California Labor & Employment Law Blog

By Sarah Drechsler

Oral argument before the California Supreme Court is scheduled for May 27 in the Edwards v. Arthur Andersen case, which addresses the permissible scope of non-compete agreements in California.  In Edwards, Plaintiff Edwards, a tax manager at Arthur Andersen ("Andersen") in Los Angeles, provided income and estate planning services to wealthy individuals.  Edwards was required to sign Arthur Andersen's standard non-compete agreement when he was hired.  The agreement prohibited Edwards, for an eighteen month period after his departure from Arthur Andersen, from performing professional services of the type he provided at Arthur Andersen for any client on whose account he had worked during eighteen months prior to his departure.  It also prohibited Edwards, for a year after his departure, from providing professional services to any client of Arthur Andersen's Los Angeles office.  In 2002, Arthur Andersen sold its Los Angeles office to HSBC, and as a condition of being hired by HSBC, Edwards was required to sign a release of claims in favor of Arthur Andersen in exchange for Arthur Andersen’s agreement to relieve Edwards of his non-compete restrictions.  Edwards refused to sign the release agreement and was not hired by HSBC as a result.  Edwards then brought an action against Arthur Andersen, claiming in part that the non-compete agreement was invalid under California law and therefore it was unlawful to condition his employment with HSBC on his execution of the release agreement.  The trial court disagreed with Edwards and held that the non-compete agreement was valid because it fit within the "narrow restraint" exception, which permits covenants not to compete where the covenant is narrowly crafted so that an employee who leaves a company still can work in his or her profession.  The trial court noted that given the large number of wealthy individuals in Los Angeles, preventing Edwards from performing services for a period of time for individuals who were clients of Arthur Andersen, was not a significant restriction on Edwards’ ability to work.

Edwards successfully appealed the trial court's decision.  The California Court of Appeal held that there is no "narrow restraint" exception under California law, and that Edwards’ non-compete agreement was, therefore, invalid.  According to the court, California prohibits non-compete agreements, no matter how narrow the restraints on competition are, except in a few limited circumstances outlined by statute involving the sale of a business, or where necessary to protect an employer's trade secrets.  The Court of Appeal reasoned in part that allowing narrowly restrained non-compete agreements would give employers an incentive to draft agreements that "push the envelope of the narrowness requirement" and employees would not be able to determine on their own whether the restraint was enforceable.

Arthur Andersen petitioned for review by the California Supreme Court, and the Court granted review in November 2006.  The matter is now fully briefed and is scheduled for oral argument later this month.  A decision is expected shortly thereafter on this important issue for California employers.

By Connor Moyle

A recent decision by California's Fourth District Court of Appeal analyzed the administrative exemption from overtime compensation and found that an employer was entitled to summary judgment because its network operations director qualified for the administrative exemption.  Significantly, in reaching its conclusion in Combs v. Skyriver Communications, Inc., 159 Cal.App.4th 1242 (2008), the court held that it was not necessary to apply the administrative/production worker dichotomy and that the employee qualified for the exemption without regard to that test. 

Background

Plaintiff Mark Combs sued his former employer Skyriver Communications seeking recovery of unpaid overtime.  Skyriver is a high-speed wireless broadband internet service provider.  Combs worked for Skyriver starting in 2001, first as manager of capacity planning, and then as director of network operations.  Combs’ duties were largely undisputed.  A resume Combs prepared after leaving Skyriver indicated that he was responsible for project management, budgeting, vendor management, purchasing, forecasting, employee management, management of overseas deployment of wireless data network, management of the integration and standardization of three networks into the Skyriver architecture, and the overseeing of day to day network operations.  At trial, Combs testified that he spent 60-70% of his time on his “core” responsibility of maintaining the well-being of Skyriver’s network.  This responsibility included high-level problem solving and “troubleshooting,” as well as planning to integrate acquired networks into Skyriver’s network.  Combs also prepared reports for Skyriver’s board of directors and conducted lease negotiations and equipment sourcing and purchasing.  The trial court granted Skyriver’s motion for judgment on the ground that Combs was exempt from overtime under the administrative exemption. 

On appeal, Combs claimed that the court should have applied the “administrative/production worker dichotomy” as set forth in Bell v. Farmers Insurance Exchange, 87 Cal.App.4th 805 (2001) (“Bell”), and that application of the dichotomy would have led to a determination that he was a nonexempt production worker.  Combs also claimed that, apart from the administrative/production worker dichotomy, application of the proper test for the administrative exemption under IWC Wage Order No. 4-2001 would have resulted in summary judgment in his favor because his job duties did not meet the requirements of the exemption.

Appellate Court Analysis

1.  Administrative/Production Worker Dichotomy Did Not Apply

The court first addressed the issue of whether the trial court should have applied the administrative/production worker dichotomy to determine whether Combs was an exempt or nonexempt worker.  The court explained that in some cases, such as Bell, a distinction was drawn between 1) administrative employees, who are usually described as employees performing work directly related to management polices or general business operations and 2) production employees, whose primary duty is producing the commodity or commodities that the enterprise exists to produce.  Employees falling into the first category are more likely exempt from overtime compensation requirements while employees in the second category are more likely nonexempt.  Combs claimed that he fell into the second category because Skyriver’s product for purposes of the administrative/production worker dichotomy was its network because the network provided the internet connectivity that Skyriver marketed.  Combs accordingly claimed he was a production worker who provided the network that provided the connectivity.

By Alison L. Tsao

The Sixth Circuit of the U.S. Court of Appeals recently ruled that an employer who hired an employee through a staffing agency may be liable for violations of the federal Family Medical Leave Act (FMLA).  In Grace v. USCAR and Bartech Technical Services, LLC, --F.3d--, 2008 WL 782470 (6^th Cir. 2008), Plaintiff Rosalyn Grace was a long-term “contractor” who provided information technology (IT) services to Defendant USCAR through a couple of different placement agencies for a period of eight years.  In the fall of 2004, Grace developed a respiratory disability (asthma) that eventually resulted in her hospitalization, whereupon she took a leave of absence through her staffing agency, Bartech.  In late December 2004, just days before Grace’s original anticipated date of return to work, Bartech informed Grace that USCAR had decided to outsource its IT duties and that, as a result, her position was terminated.

USCAR contended that its management decided in the fall of 2004 to restructure its IT division to switch from using full-time contractors to contracting directly with individual providers on an as-needed basis.  Grace’s position was allegedly targeted for restructuring.  While Grace was on FMLA leave in December 2004, USCAR decided to use the services of another Bartech contractor, Spolarich, to handle regular IT maintenance issues due to Grace’s absence.  In May 2005, USCAR contracted directly with Spolarich for a 20-hour per week job to permanently fill the new IT position at USCAR.

Grace filed suit against Bartech and USCAR in federal district court, alleging among other things, violations of the FMLA for failing to return her to her pre-leave (or comparable) position and retaliation, and for gender discrimination under Title VII and Michigan’s civil rights law.  The district court granted both employers’ motions for summary judgment.  The Sixth Circuit Court of Appeals reversed the district court’s ruling with respect to the FMLA claims but affirmed the grant of summary judgment as to Grace’s Title VII claim.

