California Minimum Wage Bill and Mandatory Sick Leave Bill Moving Forward

Last week, SB 935 (Leno) passed through the California Senate.  SB 935 provides for additional increases in the California minimum wage.  Under the current language of the bill, if enacted, the California minimum wage would move to $11 an hour in January 2015, $12 an hour in January 2016, and $13 an hour in January 2017.  Increases in 2018 and thereafter would be based upon inflation.  The bill specifically provides that the California Industrial Welfare Commission would not have authority to lower the minimum wage during periods of negative inflation.  We expect SB 935 to pass the Assembly as well.  It is unclear if Governor Brown would sign it.

AB 1522 also passed its first legislative house last week.  AB 1522 (Gonzalez), also referred to as the Healthy Workplaces – Healthy Families Act of 2014,  provides that any employee who works in the State of California for more than 7 days in a calendar year shall accrue paid sick leave at the rate of one hour for every 30 hours worked and would be able to use sick time at a rate of 24 hours per year after 90 days of employment.   Under the terms of AB 1522, paid sick leave could be used for the employee’s illness or that of a family member as well as for any leave related to domestic violence, sexual assault or stalking.  AB 1522 provides for a collective bargaining exception, as long as the CBA provides for some sick days.  We expect AB 1522 to pass the Senate as well and anticipate that most of the important lobbying on this bill will occur at the Governor’s office.

California Supreme Court Rejects Trial by Formula and Reaffirms That a Class Action Trial Must Properly Manage, Not Ignore, Individual Issues Bearing on Liability

In a case that CDF has been handling since its inception in 2001, we are pleased to report that yesterday the California Supreme Court issued its opinion in Duran v. U.S. Bank National Association, affirming in full a Court of Appeal decision overturning a $15 million judgment in favor of a class of Business Banking Officers (“BBOs”) who alleged that they were misclassified as exempt outside salespersons and owed overtime wages.  The California Supreme Court agreed with the Court of Appeal that the trial plan resulting in the judgment was fundamentally flawed and violated U.S. Bank’s due process rights.  The flawed trial plan involved the use of sampling and “representative” testimony of just 21 class members to determine class-wide liability and restitution to the entire class of 260 BBOs.  The plan precluded U.S. Bank from presenting evidence or testimony bearing on liability or damages as to any class member outside the 21-person sample.  Thus, U.S. Bank was precluded from, among other things, presenting evidence that 1/3 of the class members had executed declarations under oath establishing that spent the majority of their time on sales duties outside the Bank and, therefore, were properly classified.  U.S. Bank was also precluded from presenting evidence that the four prior named Plaintiffs in the case also all testified under oath that they spent the majority of their time on sales duties outside the Bank.  Based instead only on the limited evidence surrounding the small sample, the trial court found that the entire class was misclassified.  The trial court then allowed the overtime hours reported by the sample group to be extrapolated to the entire class (with a 43% margin of error), resulting in a verdict of $15 million and an average recovery of over $57,000 per person.  U.S. Bank appealed.

The Court of Appeal reversed the judgment, holding that the trial plan violated U.S. Bank’s constitutional due process rights by preventing U.S. Bank from presenting its affirmative defenses.  The Court of Appeal also held that the trial court should have decertified the class based on the demonstrated unmanageability of individual issues at trial.  Our post on the Court of Appeal decision is available here.  The California Supreme Court granted review and issued its opinion affirming the Court of Appeal’s decision in full.

The Trial Court’s Use of Sampling Was “Profoundly Flawed”

