“This is an official Government Notice and must not be defaced by anyone.”

Lactation Accommodation Information. .

The helpful folks at the U.S. Department of Labor wants you to know about the new federal requirement that employers grant time off for women to express breast milk.  The DOL's fact sheet is posted here.
You may recall this requirement was included in the "healthcare reform" law.  I have not yet seen any legislative effort to grant male workers equal rights in this area.  But hope springs eternal.

Top 100 Employment Law Blogs

Yeah, another day, another award.  We were included in the Delaware Employment Law Blog's top 100 employment law blogs. See the post here.   We're # 17, even. But it seems they grouped them by certain criteria, and then ordered them alphabetically. So, who knows whether they just like us or REALLY really like us.  Disirregardless, it's an honor to be read and recognized. So, thank you Delaware Employment Law Blog!

Besides tooting our horn, the purpose of this post is to give you access to at least 100 employment law blogs that post in different states, on a variety of topics. The folks at the DELB put a lot of time and effort into compiling this information, not to mention their substantive posting over there.  Take advantage of all their hard work.Knowledge is POWER people!  Whew. I just got all red and stuff.


Payroll Company Not an "Employer" for Wage Hour Purposes

If an employer "outsources" payroll services to another company, can that payroll service company be held liable for wage-hour violations as an "employer?"  No.

The California Supreme Court in Martinez v. Combs (discussed here) determined who is liable under California wage and hour law - i.e., who is an "employer."  The court of appeal in Futrell v. Payday California, Inc., applied Martinez's definition of "employer" in deciding that a payroll service provider was not an "employer."

Futrell provided private police / crowd control services for a Reactor, a production company that makes commercials. The production company "payrolled" its employees through Payday, a payroll service company.  Futrell brought a class action against Payday, alleging wage-hour violations. Payday prevailed on a motion for summary judgment because the trial court held Payday was just a vendor of Futrell's actual employer, the production company.

The court of appeal held that Martinez restricts who may be held liable for wage-hour violations. The court rejected Futrell's argument that Payday exercised control over his wages:
There is no evidence in the record showing Payday exercised any control over Futrell‟s hours or working conditions. Reactor hired Futrell, and arranged and supervised the location shoots. . . . This means the only possible linchpin for finding that Payday was Futrell‟s employer is whether Payday “exercised control over his wages.”

If Payday had merely collected tax information from workers, kept track of time cards, calculated pay and tax withholding, and submitted reports to Reactor detailing such information, leaving it for Reactor to issue paychecks to the workers on its productions, we would have an easy case; Reactor would be the only employer. In our view, the issue in this case then comes down to whether Payday exercised “control over workers‟ wages” by going beyond handling the ministerial tasks of calculating pay and tax withholding, and by also issuing paychecks, drawn on its own bank account. We think not.

. . .. . Writing on a clean slate, we conclude that “control over wages” means that a person or entity has the power or authority to negotiate and set an employee‟s rate of pay, and not that a person or entity is physically involved in the preparation of an employee‟s paycheck. This is the only definition that makes sense. The task of preparing payroll, whether done by an internal division or department of an employer, or by an outside vendor of an employer, does not make Payday an employer for purposes of liability for wages under the Labor Code wage statutes.

The court then reached a similar conclusion under the federal Fair Labor Standards Act:

Although the FLSA applies a slightly different test than California law, the predominant factor remains the control an alleged employer exercises over an employee. Incorporating the reasons explained above into the FLSA test, we find Payday was not Futrell‟s employer for purposes of the FLSA. The economic reality existing between Futrell and Payday is that the latter prepared paychecks for the former for the work he performed on behalf of his actual employer, Reactor.

This case will come as good news to PEOs and other HR outsourcing companies, who may have been sued as "joint employers" for wage and hour violations. The court here, though, held that nothing in the opinion affects the analysis of who is the "employer" under any other body of law except wage-hour.

The case is Futrell v. Payday California, Inc. and the opinion is here.

San Francisco Minimum Wage Going Up 1/1/2011

San Francisco has its own minimum wage law.   It is indexed to inflation. It did not rise in 2010. However, it's rising as of 1/1/2011.  The new rate will be $9.92 per hour.  There of course is a new poster!  Get information here. 

Court of Appeal: Employer's Lawsuit Against Terminated Employees Beats Anti-SLAPP Motion

Overhill Farms received notice from the IRS that hundreds of its employees' social security numbers were invalid. The company gave employees a chance to correct the problem. Those who did not were terminated. The law imposes fines and potential criminal liability on employers who permit employees to work with false social security numbers.

Led by an activist organization, some of the terminated employees began protesting at Overhill. The protestors accused Overhill of being racists and ageists, and all kinds of other -ists because of the termination decision based on the IRS's action.  The leaflets they handed out said, among other things:

“OVERHILL FARMS UNFAIR and RACIST EMPLOYER.”  The leaflets distributed at the protests contained the heading “OVERHILL FARMS UNFAIR AND RACIST.”  Overhill is “[a]n abusive and racist employer in the manner that it treats its workers,” which “discriminates against Latinos”; has “unfairly terminated 300 workers,” has “fired workers for expressing themselves freely according to the First Amendment of the U.S. Constitution,” has “exploited Latinos for 30, 20, 15 and 10 years and then threw them to the streets — many single female heads-of-household,” and has exploited part-time workers “visciously as if modern slavery were in place.” 

Well, Overhill fought back. It sued the protestors for a variety of torts, including defamation, interference with prospective economic advantage, and unfair business practices. But the protesters challenged the lawsuit as a "SLAPP" - a lawsuit in retaliation for their First Amendment activity - protesting.
Protesting of course is protected by the First Amendment. But the First Amendment does not protect against libel - provably false statements of fact. Certain types of false statements have to be made with malice to constitute defamation.

The court of appeal said that merely calling Overhill "racist" was not defamatory:

We agree that general statements charging a person with being racist, unfair, or unjust – without more – such as contained in the signs carried by protestors, constitute mere name calling and do not contain a provably false assertion of fact.  Similarly, references to general discriminatory treatment, such as that contained in the handbill and flyer here, without more, do not constitute provably false assertions of fact.  (See, e.g., Beverly Hills Foodland v. United Food & Commercial Workers Union, Local 655 (8th Cir. 1994) 39 F.3d 191, 196 [“‘[T]o use loose language or undefined slogans that are part of the conventional give and take in our economic political controversies — like ‘unfair’ and ‘fascist’ — is not to falsify facts.’  [Citations.]”].) 
But, the protestors went further:

The press release contains language which expressly accuses it of engaging in racist firings and declaims upon the disparate impact the firings have had on “immigrant women.”  Similarly, after discussing Overhill’s termination of one-fourth of Overhill’s work-force, the leaflets explicitly assert that  the discrepancy in social security numbers was merely a “pretext” to eliminate certain workers, and refers to Overhill’s conduct as “racist and discriminatory abuse against Latina women immigrants.”  Moreover, in almost every instance, defendants’ characterization of Overhill as “racist” is supported by a specific reference to its decision to terminate the employment of a large group of Latino immigrant workers.  The assertion of racism, when viewed in that specific factual context, is not merely a hyperbolic characterization of Overhill’s black corporate heart – it represents an accusation of concrete, wrongful conduct.

 The court therefore held that generally calling someone racist is hyperbole. But saying that an employer fired an employee due to unlawful discriminatory motive is a provable assertion of fact.  That conclusion could have ripple effects beyond protesting. For, if this opinion stands, when an employee alleges wrongful termination due to discrimination, retaliation, etc., an employer is within its right to sue for defamation if it can prove that the statement is false.