The Court recognized that the FMLA is silent about the issue of joint employment.  However, the Department of Labor (DOL) has promulgated regulations such that liability could attach to Bartech and USCAR under either an “integrated employer test” or “joint employment” test under 29 C.F.R. § 825.104(c)(1).  The Court found that the integrated employer test did not apply because there was not sufficient interrelation between the operations of the staffing agency and client employer.  However, the Court found sufficient evidence under a joint employment test because each employer exercised a sufficient level of control over Grace’s work or working conditions.  Specifically, 29 C.F.R. § 825.106(a) describes three employment relationships where joint employment will “generally . . . be considered to exist:” (1) “where there is an arrangement between employers to share an employee’s services or to interchange employees;” (2) “where one employer acts directly or indirectly in the interest of the other employer in relation to the employee;” or, (3) “where the employers are not completely disassociated with respect to the employee’s employment and may be deemed to share control of the employee, directly or indirectly, because one employer controls, is controlled by, or is under the common control with the other employer.”  Under specific regulations pertaining to cases involving staffing agencies and client employers, Bartech was determined to be Grace’s primary employer because it had the ultimate decision to hire and fire, the sole ability to assign Grace, and was the entity in charge of her payroll and benefits.  USCAR was determined to be a secondary employer because it supervised Grace’s day-to-day work and determined her salary and hours.  Although only the primary employer is responsible for giving required notices, providing FMLA leave, and maintaining health benefits, both primary and secondary employers must honor the FMLA leave and not engage in “retributory action.”  Significantly, the Court notes that the anti-retaliation provisions applicable to secondary employers apply even if the secondary employer may not be covered by FMLA.  Under 29 C.F.R. § 825.106(e), the secondary employer is responsible for “accepting the employee returning from FMLA leave in place of the replacement employee if the secondary employer continues to utilize an employee from the temporary or leasing agency.”

The Court ruled that Grace produced sufficient evidence to raise triable issues of fact as to whether USCAR’s decision to restructure its IT functions was unlawful discrimination or retaliation for Grace’s exercise of her FMLA rights.  Grace contended that the replacement employee, Spolarich, performed functions similar to those performed by her before her FMLA leave.  While Spolarich was contracted for fewer hours, he was paid at a higher rate such that the cost savings to USCAR was not significant.  Most damning was evidence of meetings notes where USCAR’s Director of Operations inquired as to Grace’s termination, and when apprised of a need for a “legitimate business reason” to avoid the risk of being sued, asked “can lawyers construct a way to make it [Grace’s termination] doable?”  The Court held these facts warranted a trier of fact to determine the true motive behind USCAR’s decision not to reinstate Grace after the expiration of her FMLA leave.

Employers who rely on staffing and placement agencies for its personnel needs are advised to review their policies with respect to FMLA compliance in relation to its “contracted” personnel.  If you have any questions about FMLA compliance with respect to an employee employed through a staffing agency, please contact us.

By Kent J. Sprinkle

Echoing the California Supreme Court's recent decision in Jones v. The Lodge at Torrey Pines Partnership et al., a California Court of Appeal has provided additional clarification on the holding that individual supervisors cannot be personally liable for retaliation under the FEHA.  Specifically, the Court of Appeal in Hammond v. County of Los Angeles et al., 73 Cal.Rptr.3d 690 (2008), held that individual supervisors cannot be personally liable for retaliation under the FEHA even when the claim of alleged retaliation by a supervisor is in response to an employee's complaint for harassment by the same supervisor (as opposed to a complaint for discrimination).  

Plaintiff Hammond, a nursing instructor employed by the Los Angeles County Sheriff's Department, sued her employer, the County, as well as her supervisor, alleging violations of the FEHA, including race and age discrimination, harassment and retaliation.  The County and her supervisor successfully moved for summary judgment and Plaintiff appealed.  On appeal, the summary judgment order was reversed.  However, the Court of Appeal held that the individual supervisor defendant was entitled to summary adjudication in her favor as to Plaintiff's claim for retaliation because such claims cannot be asserted against non-employer individuals.  Plaintiff argued that the Supreme Court's holding in Jones does not extend to claims alleging retaliation by a supervisor in response to an employee's report of harassment by that supervisor, and that Jones involved claims of retaliation by a supervisor in response to an employee's report of discrimination, not harassment.  Plaintiff argued that a supervisor who is allegedly liable for harassment should also be liable for retaliation against an employee who opposes or reports that harassment.  The Hammond court rejected this argument and instead concluded that "there is no sound basis for a distinction between retaliation for a complaint about discrimination on the one hand and retaliation for a complaint about harassment on the other." 

The Hammond court explained its reasoning in the following manner:  "The Supreme Court in Jones interpreted the FEHA as not imposing individual liability for retaliation.  The court said, 'In this case, we must decide whether the FEHA makes individuals personally liable for retaliation.  We conclude that the same rule applies to actions for retaliation that applies to actions for discrimination: The employer, but not non-employer individuals, may be held liable.'  The court's reliance on the discussion in Reno v. Baird, 18 Cal.4th 640, 643 (1998), pointing to the adverse consequences of subjecting supervisors to personal liability for personnel decisions, seems equally applicable to claims of retaliation based on reports of harassment.  It is true that under the FEHA a supervisor may be subject to personal liability for harassment, but not for discrimination.  But that distinction is of little significance in determining the question of whether a supervisor should personally be liable for retaliation under the FEHA.  The policy of protecting supervisors from 'the ever-present threat of a lawsuit each time they make a personnel decision' would seem to apply generally to retaliation claims, regardless of whether the alleged retaliation was in response to an employee's report of discrimination or harassment.  The idea that a supervisor has more incentive to retaliate for reports of harassment than for reports of discrimination is highly theoretical.  Accordingly, we hold that Brennan [the supervisor] cannot personally be liable for retaliation under the FEHA."

In analyzing this decision, as with Jones, employers should remain mindful that, although individual employees are not personally liable, employers are still liable for any unlawful retaliation, whether it relates to complaints of discrimination or harassment or something else.  Please contact us directly if you have any questions regarding the Hammond decision.

By Anthony B. Lewis

The California First District Court of Appeal has decided that individual owners of defunct corporations were not the employers of, and did not owe restitution for unpaid wages to, the employees of the defunct corporations.  The decision, Bradstreet v. Wong (April 16, 2008) affirmed a trial court’s decision that the individual owners of the garment manufacturers known as the Wins corporations were not liable for wages the corporations owed to their employees.  The Wins corporations employed garment workers for more than a decade.  They experienced financial difficulty and closed without sufficient funds to pay all wages owed to their employees.  In this case, the California Labor Commissioner, on behalf of the employees, attempted to recover the wages from the individual owners of the Wins corporations.  The Labor Commissioner lost at the trial court level and appealed, along with an intervening party.  The appeal asserted several arguments that the individual owners should be held liable for the unpaid wages, but the appellate decision rejected those arguments.

First, the decision explained that a limited, common law definition of “employer” (instead of a broader Industrial Welfare Commission definition found in its Wage Order for the garment industry) applies to actions brought pursuant to California Labor Code section 1193.6, which is the law authorizing the Labor Commissioner to file lawsuits against employers to recover unpaid wages on behalf of employees.  Under the common law definition of employer, owners of corporate employers are not ordinarily considered employers in their individual capacity, and thus are not generally liable for wages owed by the corporate employer.

Second, the decision addressed California Labor Code section 2677, a statute that is specific to the garment manufacturing industry.  This statute provides that parties other than the corporate employer can be held liable for unpaid wages as “deemed employers” in some circumstances, mostly relating to problems that arise from doing business with unregistered garment manufacturers.  The appellate court held the plaintiffs did not establish the necessary facts to prove the individuals in this case should be deemed employers under this statute.

Third, the decision held that the individual owners were not liable for restitution of the employees’ unpaid wages under California’s Unfair Competition Law, Business and Professions Code section 17203.  In this case, the individual owners did not require any employee to work for them personally and did not misappropriate to themselves any of the wages owed to the employees.  If the plaintiffs had proven otherwise, the individual owners may have been liable for restitution.

This case is important for all individual owners of corporations that are employers.  The decision respects the legal significance of incorporating a business and the protection that the corporate entity provides its owners and agents when corporate formalities are followed (this protection is know as the “corporate veil”).  Still, if you are an individual owner of a corporation that may be unable to pay wages owed to its employees, you should consult with a qualified attorney to help insure that you do not become liable in your individual capacity.