In upholding the reversal of the judgment, the California Supreme Court explained that “the judgment must be reversed because the trial court’s flawed implementation of sampling prevented USB from showing that some class members were exempt and entitled to no recovery.”  The Court explained that misclassification cases, and particularly cases involving the outside salesperson exemption, have the “obvious potential” to generate individual issues “because the primary considerations are how and where the employee actually spends his or her workday.”  In such cases, “a defense in which liability itself is predicated on factual questions specific to individual claimants poses a much greater challenge to manageability.”  The Court acknowledged that trial courts may employ various procedural tools to manage individual issues at trial, including statistical sampling, but emphasized that any such trial plan "must allow for the litigation of affirmative defenses, even in a class action case where the defense touches upon individual issues."  Additionally, the trial plan must be statistically sound.  "[W]hen a trial plan incorporates representative testimony and random sampling, a preliminary assessment should be done to determine the level of variability in the class.  If the variability is too great, individual issues are more likely to swamp common ones and render the class action unmanageable."  Against this backdrop, the Court held that the trial plan in this case was a "flawed statistical plan that did not manage but instead ignored individual issues."  The Court explained that the parties' evidence revealed great variation among class members in the amount of time they spent outside the Bank and that such variation signaled that the exemption question could not be resolved by a simple "yes" or "no" answer as to the entire class.  However, the trial plan ignored this variation by limiting the evidence from which liability would be determined to a small, unrepresentative sample of class members.  The Court criticized the trial court's arbitrary determination of the size of the sample, which was done without any expert input or validation, and further attacked the trial court's method of determining which class members would comprise the purportedly "random" sample.  This is because, among other things, the trial court allowed the named plaintiffs to be in the "representative" sample and also allowed BBOs to choose to opt-out of the trial sample (even though there was evidence that several class members with testimony favorable to the Bank opted out on the urging of Plaintiffs' counsel).  The Court also heavily criticized that the plan precluded U.S. Bank from presenting relevant evidence relating to BBOs outside the sample group:

"The court's decision to extrapolate classwide liability from a small sample, and its refusal to permit any inquiries or evidence about the work habits of BBOs outside the sample group, deprived USB of the opportunity to litigate its exemption defense.  USB repeatedly submitted sworn declarations from 75 class members stating that they worked more than half their time outside the office.  This evidence suggested that work habits among BBOs were not uniform and that nearly one-third of the class may have been properly classified as exempt and lacking any valid claim against USB.  USB also sought to introduce live testimony from witnesses about their work outside the office as BBOs.  Yet the court refused to admit any of this evidence or allow it to be considered by experts as part of a statistical sampling model.  Instead, extrapolating findings from its small sample and ignoring all evidence proffered to impeach these findings, the court found that the entire class was misclassified.  The injustice of this result is manifest.  While representative testimony and sampling may sometimes be appropriate tools for managing individual issues in a class action, these statistical methods cannot so completely undermine a defendant's right to present relevant evidence."

Thus, while the Court did not go so far as to say that statistical sampling may never be used to prove liability in a wage and hour class action, the Court strongly emphasized that any such use must, as a matter of constitutional due process, still allow the defendant to present its affirmative defenses.

The Court acknowledged that the use of statistical methods to prove damages in a class action is more acceptable than to prove liability, but that the statistical methods still must be scientifically sound and expert-endorsed.  Here, the trial court's extrapolation of overtime from the sample group to the entire class had an astounding 43% margin of error, which the Court held was unacceptably high, in addition to having been linked to an invalid finding of classwide liability.  For these reasons, the Court held that the judgment could not stand.

The Class Properly Was Decertified

In addition to holding that the trial plan was unconstitutional and required reversal of the judgment, the Court also held that the class properly was decertified due to the lack of manageability of individual issues surrounding U.S. Bank's exemption defense.  The Court emphasized that the presence of common issues does not necessarily mean that class certification is appropriate, if there are still individual issues that cannot be effectively managed at trial, as was the case here.  The Court instructed that the time to consider manageability issues is at the class certification stage, not at trial.  "In considering whether a class action is a superior device for resolving a controversy, the manageability of individual issues is just as important as the existence of common questions uniting the proposed class."  The Court held that while statistical methods possibly may be used to manage individual issues, such "methods cannot entirely substitute for common proof."  "There must be some glue that binds class members together apart from statistical evidence."  If statistical evidence will comprise a part of the proof on a class action claim, trial courts should consider at the class certification stage how such methods will be used and whether they will effectively and fairly manage individual issues.  "Rather than accepting assurances that a statistical plan will eventually be developed, trial courts would be well advised to obtain such a plan before deciding to certify a class action.  In any event, decertification must be ordered whenever a trial plan proves unworkable."

Because the trial court had "no evidence establishing uniformity in how BBOs spent their time" and the trial plan wholly failed to manage individual issues bearing on U.S. Bank's exemption defense, class certification could not stand.