The decision was 2-1. The dissent said:

I part company with the majority opinion in two fundamental respects.  First, my colleagues in the majority have incorrectly made this court the first state or federal appellate court in America, ever, to hold that the epithet “racist” constitutes a provably false assertion of fact as the basis of a claim of defamation.  The majority attempts to argue that it is only so holding because the term “racist” was used in combination with other words.  But those other words are not actionable and the majority does not and cannot argue otherwise.  Whether the word “racist” is used as a noun or an adjective in combination with other words does not matter.
Second, in my view, the majority misapplies the United States Supreme Court opinions in Milkovich v. Lorain Journal Co., supra, 497 U.S. at page 19 and Linn v. United Plant Guard Workers (1966) 383 U.S. 53, 58.  Defendants’ communications in their dispute with their employer simply did not contain a provably false fact and the reasons for their allegations were disclosed.  (Franklin, supra, 116 Cal.App.4th at p. 387.)  The majority opinion’s parsing of the one word “discrepancies” in reaching its conclusion is not consistent with United States Supreme Court jurisprudence in defamation cases.  I agree the employees’ claims might not be persuasive, but that does not make them defamatory.
My thought is that the California or US Supreme Court will take up this case.  A lot of former employees accuse their employers of being "racist" or discriminatory in making employment decisions.  One can imagine the argument that this decision will interfere with the enforcement of the civil rights laws.  One can also argue that the term "racist" or "discriminatory" is a powerful weapon and should not be tossed around without a factual basis to back it up.  There's the rub. We'll see what happens next.

The opinion is Overhill Farms, Inc. v. Lopez and the opinion is here.


U.S. Supremes Grant Review of Walmart Class Action

So, I have posted on Dukes v. Walmart for a few years now... here and here.  This is the class action involving potentially 1.5 million current and former Walmart employees all over the country.
The U.S. Supreme Court decided to consider some issues that arise in federal class actions:
Whether claims for monetary relief can be certified under Federal Rule of Civil Procedure 23(b)(2)—which by its terms is limited to injunctive or corresponding declaratory relief—and, if so, under what circumstances.


Whether the class certification ordered under Rule 23(b)(2) was consistent with Rule 23(a).
Here's a comprehensive post with cites to all kinds of relevant information from Ross Runkel's Employment Law blog. 

Federal Rule of Civil Procedure 23 governs class actions. So, that's what the court is referring to above. In essence the court is deciding whether and to what extent a court can order money to be paid if a class action is certified under Rule 23(b)(2), which is supposed to apply only to class actions seeking injunctions.

Yes, on the surface, the legal issues may read like real snoozers for HR and most employment lawyers. But the case is gold for civil procedure junkies.  And don't let all that civil procedure jargon fool you. The stakes  are incredibly high and the court has the opportunity to shape how federal class actions in discrimination cases may be asserted. The court's decision could well shape how multi-state employers implement policies to avoid class action treatment of seemingly unrelated decisions.... So, stay tuned!


IRS Standard Mileage for 2011

The IRS raised the standard mileage rate for automobile reimbursement to .... $0.51.  Don't trust me?  The link is here.

  • 51 cents per mile for business miles driven
  • 19 cents per mile driven for medical or moving purposes
  • 14 cents per mile driven in service of charitable organization


California Supreme Court: Waiting Time Penalties are..Penalties!

I know, sounds obvious. But folks were claiming that waiting time penalties, like meal period penalties, are a form of wage.  They were making this argument to permit claims for waiting time penalties under California's unfair competition law, because that law has a four year statute of limitations.

No sale, said the California Supreme Court in Pineda v. Bank of America (opinion here). In that case, Pineda received his wages four days late. He brought a class action for waiting time penalties. on behalf of everyone who was paid late under Bank of America's final pay policies. 

Pineda argued that he should be able to sue for waiting time penalties under California's unfair competition law (Bus. Prof. Code section 17200).  The Supreme Court rejected that argument because waiting time penalties are not "restitution," the only time that money is recoverable under the UCL.  Plaintiffs wanted to use the UCL to benefit from that law's four-year statute of limitations.

But the Supreme Court giveth, and taketh away.  The other issue decided today is that the statute of limitations for waiting time penalties is not affected by whether the employer ultimately paid the wages, albeit late.

The lower courts dismissed the case because he did not file his case within a year of his termination. The lower courts applied case law like in McCoy v. Superior Court (2007) 157 Cal.App.4th 225, 229-230. There, the court of appeal held a one-year statute of limitations applies to waiting time penalty claims if the wages are paid as of the time of suit. 

The Supreme Court rejected McCoy and held that in all instances, the waiting time penalty statute, Labor Code Section 203, imposes the same statute of limitations. That section says that the statute of limitations for waiting time penalties is the same as the limitations period applied to the underlying wage claims.  The Supreme Court said that rule applies whether the wages are paid or not at the time of suit.


Arizona Medical Marijuana Law

So, there was a big debate over what would happen in the workplace if California's Prop. 19 were to pass. If you have a short memory, that was the initiative to basically legalize personal use of marijuana.  Well, that initiative failed to pass back on November 2.

In Arizona, on the other hand, the voters passed their own Prop. 203. Text is here.
Prop. 203 legalizes certain "medical marijuana," making AZ the 15th state to do so. But AZ's new law expressly protects medical marijuana users at the workplace:

6-2813. Discrimination prohibited

36-2814. Acts not required; acts not prohibited 
* * *

Rad, huh?  So, you can't smoke pot AT work. The employer doesn't have to give up federal dollars to permit users to have pot in their system. ...  But generally, (1) no taking action based on positive drug tests unless the level in the blood suggests impairment (2) employers don't have to let you work "impaired" (stoned) or under the influence (buzzed?).  

I guess we're going to find out what "impaired" and "under the influence" means through a series of regulations that are supposed to be issued within the next few months.  

Remember, this isn't a general legalization of marijuana. It will apply only to "qualified" patients who are certified as having the requisite medical conditions. 

Good luck Arizona employers!  


"Suitable Seating" Class Action Goes Forward

Retailers must provide "suitable seating" in accordance with the California Industrial Welfare Commission's Wage Order 7-2001, section 14. It says: "All working employees shall be provided with suitable seats when the nature of the work reasonably permits the use of seats."

Eugina Bright worked for 99 Cents Only Stores. She brought a class action alleging that, as a cashier, the company could reasonably have provided her with a seat suitable for cashiering. She sought penalties under PAGA (Private Attorneys General Act of 2004), claiming that the Wage Order violation supported PAGA penalties.

The trial court held that Ms. Bright was not "underpaid" and, therefore, could not collect penalties under Section 20 of the Wage Order. She also could not collect PAGA penalties, the trial court believed, because PAGA's extra "catchall" penalty does not apply when there is an applicable penalty in place. Sort of a "gotcha" ruling, which I admire.

But the court of appeal did not share my sense of irony, holding that PAGA penalties are available for wage order violations, even if Wage Order Section 20 penalties do not apply:

Section 2699, subdivision (f) makes its civil penalty applicable to violations of “all provisions of this code except those for which a civil penalty is specifically provided.” (§ 2699, subd. (f).) Section 1198, the code section Bright contends was violated, contains no civil penalty. (See § 1198.) Nowhere in the Labor Code is a civil penalty specifically provided for violations of the suitable seating requirement incorporated in section 1198. Thus, section 2699, subdivision (f), by its terms, allows for a civil penalty for violations of section 1198 based on failure to comply with the suitable seating requirement.
The case is Bright v. 99 c Only Stores, Inc. and the opinion is here.