By Kent J. Sprinkle

A Plaintiff alleging racial discrimination and retaliation against his employer was ordered to pay the employer's attorneys' fees after the employer obtained summary judgment on all of Plaintiff's claims.  In Villanueva v. City of Colton, 160 Cal.App.4th 1188 (2008), Plaintiff was employed by the City of Colton in its wastewater division.  After being demoted to a lesser paying position following a reduction in force, the Court found that Plaintiff's demotion was due to legitimate non-discriminatory reasons, including Plaintiff's prior incident of mishandling an alarm incident and his lack of seniority based on continuous service.  The employer filed a motion for summary judgment and the essence of its position was that, in light of the negligent manner in which Plaintiff had handled the prior alarm incident, and the elimination of Plaintiff's position being due to the City's budget shortfall and resulting reduction in force, it had legitimate non-discriminatory reasons to defeat Plaintiff's claim of pretext for the demotion.  While Plaintiff attempted to introduce evidence of allegedly racial remarks by various individuals at the City, all of this evidence was properly excluded for various reasons.  Moreover, Plaintiff was removed from his higher-paying position instead of removing another employee holding the same position, who had more seniority, and the employee who was not demoted was also Hispanic, like Plaintiff, giving the Court further reason to believe that Plaintiff's demotion was not based on race.  

The employer sought an award of attorneys' fees to be paid by Plaintiff, based on California Government Code Section 12965(b), which authorizes an award of reasonable attorneys' fees and costs to the prevailing party in a FEHA case under certain circumstances.  The trial court awarded the employer nearly $40,000 in attorneys' fees.  The Court of Appeal affirmed the award, noting that the employer's entitlement to the award of attorneys' fees under the statute "cannot seriously be questioned" and further stated that "[i]ndeed, the record reflects overwhelming evidence that the lawsuit was unfounded, unreasonable, and frivolous."  

Plaintiff argued that the trial court was required to take into consideration his ability to pay when making a fee award.  However, the Court of Appeal held that the award of attorneys' fees was proper because the Plaintiff offered no evidence of any kind regarding his inability to pay.  The Court of Appeal noted that, in responding to the employer's request for attorneys' fees, the Plaintiff could easily have offered a declaration setting forth his income and other information that would lend support to his position.  Thus, the Court of Appeal held that even though it agreed "that a trial court has an obligation to consider a losing party's financial status before assessing attorney fees under the FEHA, on the record before us we are unable to say that the court's fee award was an abuse of discretion."

By Connor Moyle

On Monday, the California Supreme Court decided two issues arising under the California Family Rights Act (“CFRA”).  The Court’s decision in Lonicki v. Sutter Health Central addressed the following questions, deciding one in favor of the employer and one in favor of the employee:

1.      When faced with conflicting medical opinions on whether an employee is unable to perform her job, is an employer required to obtain a “tie-breaking” medical opinion in order to preserve its right to challenge the employee’s subsequent CFRA claim?

2.      Can an employee who works a similar job for another employer on a part-time basis still sue based on a claim that she was not capable of performing her job?

Background

The plaintiff worked at a Roseville, California hospital, first in the housekeeping department and then as a certified technician in the sterile processing department.  She claimed her work-related stress greatly increased when the hospital became a level II trauma center in 1997, and when she began working under a new supervisor. 

In July of 1999, the plaintiff left work after her supervisor informed her that her shift was being changed and denied her request for a vacation.  She claimed she was too upset to work and sought medical treatment.  The plaintiff saw a doctor who gave her a note for a one-month leave of absence for “medical reasons” which she presented to her employer.  The defendant hospital then directed her to see another doctor, who determined that she could return to work without any restrictions.  The plaintiff also went to see her primary care physician, who referred her to a psychologist.  She indicated that, based on medical advice, she would not return to work prior to August 27.

The employer determined that it would allow the plaintiff to use paid time off, but directed her to return to work by August 23 or face dismissal.  On August 26, the plaintiff saw a psychiatrist who determined that the plaintiff was “disabled by major depression” and recommended that her medical leave be extended through September 26.  The plaintiff brought the note to the hospital, but the human resources department informed her that she had been terminated for failure to appear at work on August 23 and 24. 

An employer is not required to obtain a “tie-breaker” opinion when the employee’s doctor disagrees with the employer’s doctor.

The CFRA provides for an unpaid leave of absence for up to 12 weeks for several possible reasons including “an employee’s own serious health condition” that “makes the employee unable to perform the functions” of his/her position.  An employer can require the employee to submit certification of a serious health condition from the employee’s healthcare provider.  An employer may also choose to pay for the employee to obtain a second opinion from a healthcare provider designated by the employer if the employer has reason to doubt the validity of the first opinion.  Finally, if the two healthcare providers disagree, the employer may require a third opinion from a healthcare provider approved by both parties.  The third opinion is binding on both parties.

The plaintiff in Lonicki argued that she had a “serious health condition” that made her unable to perform her job and that Sutter improperly denied her CFRA leave.  Plaintiff argued that the hospital was precluded from challenging that Plaintiff had a serious health condition because it had not exercised its option to obtain a third medical opinion under the CFRA’s dispute resolution procedures. 

The Court rejected the plaintiff’s argument and determined that, under the statutory language of the CFRA, an employer merely has the option to request a tie-breaking opinion if the first two doctors disagree.  Failure to do so does not prevent the employer from challenging a later claim that the employee suffered from a serious health condition that rendered her unable to do her job.  The court partially relied on several federal opinions reaching similar conclusions under the Family Medical Leave Act (“FMLA”) and declined to follow other federal authority to the contrary.

An employee who performs a substantially similar job for another employer can still claim that she was unable to perform her job.

During her “leave” from Sutter and at the time of her termination, the plaintiff worked part-time at another hospital performing duties substantially similar to those she performed for Sutter.  The trial and appellate courts in Lonicki both determined that Sutter was entitled to summary judgment on the plaintiff’s CFRA claim because the plaintiff’s ability to work part-time at another hospital performing substantially similar duties conclusively demonstrated that she could also perform her job for the defendant.  In a sharply divided and surprising opinion, the Supreme Court disagreed and determined that the plaintiff could bring her claim despite holding a similar second job. 

In reaching its conclusion, the Supreme Court determined that the Court of Appeal erred in holding that an employer must grant medical leave under the CFRA only if the employee is unable to perform her essential job functions “generally, rather than for a specific employer.”  Instead, the Supreme Court stated, the relevant inquiry was whether the plaintiff’s alleged serious health condition rendered her unable to do her job at the defendant’s hospital. 

The Court noted that the difference between a part-time job and a full-time job may be significant to a CFRA inquiry because an employee may be able to work a part-time job despite suffering from a “serious medical condition” that renders the employee unable to work full time.  The Court also pointed out that the alleged sources of plaintiff’s job-related stress (mainly a particular supervisor) were unique to her job with the defendant.  Consequently, the Court determined that the plaintiff’s ability to work part time at another hospital did not conclusively establish her ability to perform similar duties at the defendant’s hospital.  As a result, the Court reversed the award of summary judgment.

In a dissenting opinion joined by two other Justices, Justice Chin criticized the Court’s holding on this issue, stating that it was inconsistent with the legislative purpose and history behind CFRA’s enactment.  According to Justice Chin, allowing employees to obtain and hold substantially similar alternative employment while claiming inability to work their usual job, is fraught with potential for abuse.  Indeed, under the Court’s ruling, an employer faced with this situation potentially would be required to continue providing benefits for an employee on leave, even if the employee was performing work for, and being paid by, another employer.

Implications

The Court’s determination that holding a similar job does not prevent an employee from claiming she was unable to perform her job for a particular employer means that employers will find summary judgment harder to obtain in similar cases.  It also means that employers may face liability if they terminate an employee on leave simply because the employee obtains alternative employment during that leave.  Many employers have policies providing for termination of employment in these circumstances, and such policies are problematic in light of the Court’s ruling.     