The Court's decision is clearly favorable for California employers defending wage and hour class actions, both on certification principles and on the use of statistical methods to prove liability and damages in such cases.  The decision confirms a class action defendant's right to present its affirmative defenses, even where those defenses hinge on individualized issues, and also underscores that manageability issues must be at the forefront of the initial decision to certify a class.  CDF has represented U.S. Bank throughout this litigation and is very pleased to report this outstanding result.

Employer Without Notice of Off-the-Clock Work Not Liable for Unpaid Wages

This week a California court issued a favorable decision for the employer in an off-the-clock case, holding that the employer was not liable to the plaintiff for work the plaintiff performed off-the-clock because there was no evidence that the employer knew about the off-the-clock work.  While this is not a novel holding (it is well-settled that an employer is only liable for wages for off-the-clock work if the employer had actual or constructive knowledge about such work), the case is useful in illustrating the types of evidence that courts consider in analyzing whether the employer had “knowledge” of off-the-clock work being performed.

In Jong v. Kaiser Foundation Plan, the plaintiffs were three outpatient pharmacy managers for Kaiser.  Their position previously was classified as exempt but Kaiser reclassified the position to non-exempt in connection with the settlement of a prior class action challenging the exempt classification of this position.  Following the reclassification of the position to non-exempt, the plaintiffs filed a putative class action against Kaiser, alleging that Kaiser had a policy and practice of requiring its outpatient pharmacy managers to perform work off-the-clock and without pay.  Kaiser filed a motion for summary judgment as to each of the three named plaintiffs’ off-the-clock claims.  The trial court granted Kaiser’s motion as to Plaintiff Jong (holding that Kaiser was not liable to Jong and ending Jong’s claim against Kaiser), but denied the motion as to the other two named plaintiffs, allowing their claims to proceed.  Jong appealed the adverse ruling against him.

The Court of Appeal upheld the trial court’s order summarily adjudicating Jong’s off-the-clock claim in Kaiser’s favor.  The court explained that in order for an employer to be liable for unpaid wages for work performed off-the-clock, there must be evidence that the employer had actual or constructive knowledge that the employee was performing work off-the-clock.  The court held that Jong had failed to present evidence from which it could be concluded that Kaiser had knowledge that he performed any work off-the-clock.   The court’s holding was based on several admissions that Jong made in the case, including that (1) he knew Kaiser had a policy prohibiting off-the-clock work; (2) no manager or supervisor ever told him that he should perform work off-the-clock; (3) he was specifically told that he was eligible to work and be paid for overtime hours; (4) there was never an occasion when he requested approval to work overtime that was denied; (5) that he was paid for all work hours he recorded, including overtime hours, even when he did not seek pre-approval for the overtime work; and (6) he signed an attestation form agreeing not to perform work off-the-clock in accordance with Kaiser policy.

Notwithstanding these fatal admissions by Jong, Jong argued that Kaiser nevertheless still had constructive knowledge that he was performing work off-the-clock based on the fact that store alarm records revealed that Jong disarmed the alarm prior to the time he recorded beginning work and that Kaiser could have compared the alarm records to his time keeping records to discern that he was performing work off-the-clock prior to the start of his shifts.  The court rejected this argument, suggesting that the standard for constructive knowledge is not whether the employer “could have known” that off-the-clock work was being performed, but rather whether the employer “should” have known about it.  Moreover, the court held that the records did not establish that Jong was actually performing any work during any gap between disarming the alarm and signing in for the start of his shift.

Jong also argued that Kaiser was on notice that outpatient pharmacy managers must be performing work off-the-clock based on depositions in the misclassification class action revealing that employees in this position testified to working an average of 48 hours per week.  The court rejected Jong’s argument, reasoning that this evidence related to work habits prior to the reclassification of the position from exempt to non-exempt and, in any event, the evidence did not establish that Kaiser had knowledge that Jong (as opposed to OPMs generally) was performing work off-the-clock.  For these reasons, the court entered judgment in favor of Kaiser on Jong’s claims.