Annual Legal Update - Web or Live

The end of the year is here. There are new laws, new regulations, and new court decisions to digest.  How will you keep up? How will you know what to do?  Please, somebody help you!  Aaargh.

Relax. Shaw Valenza is here to ease your worried mind, smooth your furrowed brow, apply myrrh to your foreheads. OK, I wouldn't know where to get any myrrh now that Prop. 19 did not pass.  Myrrh dealers... get the word out.

Anyway, wise men -- and women -- from all over are going to get even wiser when they attend our annual Employment Law Update!  Statutes, regulations, case law, and how to's. Best news yet, Jennifer Shaw herself is presenting.  And such a deal.

Here's a link for more information.  Click it.  Now.  Ok, now.


Blog refresh - Blogroll dead

Just a quick note that I slightly upgraded the design of the blog. If you have feedback please let me know.

I just learned that my list of interesting blogs (blogroll) was destroyed, because the "blogroll" company that hosted it "ceased operations."  So, if you have suggestions for additions to my blogroll, please let me know. Also, if you used to be on my blogroll and would like to be added again, please send me a note.


Court of Appeal: No Attorney Present at Plaintiff's Mental Examination

The court of appeal's opinion in Toyota v. Superior Court should be interesting to employment lawyers and maybe to their clients involved in employment litigation.
Steven Braun was a plaintiff in a discrimination and harassment case against Toyota. He claimed significant emotional distress as a result of the conduct. Toyota arranged for a mental examination. Braun's attorney sought to impose certain conditions, including that it be taped, and that the attorney could accompany Braun to the exam and wait in an adjoining room. The doctor balked at this condition, as did Toyota. The Superior Court, however, allowed it. So, Toyota sought a "writ" - a mid-litigation appeal - overturning the Superior Court's decision.

The Court of Appeal granted the writ, which almost never happens in discovery disputes. The court said that although an attorney is not always prohibited from attending an examination, he or she must make some evidentiary showing of need. Toyota, on the other hand, showed (1) that the examination's scope was limited by court order (2) that the doctors believed the attorney's presence could influence the examination. The court also noted that medical professionals conducting such examinations are entitled to a presumption they will act properly.

The case is Toyota v. Superior Court and the opinion is here.

Court of Appeal: Meal and Rest Breaks Need Not Be Forced

Everyone is waiting for the California Supreme Court to issue its decision in Brinker or Brinkley or both regarding whether meal / rest periods must be ensured or merely provided under California law. Well, nearly everyone.

The Court of Appeal in Hernandez v. Chipotle Mexican Grill, Inc., just decided that meal and rest periods must be allowed, but that employees who choose not to take them cannot recover penalties. The court upheld dismissal of a class action given that each individual class member would have to prove he or she was prevented from taking given meal or rest periods.

The opinion in Hernandez v. Chipotle Mexican Grill, Inc. is here.

Court of Appeal Moves the Arbitration Goal Posts Again

One of the frustrations with employment arbitration is that the courts continue to invent new ways of invalidating them. Employers who favor arbitration are stuck with re-issuing agreements with each new court decision.

The California Court of Appeal's decision in Trivedi v. Curexo Technology Corp. is the latest effort to invalidate arbitration contracts.

First, the court found that the arbitration agreement was "procedurally unconscionable." That is the first step, because a court has to find both procedural and substantive unconscionability. Since the employer usually presents an arbitration agreement as "take it or leave it," an arbitration agreement usually has some "procedural unconscionability" because it is an "adhesion contract" (take it or leave it.).

But the court did not stop at adhesion contract. In a footnote, the court said that the arbitration clause was in the same type face as the rest of the employment contract in which it was contained. The court found that its lack of "prominence" was "one factor" courts consider in determining unconscionability. With this statement, the court proves once again that the doctrine of "unconscionability" is being used as an end-run around the Federal Arbitration Act. If the court required "prominence" as a condition of enforcing the agreement, the requirement would plainly violate the U.S. Supreme Court's decision in Doctor's Associates v. Cassarotto, 517 U.S. 681 (1996). In that case, Montana required arbitration agreements to be in all-caps and on the first page of a contract.

But wait, there's more. The court also held that the employer referenced the American Arbitration Association employment arbitration rules. These rules are expressly DESIGNED to implement procedural fairness. Get this - the employer did not attach the rules to the arbitration agreement. As a result, the court found, the agreement was procedurally unconscionable(!)
I just linked to the rules above. They're as easy to obtain as the Code of Civil Procedure or California case law. The employer did not attach the Code of Civil Procedure either. If the AAA rules were not used, would the agreement have been unconscionable because the Code of Civil Procedure was not attached? What if the California Supreme Court's Armendariz case was not attached? (That case imposes several requirements on lawful agreements.)

Anyway, the court then turned to substantive unconscionability. The arbitration agreement permitted the arbitrator to award fees to the prevailing party. The court held this provision to be unconscionable, because case law says that defendants may recover fees in FEHA cases only when the plaintiff's claims are frivolous, unreasonable, or without foundation. The funny thing is that the FEHA statute itself simply says that the "prevailing party" may recover fees. So, the decision requires the arbitration agreement to spell out what case law says?? The court ignored the reality that the arbitrator will consider case law in making his or her decision. The court also dismissed the employer's argument that the AAA rules require the arbitrator to award fees in accordance with applicable law.

The court also concluded that the agreement's reference to injunction relief was consistent with the Code of Civil Procedure, but was nevertheless evidence of unconscionability. The logic is that the employer would take advantage of that provision more frequently than the employee. The court leaves us to guess how a provision that is no broader than an existing statute is evidence that an agreement is invalid.

Finally, the court refused to sever the attorney's fees or injunction provision. It found the agreement was "permeated" by unconscionability because of the injunctive relief and attorney's fees provisions. The court neglected to cite the key case on severability, Little v. Auto Stiegler Inc., 29 Cal.4th 1064 (2003). The court also made no mention of how the agreement was "permeated" with unconscionability given the rather mild clauses the court found to be unconscionable.

Anyway, if this case stays on the books, it's going to require significant changes to arbitration agreements. Employers should consider either directing employees to dispute resolution rules on the web or, preferably, give the employees a copy with the agreement. Additionally, attorney's fees and injunctive relief provisions should contain the qualifying language, "as permitted by applicable law."

This case is a good example of why the U.S. Supreme Court is going to decide whether these "unconscionability" cases are a mere end run around the Federal Arbitration Act. Look for the Court's decision in AT&T v. Concepcion in a few months. Ross Runkel's excellent resources on Concepcion are here.

The decision in Trivedi v. Curexo Technology Corp. is here.


Ninth Circuit Explains "BFOQ" Defense in Sex Discrimination Case

Title VII of the Civil Rights Act of 1964 prohibits discrimination based on sex and other criteria. But there are some defenses to discrimination. One of these is the "BFOQ" or bona fide occupational qualification.

As the court of appeals explained in Breiner v. Nevada Dept. of Corrections, the BFOQ defense is "an 'extremely narrow exception to the general prohibition of discrimination on the basis of sex' that may be invoked 'only when the essence of the business operation would be undermined' by hiring individuals of both sexes."

So, the Nevada prison system was beset by a number of instances of male corrections officers engaging in sexual conduct with female inmates. A guard impregnated an inmate, which came to the attention of administration. The inmates purposely traded favors for better treatment.

Nevada's response, in part, was to exclude males from certain jobs, including "Corrections Lieutenant" at women's prisons. The thought was that hiring only female lieutenants would cut down corruption caused by female inmates' solicitations. Some male corrections officers sued, saying they were denied promotional opportunities at the female prisons.

