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Recently we reported on the federal D.C. Circuit Court of Appeals’ decision in Noel Canning v. NLRB, holding that certain of President Obama’s recess appointments to the NLRB were invalid.  That decision calls into question the validity of numerous NLRB decisions made by a panel including these recess appointees.  The court held that the appointments were invalid because they were not made during a “recess” and because the vacancies did not arise during a recess. 

Last week, the Justice Department petitioned for review of the Noel Canning v. NLRB decision before the United States Supreme Court.  The Justice Department asks the high Court to decide the meaning of a “recess” for purposes of the President’s appointment power (whether it has to be an inter-session recess or whether it can be an intra-session recess, as was the case when President Obama made the NLRB recess appointments) and also asks the Court to decide whether the vacancy has to arise during the recess or whether it can arise prior to the recess but be filled during the recess.

The opposition to the petition for certiorari is due May 28, 2013.  The Supreme Court is not likely to issue a decision on whether or not it will grant review until after its summer recess.  We will keep you posted.

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California's Legislature is considering AB10 this session, which would increase California's minimum wage from the current $8 per hour to $8.25 per hour next year, to $8.75 per hour in 2015, and to $9.25 per hour in 2016.  Beginning in 2017 and thereafter, the minimum wage would be automatically adjusted upward based on the state's inflation rate.  Recent legislative efforts to increase California's minimum wage rate have failed and it is not clear whether this bill will fare differently.  However, the bill did recently pass the Assembly Labor and Employment Committee.  California's minimum wage is already one of the highest in the country.  Only a handful of states have minimum wage rates higher than California's. 

On the federal level, legislation has also been introduced to raise the federal minimum wage from the current $7.25 per hour to $8.20 per hour three months after the legislation is passed, to $9.15 per hour one year after the legislation is passed, and to $10.10 per hour two years after the legislation is passed.  Starting the third year after the legislation is passed, the federal minimum wage would be automatically adjusted upward based on teh Consumer Price Index.  The federal legislation, known as the Fair Minimum Wage Act of 2013, would also increase the minimum wage for tipped employees over the next three years from $2.13 per hour to 70% of the minimum wage. 

We will post developments on this and other employment-related legislation here.

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Earlier this week, a California court issued a published decision holding that an employer who employs piece rate employees must compensate those employees at the piece rate for all piece rate work and at a rate of at least the minimum wage for each hour of non-piece rate work.  It is not sufficient that an employer simply look backward at the pay period to determine if the total piece rate compensation divided by total hours worked (piece rate time and non-piece rate time) equals at least the minimum wage and then make up the difference only where the total falls below the minimum wage.  The case is Gonzalez v. Downtown LA Motors and the decision is here.

The decision rests on uncertain footing, relying on a prior California Court of Appeal decision in Armenta v. Osmose, 135 Cal.App.4th 314 (2005).  In turn, the Armenta decision relied on a 2002 DLSE opinion letter, in which the DLSE opined that piece workers must be paid at least minimum wage for all non-piece rate hours worked and that the employer may not satisfy this obligation by simply looking back at the end of the pay period at the total piece rate compensation earned and ensuring that it is equal to at least minimum wage for all hours (piece rate and non-piece) worked.   In that opinion letter, however, the DLSE acknowledged that California minimum wage law is susceptible to a divergent interpretation that the backward-looking/averaging approach is permissible.  Some California federal courts have also held that the backward-looking/averaging approach is proper.  To add to the confusion, the DLSE itself flip-flopped on its own interpretation of what is required in this situation.  In an earlier DLSE Interpretive Bulletin, the DLSE endorsed the backward-looking/averaging method.  See DLSE Interpretive Bulletin No. 84-3 (Feb. 1, 1984).  However, without explanation, the DLSE reversed its position several years later, explaining in its Operations and Procedures Manual that piece rate workers, in addition to their piece rate compensation, separately must be paid at least minimum wage for all non-piece rate hours worked. 