While Kaiser was successful in defending Jong’s claims, it did not have the same success in getting the other two named plaintiffs’ claims thrown out.  The trial court denied Kaiser summary judgment of their claims, based on testimony by those plaintiffs that they had conversations with their supervisors about performing work off-the-clock.  Based on that testimony, the trial court concluded that there was a triable issue of fact regarding whether Kaiser had sufficient notice of those plaintiffs’ off-the-clock work to be liable for unpaid wages and that this issue would have to be tried.

The Jong v. Kaiser case is a good reminder of the importance of well-drafted and communicated policies prohibiting off-the-clock work and how documentation of those policies is effective evidence in defeating off-the-clock claims.  The opinion also has useful language for employers to use in emphasizing the individualized nature of the liability inquiry on an off-the-clock claim, for purposes of opposing class certification when such claims are brought as putative class actions.  The full opinion is here.

Arbitrator, Not Court, Gets to Decide Whether Arbitration Agreement Is Enforceable

Last week, a California Court of Appeal overturned a trial court decision denying an employer's petition to compel arbitration where the trial court found that the arbitration agreement was unconscionable.  In overturning the trial court's ruling, the Court of Appeal held that the trial court erred in even reaching the issue of whether the agreement was unconscionable because the arbitration agreement included a provision expressly delegating to the arbitrator authority to determine issues of enforceability of the agreement. The provision stated:

"The arbitrator, and not any federal, state, or local court or agency, shall have the 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 the Agreement is void or voidable."

Relying on United States Supreme Court precedent in Rent-A-Center, West v. Jackson, 561 U.S. 63 (2010), the court held that delegation clauses, like this one, are enforceable as long as the delegation language is "clear and unmistakeable" and the provision is not revocable under state law principles such as fraud, duress or unconscionability (limited to the fairness of the delgation provision itself and not the fairness of the arbitration agreement as a whole).  The court held the language of the delegation provision before it was clear and unmistakeable and that the provision itself was not unconscionable because there is nothing inherently unfair about authorizing an arbitrator, rather than a court, to decide issues relating to the enforceability of the arbitration agreement. As such, the court held that the delegation provision was enforceable and an arbitrator, not the court, should have decided whether the parties' arbitration agreement as a whole was enforceable and applicable to the parties' dispute. For these reason, the Court of Appeal overturned the trial court's denial of the employer's petition to compel arbitration because the trial court lacked authority to rule on the petition.

In its decision, the Court of Appeal noted that some California courts have in the past refused to enforce delegation provisions such as the one at issue in this case.  However, the Court dismissed those cases as pre-dating more recent United States Supreme Court precedent, such as Rent-A-Center and AT&T Mobility v. Concepcion, which strongly favor enforceability of arbitration agreements according to their terms.

The case is Tiri v. Lucky Chances, Inc. and is available here.  Employers may wish to consider including provisions in their arbitration agreements that specifically delegate authority to the arbitrator to decide whether the agreement is enforceable.  This is one tool for keeping unconscionability decisions out of the hands of trial courts that are sometimes inconsistent in ruling on these issues.  However, delegating authority to the arbitrator is not entiretly without risk, as one recent case before the United States Supreme Court demonstrated.  In Oxford Health Plans v. Sutter, the parties' arbitration agreement contained a delegation clause and, pursuant to that clause, an arbitrator interpreted the agreement as allowing class claims in arbitration (a ruling that almost certainly would not have been made in court).  Because of the very limited grounds for judicial review of an arbitrator's rulings, the arbitrator's interpretation of the agreement in that case was upheld.  Bottom line--employers should think carefully about the provisions in their arbitration agreements, including deciding what issues to delegate to the arbitrator, and ensure that these provisions are very clearly drafted to best ensure that the agreement is enforced as intended.  Employers must also periodically review their agreements to ensure that they are as beneficial as permissible in light of continually evolving case law.

DHS Proposes EAD for H-4 Spouses

The U.S. Department of Homeland Security (DHS) has proposed a regulation allowing for issuance of an employment authorization document (EAD) for certain H-4 spouses.  It will primarily be used where the H-1B principal already has an approved I-140 immigrant petition and is waiting for their priority date to become current before they can file for permanent residency.  DHS did not advise how long it would take for the proposed regulation to go final.  Most likely, it will be at least several months.  However, this is a good sign for H-4 spouses. The purpose of the rule is to make it easier for talented foreign nationals to remain working in the U.S.  For more information, click here.