The Ninth Circuit reversed the prison systems' summary judgment victory. The court did not believe that Nevada adequately supported its justification for discriminating against male candidates for hiring at women's prisons.

This opinion explains in detail the BFOQ defense and the employer's difficulty proving it. Much of the opinion focuses on prison cases, but the BFOQ defense and its burdens will be applicable to all businesses seeking to establish a sufficient justification for hiring women or men exclusively in a particular setting.

The case is Breiner v. Department of Corrections and the opinion is here.

New DOT Drug Testing Rules

The US Department of Transportation (DOT) modified its drug testing rules. The entire new rules can be read here.

Only employers that MUST comply with DOT drug testing rules (for drivers of larger trucks) MUST comply with these new rules, which take effect October 1, 2010.
So, employers that have voluntary (optional) drug testing plans in effect may wish to modify them to conform with the DOT rules, but they do not have to.

The DOT has summarized the changes in an email which I'm pasting here:

1) The Department is required by the Omnibus Transportation Employees Testing Act (Omnibus Act) to follow the HHS requirements for the testing procedures/protocols and drugs for which we test.

2) Primary laboratory requirements in this final rule include:

- Testing for MDMA (aka. Ecstasy);

- Lowering cutoff levels for cocaine and amphetamines;

- Conducting mandatory initial testing for heroin;

3) The Department brought several testing definitions in-line with those of HHS.

4) Each Medical Review Officer (MRO) will need to be re-qualified – including passing an examination given by an MRO training organization - every five years. The Final Rule eliminated the requirement for each MRO to take 12 hours of continuing education every three years.

5) An MRO will not need to be trained by an HHS-approved MRO training organization as long as the MRO meets DOT’s qualification and requalification training requirements.

6) MRO recordkeeping requirements did not change from the five years for non-negatives and one year for negatives.

7) The Final Rule does not allow the use of HHS-Certified Instrumented Initial Testing Facilities (IITFs) to conduct initial drug testing because the Omnibus Act requires laboratories to be able to perform both initial and confirmation testing but IITFs cannot conduct confirmation testing.

8) The Final Rule is effective October 1, 2010.

Ninth Circuit and Female on Male Sexual Harassment

The EEOC sued on behalf of Lamas, a male worker at Las Vegas' airport. He worked for a service company called Prospect Airport Services. Over time, a female, married employee,Munoz, openly solicited Lamas for sex and a relationship. When Lamas rebuffed him, she recruited co-workers to help. He steadfastly told her he wasn't interested.

Lamas ultimately complained. The first supervisor said she'd talk to Munoz, but didn't. The senior Prospect manager told Lamas it was a "personal" issue but that he would talk to Munoz as a "favor." He actually did talk with Munoz, but she was undeterred.

Lamas over time became upset and offended, his work performance suffered, and - yep - Prospect fired him.

So, the district court held the work environment was insufficiently hostile. The Ninth Circuit reversed. The court went through each element of a harassment claim and found Lamas satisfied each one at least enough to avoid Prospect's motion for summary judgment.

The opinion of course is interesting because it involves a female harassing a male. For readers of this blog, though, it's a reminder of how unsophisticated line management is about harassment. Had the sexes been reversed, it's pretty safe to assume management would not have been so cavalier. Lamas had written evidence of Munoz's come-ons. Management simply did not take him seriously, but then fired him when his performance deteriorated. Jeez. If they're conducting training at Prospect, it's not sinking in or it's not effective.

The opinion is EEOC v. Prospect Airport Services, Inc. and the opinion is here.

Court of Appeal Reverses Summary Judgment in Age and Disability Case

Sandell, formerly Taylor guitars' vice president of sales, suffered a stroke. As a result, he walked with a cane and spoke slower than had previously had. Taylor ultimately fired him, claiming he did not motivate the sales staff and because sales were anemic under Sandell's leadership.

The court of appeal reversed the trial court's summary judgment. On the disability discrimination claim, the court noted that Sandell did not claim Taylor failed to accommodate him. Sandell said he could do his job without accommodation. Rather, this was a straight disparate treatment case - "they fired me because I had a disability."

Finding a factual dispute on whether Taylor's reasons for discharge were pretextual, the court relied on performance appraisals that were rosier than Taylor's characterization of Sandell's performance during litigation. So... stop me if you've heard this ... overly nice performance appraisals will come back to bite you.

Another interesting part of the opinion addressed Sandell's subordinates declarations confirming Sandell's lack of leadership skills. The court said that the employees had failed to complain during Sandell's employment, so a reasonable jury could infer the opinions had changed (for litigation?!). That's a very generous inference for the court to make, IMO.
Finally, the court was troubled by some he-said /he-said discriminatory comments, which the court believed was enough additional evidence of discrimination to send the case to the jury. The court rejected the "same actor" claim that the CEO hired and fired Sandell within five years. The court said that the CEO's perception of Sandell as "old" could have changed within that period of time, particularly because of Sandell's physical changes.

The opinion is Sandell v. Taylor-Listug, Inc. and the opinion is here

No More Demurrers to Wage Hour Class Action Complaints?

The Court of Appeal in Guiterrez v. California Commerce Club, Inc. (opinion here) pretty much said that trial courts should not sustain demurrers (aka motions to strike class allegations) in wage-hour class actions. Ever. There are a few cases where demurrers have been sustained / granted. So, unless the Supreme Court or Legislature closes the door forever, it is not sanctionable to keep trying!

New California Workers' Compensation Regulations

Workers' compensation law is just one more thing that HR has to be worried about. I try not to worry about it, but I can't help it. Our friends at the California Chamber of Commerce published a handy FAQ regarding new regulations. The regulations concern Medical Provider Networks. In particular, the posters and notices must be revised substantially. The FAQ's lead you to the government's source documents. The deadline is October 8, 2010, so get ready.

California Court of Appeal Invalidates Anti-Injunction Law

I am still a bit behind on blogging because of last month's trial. Here's one that came down in the middle of the trial.

As the courts in this case noted, California law ma[d]e it nearly impossible to get an injunction against a union picketing in front of a private business. Labor Code Section 1138.1 and Code of Civil Procedure Section 527.3 impose significant procedural hurdles and substantive limitations on courts to issue injunctions against "peaceful picketing." These protections were extended to private property, such as outside the front entrance of retail stores.

The court first held that the entrance of a FoodsCo, including the sidewalk and "apron" were private property, not a public forum. The court distinguished cases that held enclosed shopping malls were public areas. Because the FoodsCo entrance and surrounds were private, the court noted, the company could prohibit speech without violating the picketers' First Amendment or California constitutional rights.

The court then examined whether the anti-injunction laws violated FoodsCo's rights. FoodsCo sought an injunction againt a union's trespass. The union had picketed from the opening of the store until the present, five days per week, 8 hours per day. The complaint was that FoodsCo was operating non-union.

The trial court denied the injunction because FoodsCo had not adequately proved its entitlement to an injunction under the Labor Code's special provision, Section 11381.1. The business owner must prove, among other things, that the police are unwilling or unable to provide assistance, and other grounds that do not apply to the issuance of trespass injunctions generally.
Here is the money quote:

Accordingly, as applied in this case, the Moscone Act violates the First and Fourteenth Amendments of the United States Constitution. The Act affords preferential treatment to speech concerning labor disputes over speech about other issues. It declares that labor protests on private property are legal, even though a similar protest concerning a different issue would constitute trespassing. And it denies the property owner involved in a protest over a labor dispute access to the equity jurisdiction of the courts even though it does not deny such access if the protest does not involve a labor dispute.

