Yesterday the Ninth Circuit issued its decision in Rea v. Michaels Stores, reversing a remand order and finding that the defendant employer’s removal of the case to federal court under the Class Action Fairness Act (CAFA) was proper. In line with its decision last year in Roth v. CHA Hollywood Medical Center, the Ninth Circuit reaffirmed that a defendant’s removal options are not limited to the two 30-day windows specified in the federal removal statute. As long as the defendant has not run afoul of either 30-day removal window (meaning that no pleading or other paper revealed on its face that the action was removable), the defendant may remove at any time based on its own information and investigation. The Ninth Circuit also reaffirmed its holding last year in Rodriguez v. AT&T Mobility Services, that the preponderance of evidence standard (and not the legal certainty standard) applies to CAFA removals and that allegations in a complaint purporting to limit the amount in controversy to under $5 million are not binding and do not prevent removal under CAFA.
Applying these principles to the Michaels Stores case, a wage and hour class action alleging misclassification of store managers, the Ninth Circuit held that the employer’s removal was timely, even though it was filed years into the litigation and not within 30 days of any initial or subsequent pleading. The court also held that Michaels had sufficiently demonstrated that the amount in controversy “could exceed $5 million” based on evidence that Michaels expected its managers to work 45 hours per week, along with deposition testimony of putative class members stating that they in fact regularly worked 45 or more hours per week. Extrapolating these overtime hours to the number of employees in the putative class resulted in alleged overtime damages exceeding $5 million. The court held that this evidence (particularly in the absence of any contrary evidence) was sufficient to meet the employer’s burden of proving by a preponderance of the evidence that the amount in controversy requirement was met. For these reasons, the Ninth Circuit held that the district court’s order remanding the case to state court was erroneous.
Notably, while the plaintiff’s petition for review of the remand order was pending before the Ninth Circuit, the litigation proceeded on remand in the state court, resulting in a class being certified. The plaintiff argued before the Ninth Circuit that this grant of class certification turned the Complaint’s non-binding allegation limiting recovery to under $5 million into a binding allegation, thereby precluding CAFA jurisdiction. The Ninth Circuit rejected this argument, reasoning that post-removal developments are not relevant to assessing whether removal was proper at the time the removal was filed and that such subsequent developments do not defeat an otherwise proper removal.
The Rea v. Michaels Stores decision is helpful for employers defending wage and hour class actions in California state courts but seeking to remove those actions to federal court. The full decision is available here.
February 18, 2014
Posted by Cal Labor Law in Immigration
The U.S. Department of Homeland Security will accept new H-1B visa filings on April 1 for a start date of Oct 1. H-1B work visas are for foreign national employees that are college degreed professionals such as software developers, engineers, chemists, scientists, financial analysts, etc. The annual quota of 85,000 visas applies to first time H-1B’s, not to extensions with the same company or transfers to other companies.
It is suggested that employers query their departments to see if they have a need for such a visa for either a possible new hire or to keep a valued current foreign national employee work authorized. This year's quota is expected to fill up relatively fast.
Many employers have valued foreign national employees working on a one-year work permit after college (known as Option Practical Training or OPT). Since the OPT will expire, it’s important that the H-1B visa be explored to allow them to remain work authorized. Some employees are eligible for a one-time extension of their OPT (based on their STEM education in science, technology, engineering, and math), but eventually will still need the H-1B visa.
For more information, please contact Greg Berk, Chair of the CDF Immigration Practice Group.
As many predicted, the Fifth Circuit’s recent invalidation of the NLRB’s D.R. Horton decision has not caused the NLRB to revise its enforcement position on the subject of class action waivers in employment arbitration agreements. The NLRB basically takes the position that, unless overruled by the United States Supreme Court (as opposed to a circuit court of appeal), Board decisions (such as D.R. Horton) remain in effect and are binding on the NLRB’s administrative law judges (“ALJ”). A decision last week from an ALJ in Leslie’s Poolmart, Inc. and Keith Cunnigham evidences the NLBR’s continued adherence to its D.R. Horton decision and policy. Indeed, the Leslie’s Poolmart decision actually expands D.R. Horton by holding that an arbitration agreement that was silent on the issue of class and collective claims still violated Section 7 of the NLRA by interfering with employees’ rights to engage in collective, concerted activity for mutual aid and protection.