S.F. Bay Area Employers Must Provide Commuter Benefits by September 30

The Bay Area Commuter Benefits Program, SB 1339, was enacted in 2012 to allow two local Bay Area agencies—the Metropolitan Transportation Commission and the Bay Area Air Quality Management District—to jointly adopt a commuter benefit ordinance requiring  employers to offer commuter benefits to covered employees.  These agencies have now adopted a Commuter Benefit rule requiring larger Bay Area employers to offer specified commuter benefits to covered employees by September 30, 2014 as a means of encouraging carpooling and use of public transporation.

Covered Employers

The new Rule applies to employers with an average of 50 or more full-time (30 hours of work per week) employees performing work within the following nine Bay Area counties:  Alameda, Contra Costa, San Mateo, Marin, Napa, San Francisco, Santa Clara, southern Sonoma County, and southwestern Solano County.  For purposes of determining whether an employer has an average of at least 50 employees, the look back period is the most recent three month period.

Covered Employees

The Rule requires covered employers to provide the commuter benefits described below to employees who perform an average of at least 20 hours of work per week (the average looks back to the previous calendar month) within the counties listed above, excluding a seasonal or temporary employee (an employee who works 120 days or less within the calendar year).

Required Commuter Benefits

By September 30, 2014, covered employers must offer at least one of the following commuter benefit options to covered employees:

  • Pre-tax option:  A program, consistent with section 132(f) of the Internal Revenue Code, allowing covered employees to elect to exclude from taxable wages costs incurred for transit (bus, rail or ferry) passes or vanpool (a vehicle with a carrying capacity of at least six adults, not including the driver) charges, up to $130 per month;
  • Employer-paid benefit:  A program whereby the employer pays employees a subsidy of up to $75 to cover the cost of commuting via transit or by vanpool; or
  • Employer-provided transit:  transportation provided by the employer to covered employees at no cost or low-cost via bus, shuttle, or vanpool.

In lieu of these options, an employer may offer an alternative benefit that provides at least the same reduction in single-occupancy vehicle trips as the three options identified above.  Any alternative benefit must be submitted to and approved, in writing, by the Bay Area Air Quality Management District.

Administrative Requirements

Covered employers are required to designate a Commuter Benefits Coordinator who is responsible for implementing the employer’s commuter benefit program and for complying with the Rule.  Covered employers must also register online with the Bay Area Air Quality Management District and provide specified information before September 30 and annually thereafter.  Covered employers must also provide notice of the Rule and the employer’s commuter benefits to covered employees.  Finally, the Rule imposes a recordkeeping requirement of 3 years for records establishing compliance with the Rule.

For more information and for registration obligation details, click here.

Employees to Be Allowed to Record Liens Against Employer Property for Alleged Unpaid Wages?  Whaaat?

Just when you think that California cannot get any more employer-unfriendly, the California Legislature reminds us that it actually can.  The latest reminder is legislation that was recently introduced by Democratic Assemblyman Mark Stone (AB 2416) to allow employees to record liens against their employers’ property for alleged unpaid wages.  That’s right—alleged.  In order to record a lien, the employee does not need to have proven his entitlement to unpaid wages in a court action or Labor Commissioner proceeding or otherwise.  It is only after the lien is recorded that the employee must prove up the lien by demonstrating that he is actually owed the unpaid wages.  If the employee succeeds, he is also entitled to recover attorneys’ fees and costs.  A lien can also be recorded and enforced by a group of employees or by a government agency (e.g. the DLSE).  The only way the employer can avoid the lien is by obtaining a surety bond (similar to that required to stay a money judgment pending appeal), which is itself a costly procedure.

At least there’s some faint protective relief built in to the legislation for employers--well, sort of.  If an employer defeats an action to enforce a lien, the employer can, in very limited circumstances, recover its attorneys’ fees and costs IF the employer can prove that the employee’s action was brought unreasonably and in bad faith.  (Conversely, the employee of course automatically gets awarded his attorneys’ fees and costs if he proves entitlement to unpaid wages, regardless of whether the wage withholding was in good faith.)