So, unless the Legislature acts somehow to create a constitutional anti-injunction law, the courts will have to enforce anti-trespass injunctions against unions on the same basis as it does so outside the union picketing context.

The case is Ralphs Grocery Company v. UFCW, Local 9 and the opinion is here.

Ninth Circuit: Fired Harassers Lose Sex Discrimination Claim

The plaintiffs were males who worked for Executive Jet. They were fired after an investigation revealed they engaged in certain inappropriate conduct that violated the Company's anti-harassment policy. The female who complained filed a charge with the EEOC, which found cause to believe a violation of Title VII occurred. The male employees claimed that the female was a willing participant and engaged in the same conduct of which she complained.

The males sued for, among other things, sex discrimination. They claimed that Executive Jet fired male employees for sex-based conduct, but not females who engaged in similar conduct.

The court engaged in detailed analysis regarding whether the male and female employees were "similarly situated," but found that they were not. The males never complained about harassment. The female did. Although the presence of a complaint by one group is not per se enough to render employees non-similar, that was enough to render their situations different in this case.

The court's analysis also included whether the EEOC's probable cause finding should be admitted as evidence that the males' conduct warranted action taken against them. The court of appeal reaffirmed its rule that EEOC probable cause determinations may be admissible in some circumstances, particularly in summary judgment proceedings and bench trials, where there is little chance of prejudice.

The case is Hawn v. Executive Jet and the opinion is here.

Ninth Circuit: Triable Issue on Accommodation of Hearing Impaired

The EEOC brought suit against UPS Supply Chain Solutions for failing to accommodate a hearing impaired employee. The employee, Mauricio Centeno, was deaf since birth and American Sign Language was his primary language.

He was able to do his job in accounting without a sign language interpreter. But he asked for an interpreter at company meetings. The employer offered post-meeting recaps in writing and contemporaneous notes during the meetings. He also wanted an interpreter's help with respect to certain job training and to understand the company's sexual harassment policy.

The district court granted UPS' motion for summary judgment because, it found, UPS had engaged in an interactive process with Centeno and had provided accommodations that were sufficient to enable Centeno to understand what transpired at meetings, etc.

But the court of appeals reversed. The appellate court held it was a genuine dispute of fact regarding whether the accommodations were effective. The court decided that agendas, contemporaneous notes, and summaries in English were not necessarily sufficient substitutes for a sign language interpreter. The court was especially concerned because Centeno was not proficient at written English, but the court also said it would be a triable issue even if Centeno were fluent in English.

Similarly, the court held that UPS may have failed to accommodate Centeno by delaying Excel training. Centeno claimed he could not read the online training program and required an interpreter. UPS ultimately provided him one, but two years later.

Centeno also complained he did not understand the company's anti-harassment policy and training materials because he was not given a sign language interpreter to read them. The court held that Centeno's professed lack of comprehension was sufficient to put UPS on notice that an accommodation was necessary.

This case raises the bar for employers who employ hearing impaired employees. Even when the hearing impaired can perform essential job functions without interpreters, they may be necessary so the employee can enjoy the "benefits and privileges" of employment.

The opinion is EEOC v. UPS Supply Chain Solutions and the opinion is here.

Court of Appeal Expands Wrongful Discharge Law

OK, so let's say an employee has a non-compete agreement with a former employer. After Employee is hired by new employer, the former employer sends a "cease and desist" letter to the new employer. The new employer, fearling litigation, fires the employee. Employee sues new employer for wrongful discharge?!

Yep. I know....#@^!%.

In 2003, Silguero began employment with Floor Seal Technology, Inc. as a sales representative. In August 2007, FST threatened Silguero with termination unless she signed a confidentiality agreement. The agreement prohibited her from sales activities for 18 months following either departure or termination. (A Non-compete). FST terminated Silguero's employment in October 2007.

Shortly therafter, Silguero was hired by with Creteguard. But FST contacted Creteguard and requested enforcement of the non-compete.

In November 2007, Creteguard's chief executive officer, Thomas Nucum, did not call me. Instead, he informed Silguero in writing that "although we believe that non-compete clauses are not legally enforceable here in California, [Creteguard] would like to keep the same respect and understanding with colleagues in the same industry." Nice.

Silguero argued the noncompetition agreement enforced by Creteguard was void pursuant to section 16600, that no statutory exception to section 16600 applied, and that Creteguard's enforcement violated public policy.

The Court of Appeal agreed:

The complaint in this case alleges an ―understanding‖ between Creteguard and FST pursuant to which Creteguard would honor FST‘s noncompetition agreement. Creteguard admitted in writing that it entered into this understanding with FST, ―although [Creteguard] believe[d] that non-compete clauses are not legally enforceable here in California,‖ because Creteguard ―would like to keep the same respect and understanding with colleagues in the same industry. This alleged understanding is tantamount to a no-hire agreement.

No hire agreements are illegal too.

This case is Silguero v. Creteguard, Inc. and the opinion is here.

California Supreme Court Bings Google

I think Reid v. Google (opinion here) will be more memorable for its discussion of objections in summary judgment proceedings than for its discussion of the stray remarks doctrine.

I will post my upcoming article here next Monday, which will explain the above gibberish. (Or I'll cheerfully refund your money, and that's a promise!)

Ninth Circuit Thwarts End Run Around California Labor Code

EGL, a Texas transportation company, came up with an idea. Avoid all those pesky California wage and hour laws by making everyone an independent contractor, and inserting a choice of law clause into the agreement.

First, the court had to get by the Texas choice of law clause. The clause said only that the independent contractor agreement would be "interpreted under the law of the State of Texas." The claims, however, were not brought under the agreement, but rather were brought under the California Labor Code. So, this case is a warning to practitioners to draft choice of law clauses expansively. The court did not consider whether the Texas choice of law clause could be enforced in California.

Then, applying California law, the court reversed summary judgment. The court held that there was significant evidence of an employment relationship under California's test for independent contractor status. The court went on at length. So, you can read the opinion in Narayan v. EGL, Inc. et al. here.

California Supreme Court Holds No Private Right of Action Re: Tip Pooling

Labor Code Section 351 provides that tips belong to the servers who generate them. Tip pooling - employer-mandated sharing of tips among service staff, has been held lawful under that section. But certain tip pooling arrangements, particularly those in which management shares tips, have been held illegal.

In Lu v. Hawaiian Gardens Casino, Inc., a card dealer sued over a tip pooling arrangement, claiming that the employer's policy violated section 351. The lower courts held that Section 351 does not authorize private lawsuits. The Supreme Court stepped in to resolve a split in the courts of appeal. Applying general principles regarding when the Legislature intends to create private causes of action, the Court held there was none authorized under Section 351.
Of course, the plaintiffs can pursue their unfair competition claims, etc. The main disadvantage I can see off the cuff is the absence of a claim for attorney's fees under the Labor Code.

This case does not address whether tip pooling itself is lawful. So, employers should continue to draft tip pooling arrangements in accordance with lower court decisions on the subject, such as Leighton v. Old Heidelberg, Ltd. (1990) 219 Cal.App.3d 1062, 1067; Etheridge v. Reins Internat. California, Inc. (2009) 172 Cal.App.4th 908, 921-922; Budrow v. Dave & Buster’s of California, Inc. (2009) 171 Cal.App.4th 875, 878-884; and Jameson v. Five Feet Restaurant, Inc. (2003) 107 Cal.App.4th 138, 143.

The case is Lu v. Hawaiian Gardens Casino, Inc. and the opinion is here.


Trial in employment cases is as rare as hen's teeth. Most cases settle. With the increasing prevalence of "EPLI" insurance, there is often little appetite for taking a case "all the way" and facing a jury. At least for us defense lawyers, going to trial is unusual.