Of course, the employer in the Gonzalez case did not get any break from interpreting the law the same way the DLSE has at times interpreted it.  Instead, the employer was found liable to a class of piece rate employees for minimum wage violations and was ordered to pay the class for all unpaid minimum wages, as well as penalties for “willful” violation of the law.  Apparently, it’s only okay for the DLSE to get it wrong when trying to interpret the exact requirements of California wage and hour law. 

Unless and until there is a positive change in legal authority on this issue in California, employers who pay workers on a piece rate basis may want to take a cautious approach and pay these workers not only their piece rate for piece rate work, but also minimum wage for non-piece rate work hours.

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In good news for California employers, over the last two weeks, two more favorable decisions have been issued denying class certification in California wage and hour actions.  Yesterday, in Dailey v. Sears, Roebuck and Co., a California court held that class certification was properly denied in a case alleging certain Sears auto center managers and assistant managers were improperly classified as exempt and denied overtime compensation as well as proper meal and rest breaks.  The court held that substantial evidence supported the trial court’s finding that individual issues predominated over issues common to the class on each claim.  The plaintiff had argued that his theory for class treatment was that Sears uniformly classified the positions as exempt, and had uniform policies and procedures (including strict labor budgets) that effectively required the employees to spend the majority of their time on non-exempt work and to work at least 50 hours per week.  Plaintiff submitted a declaration stating that he spent the majority of his work time on non-exempt work, and submitted declarations of just 4 co-workers stating the same thing.  In contrast, Sears submitted declarations of 21 putative class members, each explaining that they regularly spent the majority of their work time on exempt, managerial tasks. 

The plaintiff argued that his evidence was sufficient to demonstrate that misclassification was widespread and that class certification should have been granted.  Plaintiff argued that individual issues effectively could be managed at trial through the use of representative sampling to determine both liability and damages, whereby a random sample of class members would testify to their work experience and from that testimony liability and damages determinations would be made and extrapolated to the rest of the class.  The court rejected Plaintiff’s arguments.  The court held that the existence of uniform classification policies and other uniform policies and procedures applicable to the class was not enough to support class treatment.  Rather, the proper focus is on the impact of those allegedly uniform policies on the class and how much time class members spent on exempt versus non-exempt tasks.  In this regard, the court determined that substantial evidence supported the trial court’s finding that Sears’ evidence showed that work experiences (and time spent on exempt versus non-exempt work) materially varied from employee to employee depending on a number of factors and that there were no uniform policies “commonly” dictating that the putative class members spend the majority of their time on non-exempt work.  As such, individual issues would predominate over any common issues, making class treatment inappropriate.

The same conclusion was reached with respect to Plaintiff’s meal and rest break claims.  The court held that there was no evidence of a uniform policy or practice depriving class members of meal or rest breaks, making class treatment inappropriate.

Regarding Plaintiff’s proposed sampling plan for managing individual issues, the court expressed its doubt as to whether the use of representative sampling is proper to determine liability (as opposed to damages), based on the United States Supreme Court’s ruling in Wal-Mart v. Dukes.  The court held that even if it is permissible to use sampling to determine liability in some cases, it was not appropriate in this particular case given the predominance of individual issues and lack of common experience among class members. 

In another recently issued decision, Wang v. Chinese Daily News, the Ninth Circuit overturned a judgment following jury and bench trial in favor of a certified class of newspaper employees alleging various wage and hour claims.  The case has quite a procedural history.  First, a California district court granted class certification in favor of the newspaper employees.  Second, the district court granted summary judgment in favor of the class, finding that they did not qualify for exempt status as a matter of law.  Following that order, the district court held a trial on damages that resulted in the class being awarded over $2.5 million in damages.  Chinese Daily News appealed the judgment to the Ninth Circuit, and the Ninth Circuit affirmed.  The Supreme Court granted review and later reversed the Ninth Circuit’s decision in light of Wal-Mart v. Dukes. 