Additionally, employers should not interpret Lonicki as an indication that “tie-breaker” opinions are always unnecessary or inadvisable when faced with conflicting medical opinions regarding a claim of entitlement to leave.  Although Lonicki makes clear that California law does not require an employer to seek a “tie-breaker” opinion, the decision does not control future decisions by federal courts addressing the same issue under the FMLA.  Furthermore, because a tie-breaker opinion binds both parties, requesting the opinion may often provide a relatively inexpensive means of resolving disputes in their early stages.  Consequently, employers should not adopt any blanket policy regarding whether to seek a “tie-breaker” opinion and should evaluate each case on its own facts.

By Kent J. Sprinkle

A federal district court recently addressed the ongoing debate in California regarding what it means to "provide" employees with meal breaks under California law.  California's Department of Labor Standards Enforcement takes the position that employers have an affirmative obligation to ensure that employees take their meal breaks and that employers are liable for one hour of premium pay for each meal period that is not taken (or that is not timely taken), regardless of the reason.  Plaintiffs' attorneys often cite to Cicairos v. Summit Logistics, 133 Cal.App.4th 949 (2005), as endorsing the DLSE's interpretation of the law.  In contrast, as discussed in a prior post on July 22, 2007, at least one federal district court rejected the DLSE's interpretation and instead determined that an employer complies with its obligation to "provide" meal periods if the employer makes the meal periods available to employees and provides the opportunity for employees to take them.  (White v. Starbucks, 497 F.Supp.2d 1080, 1088-89 (N.D. Cal. 2007)).  In White, the court held that in order to prevail on a meal period claim, the plaintiff would have to show that he was "forced to forego" meal periods, not simply that he did not take them. 

Another federal court has now weighed in on the subject and agreed with White v. Starbucks. In Brown v. Federal Express Corporation, et al., 2008 WL 906517 (C.D. Cal. Feb. 26, 2008), District Judge Dale Fischer denied class certification to a subclass of driver employees that were allegedly denied meal and rest breaks.  The plaintiffs and putative class members were current and former non-exempt hourly drivers employed by Defendant Federal Express Corporation.  The plaintiffs claimed that the putative class of drivers, who performed a variety of delivery and hauling duties with varied types of work and distances driven, were allegedly put under excessive pressure to make deliveries as quickly as possible, such that they were unable to take meal and rest breaks within the time required by law.  They also alleged that FedEx failed to pay an additional hour of pay to putative class members who missed their meal and/or rest breaks.  In denying class certification, the court held that FedEx's requirement to "provide" meal periods only meant making meal periods available to employees.  "It does not suggest any obligation to ensure that employees take advantage of what is made available to them."  Brown, 2008 WL 906517 *5.  Citing White v. Starbucks, Judge Fischer held that "[r]equiring enforcement of meal breaks would place an undue burden on employers whose employees are so numerous or who, as with Plaintiffs, do not appear to remain in contact with the employer during the day.  It would also create perverse incentives, encouraging employees to violate company meal break policy in order to receive extra compensation under California wage and hour laws.  In the absence of California Supreme Court precedent, this Court must apply the rule it believes the court would adopt under the circumstances. (internal citations omitted).  The court does not believe that the California Supreme Court would adopt the enforcement rule advocated by Plaintiffs."  Brown, 2008 WL 906517 at *6.

The court in Brown  also relied on language in the California Supreme Court's decision in Murphy v. Kenneth Cole Prods., Inc., 40 Cal.4th 1094, 1104 (2007), as supporting its interpretation of "providing" meal breaks.  "The California Supreme Court has described the interest protected by meal break provisions, stating that '[a]n employee forced to forgo his or her meal period . . . has been deprived of the right to be free of the employer's control during the meal period.' (citing Murphy, 40 Cal.4th at 1104).  It is an employer's obligation to ensure that its employees are free from its control for thirty minutes, not to ensure that the employees do any particular thing during that time.  Indeed, in characterizing violations of California meal period obligations in Murphy, the California Supreme Court repeatedly described it as an obligation not to force employees to work through breaks."  (internal citations omitted).

Notably, the Brown court rejected Plaintiffs' argument that Cicairos v. Summit Logistics, Inc. compelled a contrary conclusion.  In addition to rejecting the notion that Cicairos mandates that "employers have 'an affirmative obligation to ensure that workers are actually relieved of all duty,'" the court in Brown also distinguished the decision, pointing out that in Cicairos, "the court found liability where an employer simply assumed breaks were taken, despite its institution of policies that prevented employees from taking meal breaks."  2008 WL 906517 at *6.  Though not discussed in such detail by the court in Brown, it is notable that a distinguishing fact (the policy that was considered to prevent employees from taking breaks) in Cicairos was the absence of a code for meal or rest breaks whereas the driver employees were required to enter codes for all sorts of other activities conducted during the work day.

After articulating the legal standard for what it means to "provide" meal periods, the Brown court found that there was no evidence of any particular policy at FedEx susceptible to common proof to show that drivers were affirmatively prevented from taking required breaks.  As a result, the court found that individual issues predominated on the meal period claims, and denied class certification.

While federal district court decisions are not binding on state courts or on the Ninth Circuit, the growing acceptance of the reasoning in White v. Starbucks is a good sign for employers.  The extended discussion in Brown regarding the Supreme Court's comments in Murphy is also a good sign, since the Murphy case, while not squarely addressing the standard for "providing" breaks, certainly provides a sound basis for the reasoning in Brown.  We will closely monitor further developments on this important issue and will post any news. 

By Nancy Berner

As has been widely reported in the news, Starbucks’ baristas have scored an apparent victory in California, as a San Diego Superior Court judge recently determined the company violated Business and Professions Code section 17200 (Unfair Competition Law) when it allowed shift supervisors to share the proceeds of the tip jar with the baristas.  (Chou v. Starbucks, GIC 836925.)  Originally pled as a violation of both the Unfair Competition Law and the California Labor Code, the class action plaintiffs made the strategic decision to dismiss their legal Labor Code claims and proceed to trial (without a jury) solely on their equitable unfair competition claim (and its four-year statute of limitations).  Plaintiffs successfully argued that 120,000 California-based baristas are owed restitution in the amount of $86 million dollars plus interest, for a final sum exceeding $100 million.  Plaintiffs will also seek to recover attorneys’ fees.  Starbucks has reported that it intends to “vigorously” appeal the decision, but in the meantime, restaurateurs are well advised to review their own tip pooling policies.

Tip pooling arrangements are not per se illegal.  Indeed, according to California’s Department of Labor Standards Enforcement (DLSE), restaurants can implement mandatory tip pooling policies requiring tips to be shared with employees who provide direct table service, provided that the pooling arrangement is fair and equitable.  Tip pooling policies whereby the servers receive 80% of the tips and the remaining 20% is shared with other direct table service employees, have been found fair and equitable.  The tips may not be shared with employees, such as cooks and dishwashers, who do not provide direct table service. 

The Starbucks case highlights another important limitation on tip pooling policies.  The California Labor Code prohibits employers “or their agents” from sharing in the tips left for employees.  Therefore, owners, managers or supervisors may not share in the tips, even if they share in the table waiting duties.  It is important to note that the DLSE takes a broad view of the range of employees who qualify as “supervisors.”  According to the DLSE, a supervisor is anyone “with the authority to hire or discharge any employee or supervise, direct, or control the acts of employees."  (September 8, 2005 Op. Letter of Donna M. Dell.)  

Tip pooling lawsuits appear to be the flavor of the month.  In fact, in the wake of the recent San Diego Superior Court ruling, Starbucks was hit with similar class action lawsuits in Massachusetts and Minnesota.  All employers who utilize tip pooling should review their policies to ensure compliance with the law.  For further guidance on the legal requirements for tip pooling policies, please see our previous post on this subject.