Trial also is, to say the least, arduous. Sleep is something you get in between preparing for trial, conducting the trial, and preparing for the next day. No matter how much you prepare, there is much to do once the trial begins.

Once you're there, the odds are against you. Plaintiffs win as much as 60% of the time, depending on the type of claim and the court's location. That's another reason cases settle a lot. Let's not forget the time and money the employer has to spend, and victory defined only as a jury's conclusion that the defendant was right.

Don't let anyone tell you different. Winning is special. So, we're proud to let you know about two employment law trials that concluded this week with favorable outcomes.

First, Shaw Valenza alumnus Shane Anderies, now of Anderies and Gomes, won a verdict in style. His case, covered by the media (also rare), resulted not only in a defense verdict, but also a huge award on a cross-claim for defamation. Read about Moreno v. Ostly et al here.

Oh, yeah, and the Shaw Valenza trial team just received a verdict on behalf of our client Signature Properties in a retaliation case, tried in Sacramento Superior Court. The jury was out just 6 hours after a four week, fifteen trial-day, trial. No press coverage so far. The facts of our case were nowhere near as interesting as Shane's. (His involved a paralegal suing a lawyer for sexual harassment and his defamation cross-action). But winning was just as exciting for our client as us as it was for Shane and his.

Thanks to all of you who patiently waited for return calls during July. I will get back to you soon. I promise. I also will be posting on a number of new cases in the coming days. And congratulations again to Shane, Mr. Ostly, and of course Signature Properties.


Court of Appeal: Employee Must Initiate Interactive Process

Tanya Milan worked for the city of Holtville's water treatment plant. After a work-related injury, she began a leave of absence. During the leave, her workers' compensation doctor decided she would not be able to perform her duties. She never requested an accommodation or contacted her employer to state her intention to return to work. Instead, she accepted retraining benefits from the city's workers' compensation administrator and began taking courses for a new career.

The trial court awarded damages. The court felt that when the employee's doctor opined she was unable to do her job, that triggered the city's obligation to accommodate her.

However, on appeal, the court reversed. The court noted that the claim for failure to participate in an interactive process requires the employee to initiate the process:

Section 12940, subdivision (n), requires that an employer "engage in a timely, good faith, interactive process with the employee or applicant to determine effective reasonable accommodations, if any, in response to a request for reasonable accommodation by an employee or applicant with a known physical or mental disability or known medical condition." (Italics added.)

* * *

Importantly, by its terms section 12940 subdivision (n) requires that the employee initiate the process. (Gelfo v. Lockheed Martin Corp., supra, 140 Cal.App.4th at p. 62, fn. 22.) On the other hand, "no magic words are necessary, and the obligation arises once the employer becomes aware of the need to consider an accommodation. Each party must participate in good faith, undertake reasonable efforts to communicate its concerns, and make available to the other information which is available, or more accessible, to one party. Liability hinges on the objective circumstances surrounding the parties' breakdown in communication, and responsibility for the breakdown lies with the party who fails to participate in good faith."

Here is the money quote:

In short, where, as here, an employer has not received any communication from an employee over a lengthy period of time, and after the employee has been given notice of the employer's determination the employee is not fit, an employer is not required by section 12940, subdivision (n), to initiate any discussion of accommodations. Imposition of such a duty under those circumstances would contradict the express terms of the statute which requires that the employee initiate the interactive process.

Although this case does not require it, from a preventive standpoint, it is important to document attempts to check in with employees on long term leave. Employers should also ensure it has policies requiring employees to communicate periodically regarding their status and intentions. By doing so, that bolsters the argument that the employee's failure to communicate demonstrates a lack of intention to engage in an interactive process or request accommodation.

The case is Milan v. City of Holtville and the opinion is here.

Court of Appeal Approves Nordstrom Class Settlement

Nordstrom employees filed a class action challenging a commission plan. The parties settled for nearly $9 million in cash and vouchers, and Nordstrom agreed to make changes to its commission plans.

One employee filed a valid objection, which the trial court overruled. The trial court then approved the settlement as "fair, adequate and reasonable." The objector, Kellie Taylor, appealed.

Taylor's objection primarily went to the contention that the plaintiff's claims were stronger than what the settlement justified. The court evaluated the strength of the commission claims and found Nordstrom had a number of good faith defenses to whether its commission plan was faulty. This case will be helpful in providing an overview of commission plan law. For example, the court rejected the notion that the parties' allocation of $0 to PAGA and waiting time penalties was unreasonable:

There is no willful failure to pay wages if the employer and employee have a good faith dispute as to whether and when the wages were due. (Amaral v. Cintas
Corp. No. 2 (2008) 163 Cal.App.4th 1157, 1201-1202.)
The court then explored the good faith basis for the dispute. In doing so, the court summarized cases discussing commission plans and their validity:

The right to commission wages is subject to the employment contract between an employer and employee, and Nordstrom calculated and paid its employees’ commission wages in accord with its written commission agreements with its employees. “It is undisputed that commissions are ‘wages,’ and thus that plaintiff’s claim for commissions falls within the terms of Labor Code sections 2926 and 206. [Citations.] However, for purposes of enforcing the provisions of the Labor Code, ‘[t]he right of a salesperson or any other person to a commission depends on the terms of the contract for compensation.’ [Citations.] Accordingly, plaintiff’s right to commissions ‘must be governed by the provisions of the [employment agreement].’ [Citation.] We have already concluded that, pursuant to the plain language of the written employment agreement, plaintiff was not entitled to any further commissions after he was terminated. Accordingly, defendant’s failure to pay such commissions cannot constitute a violation of the Labor Code.” (Nein v. HostPro, Inc. (2009) 174 Cal.App.4th 833, 853, fn. omitted; see also Div. of Lab. Stds. Enforcement, Enforcement Policies and Interpretations Manual (June 2002 Rev.) § 34.3 [“Commission computation is based upon the contract between the employer and the employee”] (DLSE Manual); id., § 34.3.1 [“Computation of commissions frequently relies on such criteria as the date the goods are delivered or the payment is received. Sometimes, the commission of the selling salesperson is subject to reconciliation and chargebacks if the goods are returned. If these conditions are clear and unambiguous, they may be utilized in computing the payment of the
Good stuff. Then the court discussed payment of commissions when they can be calculated, rather than immediately:

If commissions cannot be calculated as of the time employment is terminated,
California law permits an employer to pay commissions after the termination date, as long as they are paid once they can be calculated. (DLSE Manual, supra, §§ 4.6, 5.2.5.) California law also permits Nordstrom’s policy of paying commissions based on net sales. (Steinhebel v. Los Angeles Times Communications, LLC (2005) 126 Cal.App.4th 696, 707 [approving process under which “an employer makes advances on commissions to employees and later reconciles any overpayments by deductions from future commissions”]; Hudgins v. Neiman Marcus Group, Inc. (1995) 34 Cal.App.4th 1109, 1122 [central issue decided was that employer could not deduct pro rata share of commissions from all employees for returns where salesperson could not be identified; “[a]s to those items of merchandise the customer decides to keep, the sales associate has clearly earned his or her commission at the moment the sales documents are completed and the customer takes possession of the purchased items. As to identified returns, the sale is reversed and the individual sales associate is required to return the commission because his or her sale was rescinded”], italics added.)

Taylor also objected to the use of merchandise coupons as partial payment because coupons cannot be used as a substitute for wages under Section 212. The court rejected this argument because the wages were not due and earned. This was a settlement of a disputed claim.

So, the Court approved the settlement. This case appears to throw some cold water on the new trend of objecting to settlements.