The proposed legislation has exclusions for employees covered by collective bargaining agreements if certain specified conditions are met, and also excludes employees who are exempt administrative, professional or executive employees (of course, the employee can challenge his exempt status and thereby avoid this exclusion, and the legislation specifically states that it is the employer’s burden to prove, as an affirmative defense, that the employee meets the test for exemption).

Employers should voice their opposition to this unnecessary legislation, which has already passed one labor committee and, if enacted, will provide one more tool for the plaintiffs’ employment bar to use to pressure employers to settle wage and hour claims, particularly those brought on behalf of a class of employees.  The text of the proposed legislation is available here.

Don’t Miss CDF’s April 22 Webinar on the Use of Criminal History Inquiries For Employment Purposes

Our subscribers are reminded of our upcoming webinar on Tuesday, April 22, 2014 on the subject of criminal history inquiries during the hiring process (and for subsequent employment purposes).  In this webinar, CDF Partner Mark Spring will discuss recent developments in the law in this area, including recent federal EEOC enforcement guidance and the increasing number of states and cities (most recently San Francisco) enacting "ban the box" laws that limit criminal history inquiries on employment applications and in the employment context more generally.  He will also discuss additional restrictions on criminal history inquiries imposed by California law and offer practical guidance on best practices for California employers to follow in order to minimize risk in this area of increasing legislative focus and litigation.  For more information on this complimentary 30-minute webinar and to register, click here.  

San Francisco Employers Must Limit Criminal History Inquiries

San Francisco has joined several other cities in enacting “ban the box” legislation to restrict the ability of private employers to inquire about and consider criminal history information for employment purposes.  San Francisco’s recently enacted Fair Chance Ordinance takes effect August 13, 2014.  The Ordinance applies to private employers located or doing business in the City and County of San Francisco with 20 or more employees (including owners and regardless of where the employees work).  The Ordinance’s protections apply to applicants or employees whose place of employment is entirely or substantially located in San Francisco.

The Ordinance prohibits covered employers from making any inquiry regarding criminal history until after an initial job interview.  The Ordinance specifically prohibits “check the box” type questions regarding criminal history on employment applications.  In addition to prohibiting direct inquiry of an applicant or employee, the Ordinance also specifies that employers may not indirectly inquire about criminal history through the use of a background check or other means until after an initial interview.  Furthermore, prior to conducting any criminal history inquiry, the employer must provide the applicant or employee with a written notice of their rights under the Ordinance.  This notice, along with a required workplace poster, will be prepared and published by San Francisco’s Office of Labor Standards Enforcement (OLSE).

In addition to restricting the timing of any criminal history inquiry, the Ordinance also restricts the scope of any such inquiry as well as an employer’s permissible response to learning that an applicant or employee indeed has a criminal background.  The Ordinance completely prohibits employers from inquiring about or considering (1) arrests that did not result in a conviction (unless an investigation or charges are currently pending); (2) completion of a diversion program; (3) sealed or juvenile offenses; (4) offenses that are more than seven years old from the date of sentencing; and (5) offenses that are not felonies or misdemeanors (such as infractions).  Even if an employer learns of criminal history information, the employer is limited in its ability to consider that information as a bar to employment.  The Ordinance requires that the employer conduct an individualized assessment of the nature of the offense as it relates to the specific job position at issue.  The offense may only be considered if it has a “direct and specific negative bearing on that person’s ability to perform the duties or responsibilities necessarily related to the employment position.”  In this regard, the employer must consider whether the position “offers the opportunity for the same or a similar offense to occur” and whether “circumstances leading to the conduct for which the person was convicted . . . will recur.”  The employer must also consider the amount of time that has elapsed since the conviction and consider any mitigating factors and rehabilitation efforts specific to the individual applicant or employee.

If an employer decides to take adverse action based on criminal history information (e.g. refusal to hire or promote), the employer must first notify the applicant or employee of the intended decision in writing (and provide a copy of the background check or criminal conviction report) and allow the applicant or employee seven days to respond with any evidence of inaccuracy in the information or to describe any mitigating factors or rehabilitation.  After receiving such a response, the employer must wait a reasonable time to evaluate the information and reconsider the intended action before making a final decision.  If the employer decides to proceed with the adverse action, it must notify the employee of that decision and that it was based on the criminal history information.