By Vanessa W. Whang

California's Fourth District Court of Appeal recently dealt another blow to arbitration agreements in the employment context.  In Metters v. Ralphs Grocery Company, the court affirmed the denial of a motion to compel arbitration of a discrimination and harassment case.  The plaintiff, Metters, had signed a dispute resolution form entitled "Notice of Dispute and Request for Resolution Form," to submit his discrimination and harassment claims to the Company for internal investigation.  The dispute resolution form contained an arbitration provision and when the employee eventually sued Ralph's, the company moved to compel the case to arbitration.  However, the trial and appellate courts found the dispute resolution form was insufficient evidence of an agreement to arbitrate.  The form included plain language explaining that the employee, by submitting the form, was agreeing to mandatory, binding arbitration of any "covered disputes" as defined in a "policy" that was referenced but, according to Metters, not attached to the form or provided to him.  The Court found that the document did not look like a contract and did not sufficiently alert the employee that, by signing the form, he was agreeing to binding arbitration.  "A transactional attorney sitting in an office somewhere…[might] be able to figure out what it meant," but the Court felt that the employee should not have been expected to figure out that the dispute resolution form bound him to arbitrate his claims.  The trial court, finding no "meeting of the minds" between the parties on an agreement to arbitrate disputes, refused to compel the case to arbitration and the California Court of Appeal affirmed. 

To avoid the result in Metters, California employers would be well-advised to:  1) create free-standing arbitration agreements that are not buried or hidden within other documents; 2) draft arbitration agreements to make them appear contractual in nature; 3) ensure arbitration agreements do not substantially rely on extraneous documents or policies incorporated by reference; 4) ensure that the language of the arbitration agreement is clear so that the employee is alerted to the arbitration provision; and 5) have arbitration agreements reviewed by competent legal counsel to ensure compliance with California law.  While the Metters case is largely limited to very detailed facts, this case is another reminder that arbitration agreements continue to be subject to close scrutiny by California courts.

By Robin E. Weideman

In Costco Wholesale Corp. v. Superior Court, a putative class action alleging misclassification of certain Costco managers, California’s Second Appellate District held that the trial court did not err by ordering Costco to produce portions of a pre-litigation attorney-client memorandum prepared for Costco by its outside counsel.  Specifically, in 2000, Costco retained outside counsel to analyze whether its department managers (including those at issue in this class action) qualified for exempt status.  Outside counsel conducted interviews, reviewed job descriptions, and prepared an in-depth 22-page memorandum to Costco’s in-house counsel, analyzing the exempt status of these managers.  Costco unsurprisingly refused to produce this memorandum to plaintiffs in discovery, asserting the memorandum was protected from disclosure by the attorney-client privilege and work product doctrine.  The trial court ordered Costco (over Costco’s objections) to produce the memorandum for an in camera review by a referee.  The referee determined that portions of the memorandum summarizing the managers’ job duties were not privileged and should be produced.  Costco petitioned for a writ of mandate.

On review, the Second Appellate District affirmed the trial court’s order, based on its determination that Costco has not proven the need for “extraordinary” writ relief. According to the court, Costco had not demonstrated that it would be “irreparably harmed” by disclosure of portions of the memorandum describing managers’ job duties because, according to the court, this information “came from job descriptions and interviews with two managers,” was “inconsequential,” and did not “infringe on the attorney-client relationship.”  The court rejected Costco’s argument that the factual portions of the memorandum were work product in that they necessarily reflected counsel’s legal impression of the facts.  The court also concluded that Costco would not be harmed by the disclosure because the information was readily available through other sources anyway, i.e. depositions, interrogatories, requests for production of job descriptions.

Assuming the Costco decision withstands further appeal, it should be expected that plaintiffs’ attorneys will heavily rely on this decision going forward as a means of trying to obtain in camera review and possible production of legal memoranda and other communications between counsel and their clients, analyzing the propriety of exempt classification.

Posted by Brent M. Giddens

Last week, a California Court of Appeal issued its decision in Isner v. Falkenberg, a case addressing whether and to what extent time spent by employees living on the employer's property was compensable hours worked.  The Isners were required, along with other resident employees, to remain within earshot of the Company's emergency alarm system during off duty hours.  Although the case is limited to the relatively rare instance of resident employees, it does underscore the general rule regarding whether "on call" time constitutes compensable "hours worked."  As often described, if employees are "engaged to wait," meaning their personal freedom to pursue private interests is substantially restricted, then such time is considered hours worked.  Conversely, if employees are "waiting to be engaged," meaning they can go about their usual business without substantial restriction, such time is not hours worked despite the potential obligation to be prepared to work.  The Isner court found that since the employees were permitted to engage in personal interests and activities without material limitation, such time spent "within earshot" of the employer's emergency alarm system was not "hours worked."

Employers would be well advised to carefully review any "on call" requirements for non-exempt employees to ensure such time is being properly treated from an hours worked perspective.

Posted by Jennifer Barrera

A judge in the Northern District of California recently ruled that an on-duty meal period is not equivalent to a “waived” meal period.  In McFarland v. Guardsmark, LLC, the employee (a security guard) worked shifts in excess of ten hours, thereby entitling him to two meal periods under California's Labor Code.  The employee later filed a lawsuit against his employer, claiming the two on-duty meal periods in one shift were essentially two waived meal periods, and therefore violated his right to a duty-free meal period.  The employee relied upon an excerpt from the Department of Labor Standards Enforcement (“DLSE”) Operations Manual that implied the DLSE considers an on-duty meal periods as a “waived” meal period and that an employee cannot waive two meal periods in one shift.  The employer filed a motion for summary judgment and argued that an on-duty meal period is a type of paid meal period, not a waived meal period. 

In her ruling, the judge rejected the DLSE’s interpretation of on-duty meal periods and stated that courts are not required to defer to the DLSE’s manual.  The judge agreed with the employer and held that an on-duty meal period is not a waived meal period and, therefore, the employee may take two on-duty meal periods in one shift, assuming the other requirements for an on-duty meal period are satisfied. 

The employee’s attorneys have indicated that they are planning to appeal this ruling, and we will provide updates if the court's decision is ultimately reviewed on appeal.  In the interim, please contact us with any questions on this issue or to discuss the requirements an employer must satisfy to establish an on-duty meal period. 

Posted by Jeremy T. Naftel

California employers are very familiar with the negotiating leverage afforded to employees by the state's wage and hour laws.  Last week, a California Court of Appeal took a step towards leveling the playing field in Harrington v. Payroll Entertainment Services, Inc. 

In that case, the plaintiff -- who had admittedly been underpaid $44.63 in overtime -- filed a lawsuit on behalf of himself and all similarly situated employees.  The court denied class certification and the case ultimately settled for $10,500.  The parties agreed that plaintiff was the “prevailing party” for purposes of an attorney fee award, and agreed that the trial court would determine the reasonableness of the fee claimed by plaintiff’s lawyers.

The fee request submitted by the plaintiff’s lawyers totaled $46,277.  Defendant opposed the application, and the trial court denied it in its entirety.  On appeal, the court agreed with plaintiff that “reasonable” attorneys fees were mandated by statute.  However, the court characterized the $10,500 settlement of a $44.63 claim as a “windfall” and refused to work a still greater injustice by awarding tens of thousands of dollars in attorney's fees.  The court reasoned that such an award would not meet the “reasonableness” standard of the statute.  Instead, the court awarded a total of $500 in fees, and encouraged the plaintiff to share his windfall with his attorneys.

This ruling recognizes that California’s strict wage and hour laws can result in injustice if applied blindly, and may be helpful in injecting an element of reasonableness into future employee-employer negotiations.  Please contact us directly to discuss any questions you may have relating to the impact of this decision as it relates to your business.