The case is Nordstrom Commission Cases and the opinion is here.

U.S. DOL Expands Who Can Take FMLA Leave to Care for a Child

The U.S. Department of Labor is busy writing new "interpretations" of the law, rather than promulgating regulations through the normal process. In their third effort, the DOL has decided to explain who is eligible to take Family and Medical Leave under the FMLA to care for a "son" or "daughter."

It is true that the FMLA and its regulations permit leave by employees who are not biological parents when they stand "in loco parentis." But what is "in loco parentis"? Well, the statute, the courts, and the DOL's own regulations have defined the term before. The DOL cited some of the interpretations in its letter:
In loco parentis is commonly understood to refer to “a person who has put himself in the situation of a lawful parent by assuming the obligations incident to the parental relation without going through the formalities necessary to legal adoption. It embodies the two ideas of assuming the parental status and discharging the parental duties.” . . . “The key in determining whether the relationship of in loco parentis is established is found in the intention of the person allegedly in loco parentis to assume the status of a parent toward the child. The intent to assume such parental status can be inferred from the acts of the parties.” . . . Courts have enumerated factors to be considered in determining in loco parentis status; these factors include the age of the child; the degree to which the child is dependent on the person claiming to be tanding in loco parentis; the amount of support, if any, provided; and the extent to
which duties commonly associated with parenthood are exercised.

After reciting these definitions, the DOL goes on to say in its letter: "The FMLA regulations define in loco parentis as including those with day-to-day responsibilities to care for and financially support a child. 29 C.F.R. § 825.122(c)(3). . . .

OK. But then, they say:
It is the Administrator’s interpretation that the regulations do not require an
employee who intends to assume the responsibilities of a parent to establish that he or she provides both day-to-day care and financial support in order to be found to stand in loco parentis to a child. For example, where an employee provides day-to-day care for his or her unmarried partner’s child (with whom there is no legal or biological relationship) but does not financially support the child, the employee could be considered to stand in loco parentis to the child and therefore be entitled to FMLA leave to care for the child if the child had a serious health condition. The same principles apply to leave for the birth of a child and to bond with a child within the first 12 months following birth or placement.
Huh? It may be news to parents that they can "intend to assume the responsibilities of a parent," without providing "financial support." It may also be news to the person who wrote the sentence right before the language quoted above, since the word "and" connects "day-to-day responsibilities"and "financially support."

And that last part of the above quote suggests that boyfriends can take "leave for the birth" of a girlfriend's child and for "bonding"? That sort of undercuts the entire statute and regulatory scheme. Why include "parent" in the statute at all when just about anyone can qualify as standing "in loco parentis?"

Here's another interesting quote from the DOL attempting to explain its interpretation:
Neither the statute nor the regulations restrict the number of parents a child may have under the FMLA. For example, where a child’s biological parents divorce, and each parent remarries, the child will be the “son or daughter” of both the biological parents and the stepparents and all four adults would have equal rights to take FMLA leave to care for the child.
If I read this right, any step-parent automatically can take FMLA leave even when the step-parent does not indicate any interest in acting as the parent of the other spouse's biological child from a previous relationship? What if the divorced parents meet their soul mates and choose not to remarry? Is that enough to confer "in loco parentis" status on the non-biological soul mate?

Can it be that anyone with a significant other who has a child can grab some job-protected leave, ostensibly to care for the child? Of course not. The DOL has stringent verificiation requirements to ensure that only persons really and truly standing in loco parentis can have leave:
Where an employer has questions about whether an employee’s relationship to a child is covered under FMLA, the employer may require the employee to provide
reasonable documentation or statement of the family relationship. A simple statement asserting that the requisite family relationship exists is all that is needed in situations such as in loco parentis where there is no legal or biological relationship. See 29 C.F.R. § 825.122(j); 73 Fed. Reg. 67,952 (Nov. 17, 2008).
OK, not so stringent. There is no documentation requirement other than a "simple statement": "My girlfriend has a child who has a serious health condition and I need leave to take care of her." No chance for abuse there.

If you sense I'm annoyed, it's not about whether bona fide FMLA leave is important for parents and children. The issue is that some may be tempted to seek refuge in taking FMLA leave for no reason other than to shield themselves from discipline. Yes, this has actually happened. The DOL has opened up a gaping hole permitting abuse of a well-intentioned law, but without issuing regulations and without persuading Congress to amend the statute.

Administrator Interpretation 2010-3 is here.

U.S. Supreme Court Declines to Take Up San Francisco Healthcare Law

Back in 2008, the Ninth Circuit Court of Appeals held that San Francisco's Healthcare Security Ordinance was not preempted by ERISA. We posted on that here. Fast-forward (chuckle) to yesterday, when the U.S. Supreme Court refused the Golden Gate Restaurant Association's petition for review. So, looks like those pesky surcharges disclosed at the bottom of menus throughout San Francisco are here to stay.


U.S. Supreme Court Issues Two More Arbitration Decisions

The U.S. Supreme Court closed out its employment cases for the 2010 Term with two arbitration decisions. The Court held in one opinion that the arbitrator must resolve an arbitrability issue. The Court reached the opposite result in the other. Here's what happened.

In Granite Rock Co. v. Teamsters, the company and its union agreed on a new contract. But the Company would not agree to hold the union harmless for strike-related damage. The union continued to strike. The company argued the strike violated the "no-strike" clause in the parties' new contract, which also contained an arbitration clause. The union believed the agreement was not properly ratified and, therefore, not a contract when the strike occurred.

Granite sued the Teamsters in federal court alleging breach of contract against the local union, and interference with contract against the International. District court allowed a jury to decide when the agreement was ratified - which determined if the strike was arbitrated or resolved in court. Once the jury decided the agreement was properly ratified, the district court sent the case to arbitration over the merits of the breach of contract issue. The Ninth Circuit, though, held that the arbitrator should have decided the ratification issue.

The Supreme Court held the district court got it right. The court was required to decide if the parties agreed to arbitrate the breach of the no-strike clause issue, because courts enforce arbitration only to the extent the parties agreed. The date the contract was ratified amounted to a dispute over the applicability of arbitration to the dispute. If ratified, there would be a valid contract. Here's how the court put it:

a court may order arbitration of a particular dispute only where the court is satisfied that the parties agreed to arbitrate that dispute. See First Options, supra, at 943; AT&T Technologies, supra, at 648−649. To satisfy itself that such agreement exists, the court must resolve any issue that calls into question the formation or applicability of the specific arbitration clause that a party seeks to have the court enforce. See, e.g., Rent-A-Center, West, Inc. v. Jackson, ante, at 4−6 (opinion of SCALIA, J.). Where there is no provision validly committing them to an arbitrator, see ante, at 7, these issues typically concern the scope of the arbitration clause and its enforceability. In addition, these issues always include whether the clause was agreed to, and may include when that agreement was formed.
So, the court, not the arbitrator, had to decide when the contract was ratified.

This decision was 7-2, authored by Justice Thomas. Justices Sotomayor and Stevens dissented from this part of the opinion, but joined in the unanimous decision that there is no claim for tortious interference under federal law.

The opinion in Granite Rock Co. v. Teamsters is here.

Just a couple of days earlier, though, the Court held in Rent-a-Center West, Inc. v. Jackson that the arbitrator must decide arbitrability, albeit in a different context. Granite was decided under Section 301 of the LMRA. Rent-a-Center is a Federal Arbitration Act case. But the Court cites FAA decisions in Granite, too. So, the analysis is probably the same.