On remand, the Ninth Circuit reversed the district court’s grant of class certification.  In light of Wal-Mart v. Dukes, the court held that class certification could not be maintained under Federal Rule of Civil Procedure 23(b)(2) because the class sought individualized monetary relief, which was not merely “incidental” to their request for injunctive relief.  The Plaintiffs actually conceded that class certification was improper under 23(b)(2).  However, this still left open the question as to whether class certification properly could be maintained under Rule 23(b)(3), which applies when a court determines that common issues predominate over any issues requiring individualized adjudication.  In this regard, the court remanded the issue to the district court to reconsider in light of Wal-Mart v. Dukes and the Ninth Circuit’s decision.  In providing guidance and direction to the district court to consider on remand, the Ninth Circuit emphasized that “commonality” does not exist simply because the claims raise “common questions” about the employer’s compliance with wage and hour laws.  “What matters to class certification is not the raising of common questions—even in droves—but rather the capacity of a classwide proceeding to generate common answers apt to drive the resolution of the litigation.”  The court held that commonality could not be established simply because the employer had a uniform classification policy.  The court further emphasized that “dissimilarities within the proposed class may impede the generation of common answers.”  As a result, the court emphasized that on remand “Plaintiffs must show significant proof that [CDN] operated under a general policy of [violating California labor laws]” in order for class certification to be warranted.

The Wang decision, like the Sears decision, also contains some positive guidance on the impropriety of using sampling at trial in the event a class is again certified on remand.  The court explained its view that the United States Supreme Court has disapproved of “trial by formula” whereby sampling is used to determine damages, which are then extrapolated to the rest of the class without further individualized proceedings.  The court emphasized that “employers are entitled to individualized determinations of each employee’s eligibility for monetary relief” and that “employers are also entitled to litigate any individual affirmative defenses they may have to class members’ claims.” 

This guidance from both a California court and the Ninth Circuit on the impropriety of sampling to determine liability and/or damages is good stuff for California employers defending wage and hour class actions.  Employers should of course be aware that further guidance on this important issue is expected from the California Supreme Court in Duran v. U.S. Bank, which is currently under review.

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Yesterday, the United States Supreme Court issued its decision in Standard Fire Ins. Co. v. Knowles, resolving a split of authority among the federal circuit courts as to whether a class action plaintiff filing in state court can prevent the defendant from removing the case to federal court under the Class Action Fairness Act (CAFA) by stipulating that plaintiff and the putative class will not seek damages in excess of $5 million (the jurisdictional minimum for CAFA removal).  Several circuits, including the Ninth Circuit (which governs California's federal courts) had ruled that a class action plaintiff could successfully avoid CAFA removal by signing a stipulation at the beginning of the case agreeing not to seek damages in excess of $5 million.  Other circuits had held that this practice was ineffective and could not be used to avoid removal under CAFA because a named plaintiff cannot bind absent class members in an uncertified class action.  As such, regardless of any stipulation by the named plaintiff to limit damages, a defendant could still remove under CAFA by demonstrating that the parties are diverse and that the amount in controversy is sufficient under CAFA.  Yesterday, in a unanimous decision authored by Justice Breyer, the United States Supreme Court in Knowles agreed with the latter view, thereby eliminating one forum shopping tool used by plaintiffs' class action lawyers to avoid federal court.  The Knowles decision overrules prior bad Ninth Circuit precedent to the contrary in Lowdermilk v. U.S. Bank National Association, which is good news for California employers.  The full opinion of the Supreme Court in Knowles is here.

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Today, another California court weighed in on the enforceability of an employment arbitration agreement in the context of a class action wage and hour lawsuit.  In Compton v. Superior Court, the court refused to compel arbitration of an employee's wage and hour claims, based on the court's finding that the employee's arbitration agreement was unconscionable and unenforceable.  The court relied on California unconscionability caselaw, including the seminal California Supreme Court decision in Armendariz.  The court held that AT&T v. Concepcion did not preempt Armendariz and that California unconscionability standards remain a proper ground for refusing to enforce an arbitration agreement.   Applying those standards, the court held that the arbitration agreement at issue was procedurally unconscionable because it was required to be signed as a condition of employment, and that it was substantively unconscionable because it was insufficiently bilateral.  Specifically, the agreement required the employee to arbitrate virtually all claims employees typically bring against an employer, but excluded from arbitration claims an employer is most likely to bring against an employee (e.g. claims for injunctive or equitable relief for trade secret misappropriation).  The agreement also provided a shortened statute of limitations for employee claims (one year).  As such, the court held that the agreement was "permeated" with unconscionability and refused to sever the unconscionable provisions and otherwise enforce the agreement.  The Compton decision is available here. 