Employers and managers received some welcome news yesterday when the California Supreme Court ruled in Jones v. The Lodge at Torrey Pines Partnership that supervising employees could not be held personally liable in cases alleging claims of retaliation. 

In Jones, a jury returned a verdict against the employer and an individual defendant supervisor, finding both liable for retaliating against an employee who had made a sexual orientation discrimination complaint.  In reversing the appellate court's decision affirming that verdict, the California Supreme Court found that the statutory language prohibiting retaliation did not plainly provide for personal liability on retaliation claims.  Drawing an analogy to discrimination claims, which also do not provide for personal liability of individual employees, the Court stated that:

“All of these reasons for not imposing individual liability for discrimination – supervisors can avoid harassment but cannot avoid personnel decisions, it is incongruous to exempt small employers but to hold individual non-employers liable, sound policy favors avoiding conflicts of interest and the chilling of effective management, corporate decisions are often collective, and it is bad policy to subject supervisors to the threat of a lawsuit every time they make a personnel decision – apply equally to retaliation.” 

Based upon these policy considerations, the ambiguous statutory language, and a review of legislative history, the Court held that there was no personal liability for retaliation claims.

In analyzing this decision, employers should be mindful that, although individual employees are not personally liability, employers are still liable for any unlawful retaliation.  Please contact us directly if you have any questions regarding the Jones decision.

Posted by Nancy G. Berner

In its unanimous decision in Sprint/United Management Co. v. Mendelsohn, an age discrimination case, the U.S. Supreme Court explicitly directed a lower court to question the relevancy of testimony by co-workers who claimed they were also subjected to age discrimination, but who played no role in the discrimination allegedly suffered by the plaintiff.

In that case, a former 51-year old Sprint employee alleged that she had been selected to be part of a reduction-in-force because of her age, and attempted to present evidence that five other former employees had also been unfairly treated due to their age.  None of the five witnesses had worked in the same group as plaintiff or under the supervisors in her chain-of-command.  The trial court held that this so-called "me too" evidence was both unfairly prejudicial and irrelevant because those workers were not similarly situated given that their work had not been overseen by any of plaintiff's direct supervisors; this ruling was subsequently interpreted to mean that such "me too" evidence was per se prohibited in such cases.

The U.S. Supreme Court, however, found that such evidence is neither per se admissible nor per se inadmissible.  Specifically, the Court held that the appropriate methodology in such cases would be a fact intensive, case-by-case approach, including an analysis of how closely related the evidence is to the plaintiff's circumstances and theory of the case. 

In practical terms, even if the evidence is determined to be relevant, the court must still then determine whether it should be presented to a jury, especially where it could be highly prejudicial to the defendant, also requiring a fact intensive, case-by-case approach.  Please contact us directly to discuss any questions you may have relating to the impact of this decision as it relates to your business.

Posted by Christopher M. Robertson

Hammond v. County of Los Angeles illustrates that an employer's success at the appellate court level can be just as dependent on the luck of the draw as at the trial court level.  Specifically, in that case the dissenting justice had a completely different view of what constitutes an adverse employment action and sufficient evidence of discrimination than the two justices who reversed the trial court's order granting the employer's motion for summary judgment. 

To be actionable under California's Fair Employment and Housing Act (FEHA), the discriminatory or retaliatory adverse employment action must materially affect the terms, conditions or privileges of employment, and must have occurred during the one year preceding the filing of the DFEH complaint.  The majority opinion in Hammond found that a reduction in teaching assignments for the plaintiff, a nursing instructor, was sufficient to constitute an adverse employment action, and although that reduction began before the applicable statute of limitations period, such an adverse employment action was not time-barred because it continued into the applicable statute of limitations period.  The dissenting justice, on the other hand, rejected the majority's contention that the reduction in teaching assignments constituted an adverse employment action because it relegated the plaintiff to "some undefined, but lesser, status," and criticized the majority opinion for "essentially allowing an infinite period of limitations." 

Posted by Nancy G. Berner

Posted by Nancy G. Berner

On Friday, February 8, 2008, the Golden Gate Restaurant Association (“GGRA”) appealed to U.S. Supreme Court Justice Anthony Kennedy seeking, in essence, to stop enforcement of the portion of the San Francisco Health Care Security Ordinance mandating employer spending requirements for employee healthcare.  The employer spending requirement was deemed unenforceable by the U. S. District Court in December 2007.  The City of San Francisco appealed that decision; the following month, the Ninth Circuit stayed the lower court's ruling during the City’s appeal, meaning that employers must make the mandated payments while the dispute works its way through the appellate process. 

It is this latest ruling – namely, that San Francisco employers make payments that may or may not eventually be found enforceable – that the GGRA seeks to overturn.  Plainly put, the GGRA has asked the Supreme Court to stay the requirement that employers make required payments until the courts determine whether or not the mandate is legally viable.  Justice Kennedy has the option of either acting alone on the GGRA’s petition, or referring it to his colleagues, and has requested a response from the City by 5:00 pm, Wednesday, February 20th. 

For the immediate future, however, the law has not changed, and employers must make the mandated payments until and unless the Supreme Court says otherwise.  Please contact us directly to discuss any questions you may have relating to this matter. 

Posted by Ursula R. Kubal

A federal court recently determined that an employer's issuance of paychecks drawn on non-California banks warrants the imposition of sizable penalties.  Specifically, in Solis v. Regis Corporation, plaintiff filed a putative class action lawsuit alleging that by issuing paychecks drawn on an Illinois bank, Regis violated Labor Code section 212, which requires that California paychecks be "payable in cash, on demand, without discount, at some established place of business in the state, the name and address of which must appear on the instrument."  Plaintiff sought penalties pursuant to Labor Code section 225.5 (authorizing a civil penalty against any person who unlawfully withholds wages due to a violation of Section 212) because some of them had been forced to pay additional fees to cash these out-of-state payroll checks.

Although Regis admitted a technical violation of Section 212, it argued that it did not owe penalties for those employees who had been able to cash their paychecks for no charge -- in other words, employees who did not pay a check-cashing fee had no wages withheld and, therefore, no penalty should be imposed.

The U.S. District Court for the Northern District of California disagreed, holding that regardless of whether an employee had been injured, Regis technically violated the statute by paying employees with checks that did not comply with Section 212.  The court recognized that Section 225.5 penalties apply only when workers have to pay a fee, but noted that even if penalties are not available under Section 225.5 for those employees who did not pay such fees, penalties are available to them under California's Private Attorneys General Act. 

The Solis decision is a harsh reminder to employers of the importance of periodically having their employment policies and practices audited to ensure that they are in full compliance with California's intricate maze of labor laws.  If you have any questions regarding the Solis decision or your company's pay practices, please contact us directly.

Posted by Candice Boyd

California employers recently suffered a setback in their ability to curb perceived defamatory statements made about their businesses. In Nygard, Inc. v. Uusi-Kerttula, the California Court of Appeal affirmed the granting of motions to strike an employer’s complaint pursuant to California’s “anti-SLAPP” statute. Cal. Code Civ. Proc. § 425.16. The statute allows a defendant to seek early dismissal of a lawsuit that qualifies as a “strategic lawsuit against public participation.” 

In Nygard, a former employee gave an interview to a magazine after ceasing his employment with plaintiffs Nygard, Inc. and Nygard International Partnership (collectively, “Nygard”). The interview concerned the employee’s work experiences with Nygard, about which the employee provided several negative comments. 

Posted by Sarah N. Drechsler

An appellate court's recent decision in Ahmadi-Kasani v. The Regents of the University of California highlights the fact that an employee will not always be required to exhaust an employer's internal grievance procedure if that procedure fails to provide sufficient due process.