The Ordinance requires covered employers to retain records (including application forms and other related records) for three years.  Covered employers are also affirmatively required to state on all job solicitations or advertisements that the employer will consider for employment qualified applicants with criminal histories in a manner consistent with the Ordinance.

The OLSE may investigate compliance and violations of the Ordinance and may award appropriate relief to an applicant or employee, as well as impose penalties against an employer.  The OLSE may also file a civil action against an employer for a violation of the ordinance.

Employers are reminded that they have separate obligations to comply with the Fair Credit Reporting Act as well as California’s Investigative Consumer Reporting Agencies Act.  Both of these acts regulate the process of conducting background checks for employment purposes and overlap in some ways with the requirements of the San Francisco Ordinance.  Additionally, employers are reminded that the EEOC recently published its own guidance on the use of criminal background checks for employment purposes and has stepped up its enforcement efforts in this area.  Employers are urged to review their criminal background check practices for compliance, and San Francisco employers must additionally ensure more specific compliance with the new San Francisco Ordinance.  The text of the Ordinance is available here.  

Real March Madness at the NLRB: NLRB Finds That Scholarship Football Players at Northwestern University Can Unionize

Yesterday, Region 13 of the National Labor Relations Board issued a groundbreaking decision in holding that scholarship football players at Northwestern University are “employees” under the National Labor Relations Act and can be represented by a union, the College Athletes Players Association (CAPA), if they vote to do so.  The NLRB ordered an election to take place and ordered Northwestern to provide an Excelsior list of voters to the Board by April 2.  In reaching this conclusion, after analyzing the testimony of players, coaches and others, the Board held:

  1. The scholarship football players are not primarily students.
  2. The athletic activities of the scholarship football players do not constitute a core element of their educational degree.
  3. The athletic activities of the scholarship football players are supervised by individuals who are not members of the academic faculty and this fact militates against a finding that these individuals are merely students.

Based on these and other sub-factors described in detail in the decision, the Board concluded that the walk-on players were not employees, but that the scholarship players were employees and could participate in a union election.  This decision has the potential to cause major changes in the way college athletics are administered.  It is being closely watched not only by labor and employment law experts, but by colleges, the NCAA, ESPN and all sports media, and anyone with any interest in college athletics and/or amateur athletics.

Northwestern has already announced that it will appeal this decision to the entire National Labor Relations Board.  Under NLRB rules, this Board will only consider the appeal if Northwestern can establish one of the following conditions:

  1. That a substantial question of law or policy is raised because of (i) the absence of, or (ii) a departure from, officially reported Board precedent.
  2. That the Regional Director’s decision on a substantial factual issue is clearly erroneous on the record and such error prejudicially affects the rights of a party.
  3. That the conduct of the hearing or any ruling made in connection with the proceeding has resulted in prejudicial error.
  4. That there are compelling reasons for reconsideration of an important Board rule or policy.

This was a surprising ruling, as many experts expected that the CAPA was going to have a difficult time convincing the NLRB that the student-athletes were “employees” under the NLRA.   However, there is a long way to go before this becomes a reality.  Most expect vigorous appellate litigation by both sides, which will be well financed by interested parties.  In addition, it is reasonably likely that Congress may intervene and act to amend the NLRA in some way to make it clear that student-athletes are not covered.  Influential Republican Senator Lamar Alexander, who formerly was the President at University of Tennessee and served as the Secretary of Education under President George H.W. Bush has already weighed in on his outrage over the decision with a public statement:  “Imagine a university’s basketball players striking before a Sweet Sixteen game demanding shorter practices, bigger dorm rooms, better food, and no classes before 11 a.m. This is an absurd decision that will destroy intercollegiate athletics as we know it.”  We already know that President Obama is a big college basketball fan, so he may be more than willing to sign any bills to prevent college athletics from being turned on its head.

For a copy of this very interesting decision, please click here.

We will continue to keep you updated on this matter as it moves forward as there will certainly be more developments in the coming months.

Editor
Cal Labor Law

Robin E. Largent is a Partner in CDF’s Sacramento office and may be reached at 916.361.0991 or rlargent@cdflaborlaw.com BIO »

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