Jackson sued for employment discrimination in Nevada federal court. Rent-a-Center sought to compel arbitration. Jackson argued the agreement was "unconscionable" under Nevada law, which is a defense to the enforceability of the arbitration agreement.

But the arbitration agreement provided: "[t]he Arbitrator, and not any federal, state, or local court or agency, shall have exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability or formation of this Agreement including, but not limited to any claim that all or any part of this Agreement is void or voidable."

So, unlike in Granite, the parties' agreement expressly gave the arbitrator the authority to determine whether the agreement was void, or enforceable. The Court held that, given the parties' "clear and unmistakable" agreement, any dispute over this provision was itself a question for the arbitrator to resolve:

The delegation provision is an agreement to arbitrate threshold issues concerning the arbitration agreement. We have recognized that parties can agree to arbitrate"gateway" questions of "arbitrability," such as whether the parties have agreed to arbitrate or whether their agreement covers a particular controversy.

The Court then analyzed whether the FAA permitted the court to permit the arbitrator to decide if the agreement was unconscionable. The Court held that the FAA did permit this. In particular, the court decided that Jackson alleged the entire arbitration agreement was invalid, not exclusively the provision conferring on the arbitrator the right to decide unconscionability. Had Jackson been able to argue this delegation provision alone was unconscionable (and how would he do that?) the court may have come down a different way.

Therefore, Jackson's challenge to the arbitration agreement as "unconscionable" must be decided by the arbitrator.

If arbitration agreements reserve the power to decide unconscionability to the arbitrator, that will certainly affect courts' power to decide "unconscionability" claims by plaintiffs seeking to avoid arbitration agreements.

This one was 5-4. The dissent argued the majority simply got it wrong, synthesizing the law as follows:

questions related to the validity of an arbitration agreement are usually matters for a court to resolve before it refers a dispute to arbitration. But questions of arbitrability may go to the arbitrator in two instances: (1) when the parties have demonstrated, clearly and unmistakably, that it is their intent to do so; or (2) when the validity of an arbitration agreement depends exclusively on the validity of the substantive contract of which it is a part.

The majority believed this rule required arbitration because both prongs were satisfied. But the dissent argued (1) because the agreement was alleged to be unconscionable, Jackson could not have "clearly and unmistakably" submitted arbitrability to the arbitrator. The dissent also argued

when a party raises a good-faith validity challenge to the arbitration agreement itself, that issue must be resolved before a court can say that he clearly and unmistakably intended to arbitrate that very validity question. This case well illustrates the point: If respondent’s unconscionability claim is correct—i.e., if the terms of the agreement are so one-sided and the process of its making so unfair—it would contravene the existence of clear and unmistakable assent to arbitrate the very question petitioner now seeks to arbitrate. Accordingly, it is necessary for the court to resolve the merits of respondent’s unconscionability claim in order to decide whether the parties have a valid arbitration agreement under §2. Otherwise, that section’s preservation of revocation issues for the Court would be meaningless.

The bottom line: unless or until Congress overturns this decision, it appears employers will be able to avoid courts' rulings on unconscionability and have arbitrators decide them instead.

The opinion in Rent-a-Center West, Inc. v. Jackson is here.

Happy Anniversary to Us (Again)

Yes, it's a slight detour into self-indulgence. Thank you for your patience.

So, four years ago, two wide-eyed kids, with barely a tuna sandwich and $3.00 between them, decided to stake out their little corner of the American Dream and start a small business of their own.... Oh, and Jennifer and I started Shaw Valenza four years ago today, too! What a coincidence! (I hope those two scrappy kids made it.)

Anyhoo, after perfectly timing our decision to start a business a few months in advance of the worst time to start a business in history, we're grateful to still be here. We know why we made it, too. Coffee and toner? Sure. But we're also thankful for our clients, prospective almost-clients, and even former clients, who have made our survival possible. We are grateful to our colleagues / co-workers / employees, who have helped us flourish. Thank you, too, to our vendors and everyone else who have helped us along the way. And a big thanks to the courts, legislatures, and regulators, who continue to provide us with an ever-expanding, confusing, and conflicting body of employment laws!

By the way, SV's 4th anniversary also means that this blog celebrates its fourth year of existence. This is post number 368, and I've enjoyed every one of them. So, thank you, adoring public, for reading along with us. :::echo....echo....echo....::::

See you next year. I hope.


U.S. Supreme Court Partially Punts in Electronic Monitoring Case

We posted about Quon v. Arch Wireless here when it was just a Ninth Circuit case. There, the court of appeals held that a deputy sheriff had a reasonable expectation of privacy in his text messages sent on an employer-provided PDA.

On review, the U.S. Supreme Court ducked on the reasonable expectation of privacy issue that the courts below focussed on. The Supreme Court is concerned that the use of electronic data in the workplace and in society is still in flux and it does not want to pass judgment too soon on how privacy is maintained and expected in electronic communications. So we won't know about what policies are valid, whether a supervisor's oral statement could modify a written policy, and whether employers can destroy an expectation of privacy merely by furnishing the equipment. Another day, perhaps.

Instead, the court did hold that the City of Ontario was within its rights to look at Quon's text messages to see if he was using too much bandwidth for personal use. The court assumed there was a sufficient expectation of privacy without deciding the issue, and simply held that the search was "reasonable."
Because the search was motivated by a legitimate work related purpose, and because it was not excessive in scope, the search was reasonable under the approach of the O’Connor plurality. 480 U. S., at 726. For these same reasons—that the employer had a legitimate reason for the search, and that the search was not excessively intrusive in light of that justification—the Court also concludes that the search would be “regarded as reasonable and normal in the private-employer context” and would satisfy the approach of JUSTICE SCALIA’s concurrence. Id., at 732. The search was reasonable, and the Court of Appeals erred by holding to the contrary. Petitioners did not violate Quon’s Fourth Amendment rights.
Bottom line - this case would have more relevance to private sector employers in California if the Court had addressed the "reasonable expectation of privacy" issue. However, the court's discussion also concludes that employee monitoring is "regarded as reasonable and normal in the private-employer context."

For public sector employers, this case is significant because it clarifies the standard for the government-as-employer performing workplace monitoring even where employees have a reasonable expectation of privacy.

The case is City of Ontario v. Quon and the opinion is here.

U.S. Supreme Court: NLRB Must Have 3 Members to Rule

So, what are we going to do about the over-500 - count 'em - NLRB decisions issued by the 2-member panels??

The NLRB normally has 5 members. At the end of 2007, the Board had 4 members, and anticipated the terms of 2 recess appointments would expire shortly. So, the 4 members "delegated" its powers to a three-member panel.

Then, one of the panel members left because his term expired. That left just two - a quorum of the panel of three...right?

Well no. Several litigants challenged the Board's power to function as a two member panel. The Courts of Appeals split on the issue. The Supreme Court ruled today that the two-member decisions were improper:

we find that the Board quorum requirement and the three-member delegation clause should not be read as easily surmounted technical obstacles of little to no import. Our reading of the statute gives effect to those pro-visions without rendering any other provision of the statute superfluous: The delegation clause still operates to allow the Board to act in panels of three, and the group quorum provision still operates to allow any panel to issue a decision by only two members if one member is disqualified. Our construction is also consistent with the Board’s longstanding practice with respect to delegee groups. We thus hold that the delegation clause requires that a delegee group maintain a membership of three in order to exercise the delegated authority of the Board.

So, what happens to the 500+ decisions issued by the 2-member panel? We'll see how many of the litigants attempt to challenge them. Or, perhaps the Board, which has been staffed by 4 members since March 2010, will find some way to re-affirm the decisions. We shall see.

The case is New Process Steel LP v. NLRB and the opinion is here.