In that case, a university employee filed a grievance alleging that she had been sexually harassed by her supervisor.  The university's internal four-step grievance procedure was set out in its collective bargaining agreement with the employee's union.  However, after participating in the grievance procedure through the third step, the employee aborted the procedure and filed her lawsuit due to concerns that her grievance was not being adequately addressed by the university.

The university challenged the lawsuit, arguing that once the employee initiated the internal grievance procedure, she was required to complete the process before filing a lawsuit.  The appellate court reviewing the matter determined that the employee was not obligated to fully exhaust the internal grievance procedure because it did not provide for a "quasi-judicial hearing with sufficient due process to generate a legally-binding result."  Based on the facts of the case (i.e., there was no provision in the grievance procedure whereby the employee had the right to present sworn testimony or other evidence or to cross-examine witnesses; the employee had no right to invoke the arbitration, although the union did; and the decision of the arbitrator would not have had any binding effect in the subsequent lawsuit), the court held that it would make no sense to require an employee to fully exhaust all steps of an internal procedure before filing a lawsuit if full exhaustion would not even result in a finding that had any bearing on the subsequent lawsuit.

This decision should serve as a strong reminder that employers must ensure that their internal grievance procedures provide sufficient due process to encourage employees to avail themselves of internal remedies, and to result in findings that will be binding in subsequent litigation.  If you have any questions regarding drafting such procedures or the implications of this decision for your business, please contact us directly.

Posted by Nancy G. Berner

The Ninth Circuit Court of Appeals recently issued a ruling denying a union’s claim that a company engaged in unlawful surveillance when HR personnel interrupted two meetings between union organizers and individual employees.  Local Joint Executive Board of Las Vegas v. NLRB (9th Cir. 05-75515 01/28/08).

The underlying facts were not at issue. Unions implemented an open campaign to organize and unionize culinary workers at a Las Vegas hotel. On two separate occasions, a human resource manager observed and then interrupted conversations in the employee dining room between organizers and workers to present the hotel’s point of view.  In particular, the manager stated that workers should be aware that signing a union card obligated the worker to pay monthly dues, and that the workers should make sure they had all the facts before signing the card.

The California Supreme Court announced today that it granted the petition for review filed by Google in that company's continued appeal of an age-discrimination action filed by one of its former employees. 

Specifically, and as reported in a previous entry on this blog, the plaintiff in Reid v. Google, Inc. (who was 54 years old at the time of his termination) claimed he had been called “fuzzy,” “sluggish,” and “lethargic” at work, and that he had been told his ideas were "obsolete" and "too old to matter."   After the trial court granted Google's summary judgment motion, plaintiff appealed the decision.  The appellate court found that these comments were not, as a matter of law, "stray remarks," and that the plaintiff should consequently be allowed to pursue his claims (click here to review that decision).  Google has now appealed from that ruling, seeking relief from the California Supreme Court, which has agreed to hear the matter.

We will continue to provide updates as this case makes its way through the Court.  In the interim, please contact us directly to discuss any questions you may have relating to this matter.

Posted by Robin E. Weideman

Earlier today the California Supreme Court issued its long-awaited decision in Ross v. RagingWire Telecommunications, Inc. and held that an employee who was fired for failing a drug test due to medical marijuana use does not have a valid claim for disability discrimination or wrongful termination against the employer. 

The plaintiff in that case applied for and was offered a position as a systems administrator with RagingWire.  In connection with his hiring, he was required to take a drug test, and three days later started work for RagingWire.  Later the same week, RagingWire received plaintiff's drug test results, which were positive for marijuana, and suspended plaintiff.  Plaintiff provided RagingWire with a doctor's note explaining that he was medically prescribed marijuana to treat chronic back pain.  Notwithstanding the doctor's note, RagingWire terminated plaintiff's employment.

Plaintiff subsequently sued RagingWire for disability discrimination and failure to accommodate a disability under the California Fair Employment and Housing Act.  He also alleged a claim for wrongful termination in violation of public policy, arguing that RagingWire's termination of his employment contravened the public policy behind California's Compassionate Use Act (the California statute exempting users of medically prescribed marijuana from criminal liability under certain state laws). 

Posted by David V. Greco

Employers facing class actions for failure to provide employees with meal and rest breaks received a bit of good news from a California appellate court when it denied class certification on such claims because it determined that common questions of law and fact did not predominate. 

Specifically, in Bell v. Superior Court, plaintiffs were drivers who claimed, among other things, that their employer failed to provide them meal and rest breaks as required by law.  Plaintiffs contended that the company had an unwritten policy of scheduling too much work to allow drivers to take their breaks and submitted declarations to support their claims.  In response, the company submitted evidence demonstrating that meal and rest breaks were provided, including personnel handbooks and manuals that set forth policies for meal and rest breaks and declarations confirming that drivers were trained to take breaks and that at least some drivers did so.  The court denied class certification, finding that individual issues predominated over common issues, based in part on its determination that there was no evidence of a company-wide policy prohibiting meal and rest breaks. 

What this means for California employers is that the existence of written policies directing employees to take meal and rest breaks (including those in employee manuals) is something that courts consider when determining whether or not to certify a class.  Drafting and implementing such policies is a relatively simple process, and one which – as shown by this case – can have significant positive repercussions at a later date. If you have any questions regarding drafting such policies or the implications of this decision for your business, please contact us directly.

In a ruling last month, the National Labor Relations Board allowed employers to uniformly prohibit use of company e-mail for e-mail solicitations to other employees, even if those solicitations were to organize union-related activities on behalf of employees. In The Guard Publishing Company, 351 N.L.R.B. No. 70 (2007), the employer implemented a policy prohibiting employees from engaging in non-job-related e-mail solicitations. Based upon this policy, the employer disciplined an employee, the union president, for sending e-mails to other employees requesting that employees wear green and participate in a parade to show union solidarity. The union charged that this discipline unlawfully discriminated against union-related activities. 

The NLRB held that an employer may “lawfully bar employees’ non-work-related use of its e-mail system, unless the [employer] acts in a manner that discriminates against Section 7 activity.” The NLRB further held that because the non-solicitation policy “on its face does not discriminate against Section 7 activity,” the union’s discrimination charge with respect to the two e-mails was without merit. Key to the NLRB’s decision was the fact that the company did not discriminate by applying the non-solicitation policy to only union-related solicitations. If the company had only enforced the policy against union-related solicitations while allowing other non-job-related solicitations to proceed unfettered, the policy would have indeed constituted unlawful discrimination under the National Labor Relations Act. 

In a somewhat disappointing ruling for employers, the Ninth Circuit recently held in NLRB v. Friendly Cab Company that taxicab drivers were improperly classified as independent contractors rather than employees.  In reaching its decision, the court focused on the control the employer exercised over the drivers and its restriction on the drivers' entrepreneurial activities. 

As background, the National Labor Relations Act ("NLRA") provides employees the right to engage in collective bargaining, but does not extend this right to independent contractors.  Friendly Cab Company ("Friendly") contended that its taxicab drivers were independent contractors and therefore not entitled to collective bargaining rights under the NLRA.  The National Labor Relations Board ("NLRB") concluded that the drivers were indeed employees, rather than independent contractors.  Friendly appealed the decision to the Ninth Circuit, and the Ninth Circuit affirmed.

Posted by Connor J. Moyle

A recent appellate court decision has confirmed that an agreement providing for 1) written notice of termination and 2) a termination review procedure does not alter the at-will nature of the employment relationship.  Specifically, in Bernard v. State Farm Mutual Automobile Insurance Co. the court held that a plaintiff could not pursue his contract-based cause of action for wrongful termination because he had an at-will employment relationship with his employer that was terminable at any time.

In that case, the parties had entered into an agreement that contained the following language:

     III.A. You or [employer] have the right to terminate this Agreement by written notice delivered to the other or mailed to the other’s last know address.