As California employers should know, there are several cases pending before the California Supreme Court on the issue of whether and to what extent Concepcion preempts California law relating to enforceability of employment arbitration agreements.  This case may well be taken up for review as well, on a grant and hold basis.  Stay tuned for guidance to be issued from the California Supreme Court on this important issue, hopefully later this year.

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Following its recent release of a new I-9 form, the U.S. Department of Homeland Security has now announced that a new I-9 manual has been released.  The manual is a useful guide to some of the more obscure procedures involved with the I-9 form.  The manual can be found here. 

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On Friday, March 8, 2013, the U.S. Department of Homeland Security finally issued the long-awaited updated I-9 Form.  The old form can still be used for two months until May 7, 2013.  The new I-9 form is available here.

The I-9 form is used to verify work authorization of new hires in the U.S. as well to re-verify work authorization of foreign nationals working with temporary work authorization.  The new and old forms are very similar in content.  However, unlike the old one-page form, the new form is 3 pages long and easier to understand and fill out.  The new form also clearly differentiates between employees who only need to be verified once (U.S. Citizens and permanent residents) and foreign nationals who are here temporarily and must be re-verified whenever their work authorization expires. 

Regarding the list of acceptable documents that an employee tenders, the new form emphasizes that if a social security card is selected by the employee as a List C document, only an unrestricted social security card is acceptable.  If the social security card has any restrictive language on it, it cannot be used for I-9 purposes since the individual may have obtained it when they had temporary work authorization and now no longer do. 

Although there is a Spanish version of the I-9 form as well, it may only be used in Puerto Rico. 

As a reminder, at the time of hire, employers must inspect an original document chosen by the employee from List A, or one each from Lists B and C.  It must be done within the first 3 days of hire.  It is recommended that copies of the documents be attached and retained to the I-9 as further proof of the good faith efforts by the Employer to comply with the mandate.  If the documents appear to be authentic, then the employer will not be liable if it later turns out they are not authentic.  The I-9 forms should be retained for 3 years after termination of employment.  Employers who have enrolled in E-Verify must still have a paper or digital I-9 on file for every employee. 

Employers are encouraged to periodically audit their I-9’s and take corrective action where errors are found. 

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In recent years, the FMLA has been amended several times, most recently in 2009 under the National Defense Authorization Act and Airline Flight Crew Technical Corrections Act.  While the most recent amendments relate to rarely used FMLA provisions, the DOL recently approved new regulations covering these provisions, and of even more significance to all FMLA-covered employers, issued a new FMLA poster effective today, March 8, 2013.  The new poster is available here.  All employers covered by the FMLA should begin using the new poster immediately.  For more information on the most recent amendments to the FMLA, see our prior post here.  Additional information relating to the new regulations is available on the DOL's website here.

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The U.S. Department of Homeland Security will accept new H-1B visa filings on April 1 for a start date of Oct 1.   H-1B work visas are for foreign national employees that are college degreed professionals such as software developers, engineers, chemists, scientists, financial analysts, etc.   The annual quota of 85,000 visas applies to first time H-1B’s, not to extensions with the same company or transfers to other companies. 

It is suggested that employers query their departments to see if they have a need for such a visa for either a possible new hire or to keep a valued current foreign national employee work authorized.   This year's quota is expected to fill up relatively fast. 

Many employers have valued foreign national employees working on a one-year work permit after college (known as Option Practical Training or OPT).  Since the OPT will expire, it’s important that the H-1B visa be explored to allow them to remain work authorized.  Some employees are eligible for a one-time extension of their OPT (based on their STEM education in science, technology, engineering, and math), but eventually will still need the H-1B visa.

For more information, please contact Greg Berk.