     III.B. In the event we [employer] terminate this Agreement, you are entitled upon request to review in accordance with the termination review procedures approved by the Board of Directors of the Companies, as amended from time to time.

The former employee argued that extrinsic evidence of the contract’s meaning should be admitted because the language was ambiguous.  However, the court held that the plain language of the agreement was not reasonably susceptible to an interpretation requiring good cause for termination, and instead interpreted the agreement as having created an at-will employment relationship.  The court also held that the termination review procedure referenced in the agreement did not substantively alter the at-will nature of the relationship.

The Bernard decision esssentially confirms that employers may include carefully-drafted provisions for termination notice and review procedures in employment agreements without sacrificing the at-will nature of an employment relationship.  If you have any questions about the implications of the Bernard decision for your business, please contact us directly.

Posted by Nancy G. Berner

Yesterday the Ninth Circuit Court of Appeals issued an emergency stay permitting the City of San Francisco to implement the Employer Spending Requirement (“ESR”) provision of its Health Care Ordinance while it appeals the recent lower court ruling that found the ESR is preempted by federal law (click here to view the court's order).  Although the City’s appeal is distinct from the stay, the court ruled that the City has a “strong likelihood of success” in prevailing on its appeal.

This emergency stay has an immediate impact on employers who employ 50 or more individuals total, with any of those persons working in San Francisco.  Specifically, businesses with 50 to 99 employees that are not already spending a minimum of $1.17 per hour on employees who work 10 or more hours per week will now be required to do so; businesses with more than 99 employees that are not spending more than $1.76 per hour for employee healthcare must now spend that amount.  Although the court did not articulate an effective date, its ruling in essence means that covered employers are required to immediately begin complying with the ESR.

We will continue to provide updates on this rapidly changing issue.  In the interim, please contact us directly to discuss any questions you may have relating to this matter.

Posted by Nancy G. Berner

The holiday season brought at least temporary tidings of comfort to San Francisco employers when U.S. District Judge Jeffrey White ruled that a key provision of the City’s Employer Mandate for Healthcare – requiring employers to meet minimum contribution levels to employee health insurance benefits or help fund a city program – violates the 1974 federal Employee Retirement Income Security Act.  In his most recent ruling, Judge White agreed with the Golden Gate Restaurant Association that the Employer Spending Requirement provision is preempted by federal law and granted summary judgment in its favor (click here to view the decision).  The City responded swiftly with a request for an emergency stay of the ruling, pending an appeal, from the Ninth U.S. Circuit Court of Appeals.  The Ninth Circuit did not rule immediately on the emergency stay, but agreed to hear oral argument on January 3rd.

Updates on this rapidly changing issue will be posted on this website as information becomes available.  In the interim, please contact us directly to discuss any questions you may have relating to this matter.

The California Supreme Court recently heard oral arguments in Ross v. Ragingwire Telecommunications, Inc., a case in which a lower court held that an employer does not have a duty to accommodate an employee's disability by permitting him to use illegal drugs, even if the drug is marijuana used for medical purposes pursuant to California's Compassionate Use Act (which protects medical marijuana users from criminal liability).

In that case, plaintiff was offered a job and worked for 8 days before his employer learned he had tested positive for marijuana and thus failed a pre-employment drug test.  Even though he produced a note from his physician confirming that the marijuana was prescribed for medical purposes to provide relief for lower back strain and muscle spasms, the employee was fired.  The employee subsequently filed suit, contending that his employer had violated California's Fair Employment and Housing Act in failing to reasonably accommodate his disability by terminating him for his use of medically-prescribed marijuana. 

In its defense, the employer raised many of the concerns that are shared by other employers throughout the state, including absenteeism from work, diminished productivity and greater health care costs, as well as concerns relating to the contradictions between state and federal law regarding the legality of using medicinal marijuana.  In response to these concerns, plaintiff argued that his use of marijuana did not interfere with his job performance, and that he did not use the drug during working hours or on the job site.  Ultimately, the court of appeal sided with the employer and found that employers may legally terminate employees for using illegal drugs, with no exceptions for medically-prescribed marijuana. 

A decision is expected by the California Supreme Court in this case by early February 2008, at which time we will post a blog-entry summarizing the Court's decision.  In the interim, please contact us directly to discuss any questions you may have regarding your obligation to accommodate employees using marijuana for medicinal purposes.

Posted by Connor J. Moyle

A California appellate court recently clarified that a one-year statute of limitations applies to claims brought solely for waiting time penalties relating to late payment of wages under Labor Code section 203. 

Specifically, in McCoy v. Superior Court, the court determined that a putative class action plaintiff was not entitled to allege a claim for waiting time penalties alone because the one-year statute of limitations for those penalties had run.  In that case, the underlying wages had indisputably been paid, but plaintiff claimed that his employer had not paid wages owed until one day after completion of temporary work assignments.  Plaintiff argued that the statute of limitations for a claim seeking waiting time penalties is the same as that for recovery of the underlying wages, which he asserted is four years.  Defendant argued, however, that in a claim that only seeks waiting time penalties, the general one-year statute of limitations for penalties should apply.

The appellate court agreed with the defendant-employer and reasoned that the purpose of Section 203 is to ensure that employers pay wages promptly, not to provide for a penalty independent of the wage claim. Thus,  where the employer has paid the underlying wages, the purpose for extending the statute of limitations for waiting time penalties to coincide with that for wages no longer exists.  Having found the time period in Section 203 inapplicable, the court applied the general one-year limitations period for penalties found in Code of Civil Procedure section 340(a).  The court also rejected plaintiff's alternative argument that waiting time penalties should be considered “wages” rather than a penalty, and that the longer limitations period for wages should therefore apply. 

Employers should note that the McCoy court explicitly limited its holding to suits that do not also involve a claim for unpaid wages.  Nevertheless, this decision has the potential to benefit employers by limiting the amount of time they remain exposed to employees for waiting time penalties where all underlying wages have been paid.  The decision also underscores the importance of promptly paying wages due upon discharge.  Please contact us directly to discuss any questions relating to the effect this decision may have on your workplace.

A recent California appellate court decision clarifies that not every instance of inappropriate conduct can give rise to a “hostile work environment” sexual harassment claim.  Specifically, in Mokler v. County of Orange, the court determined that three instances of offensive behavior over a five-week period, though inappropriate, did not demonstrate the continuous, pervasive harassment necessary to show a hostile work environment.

In Mokler, plaintiff served as the Executive Director of the Orange County Office on Aging; as part of her job, she routinely interacted with County Supervisors.  One of the male Supervisors called plaintiff an “aging nun” when he learned she was not married.  A week later, when plaintiff greeted the Supervisor at a social function, he took her arm, pulled her towards him so that the sides of their bodies were touching and asked her if she was there to lobby him.  When she responded in the negative, the Supervisor pointed to two women standing next to him and asked, “Why not?  These women are lobbying me.”  He also looked her up and down and told her she had a nice suit and nice legs.  A month later, when plaintiff went to the Supervisor's office, he told her she looked nice and put his arm around her; he then pressed her to tell him where she lived and put his arm around her again, rubbing her breast in the process.  During this same meeting, the Supervisor made a derogatory remark about Mexicans.

In a decision that surprised and pleased many employers, the appellate court held that the three incidents, though “rude, inappropriate, and offensive,” were not sufficient to create a hostile work environment as a matter of law because they did not show “a pattern of continuous, pervasive harassment.” 

Note that although the employer in this case was not found liable for sexual harassment, the decision nevertheless underscores the potential liability employers face from sexual harassment claims.  To minimize this risk, employers should have strongly worded policies in place forbidding sexual harassment and should ensure that their supervisors are trained in sexual harassment prevention.  In addition, employers should be sure to investigate all complaints of harassment quickly and thoroughly.  Please contact us directly to discuss any questions relating to the effect this decision may have on your workplace.