In Leslie’s Poolmart, employees were required to sign an arbitration agreement upon hire, whereby they agreed that they would arbitrate any employment-related disputes. The agreement said nothing about whether an employee could pursue class or representative relief in arbitration. Notwithstanding his agreement to arbitrate, employee Cunningham filed a class action lawsuit in California state court against Leslie’s, alleging various wage and hour violations. Leslie’s removed the case to federal court and then filed a motion to compel arbitration of Cunningham’s individual claims and requested that the class claims be dismissed. The court granted the motion (with the exception of a PAGA claim, which the court held was exempt from individual arbitration).
Not to be deterred, Cunningham filed a charge with the NLRB alleging that Leslie’s arbitration agreement and efforts to enforce it violated section 7 of the NLRA. Last week, a NLRB ALJ agreed. The ALJ held that she was still bound by D.R. Horton regardless of the fact that the Fifth Circuit effectively overruled the decision. The ALJ further held that D.R. Horton applied even though the arbitration agreement in this case (unlike the one at issue in D.R. Horton) did not expressly preclude arbitration of class or representative claims. The ALJ reasoned that even though the agreement did not expressly foreclose class claims, it effectively foreclosed such claims because the employer required all employees to sign the agreement and responded to court actions by making motions to compel individual arbitration and to dismiss any class allegations. Thus, the ALJ found that the agreement interfered with employees’ ability to engage in collective concerted activity. The ALJ further held that a single employee's filing of a class action claim (even without active participation of any other employee) constituted protected concerted activity. The ALJ ordered Leslie’s to rescind its arbitration policy and/or to revise it to make clear that employees can pursue class claims either in arbitration or in court. The ALJ further ordered Leslie’s to file a motion with the district court requesting that it vacate its order compelling Cunningham to arbitrate his individual claims. The January 17, 2014 Leslie’s Poolmart decision is available in full on the NLRB’s website here.
Unless and until the United States Supreme Court overrules D.R. Horton, it appears, at least for now, that some plaintiffs' class action lawyers may continue using unfair labor practice charges as a last ditch effort to try to avoid dismissal of their class claims. Given the wide rejection by courts of the NLRB's D.R. Horton decision, the ultimate success of this type of tactic is doubtful.
Yesterday a California court issued a favorable decision for employers regarding overtime pay obligations for employees covered by a collective bargaining agreement. In Vranish v. Exxon Mobil Corp., the plaintiffs, who were unionized production and maintenance workers at Exxon’s Santa Ynez facility, filed a putative class action against Exxon, alleging that Exxon failed to fully pay them overtime compensation required under California law. Pursuant to the applicable CBA, the plaintiffs regularly worked an alternative workweek schedule of seven 12-hour shifts, followed by a period of seven days off. Also pursuant to the CBA, the plaintiffs were paid overtime compensation at the rate of one and one-half times their regular rate of pay for hours worked in excess of 40 per week or 12 hours per day. Overtime was not paid for hours worked between 8 and 12 in a workday.
Plaintiffs sued, alleging that Exxon’s failure to pay them overtime for hours worked between 8 and 12 in a workday was a violation of California’s daily overtime pay requirement set forth in California Labor Code section 510. The court rejected this argument, holding that the daily overtime provision of section 510 did not apply to plaintiffs because they were covered by a valid CBA and sections 510 and 514 exempt employees covered by a CBA containing its own overtime pay provisions. Plaintiffs did not dispute that the CBA was valid or that it provided for payment of overtime compensation in certain circumstances. However, plaintiffs argued that the CBA’s overtime provision was nonetheless in violation of California law because it did not provide for daily overtime for hours worked between 8 and 12 per day. According to plaintiffs, the exemption for employees covered by a CBA only applies if the CBA provides for overtime compensation at least at the rates and in the circumstances set forth in section 510. The court rejected this argument, citing the Division of Labor Standards Enforcement Policy Manual as well as opinion letters wherein the DLSE agreed that the parties to a CBA are free to negotiate and agree on the circumstances under which overtime pay is triggered and the rate at which it will be paid. As a result, section 510’s specific overtime requirements do not apply to employees covered by a valid CBA that contains its own overtime pay provisions.
The court alternatively held that even if plaintiffs’ interpretation of the CBA exemption was correct, Exxon still would not be liable for overtime compensation because the plaintiffs worked a validly adopted alternative workweek schedule providing for 12-hour shifts and, as such, were not eligible for overtime compensation for hours worked between 8 and 12 in a workday.
The full decision is here.
This month, a San Francisco district court denied class certification in Lou v. Ma Laboratories, ruling that class counsel was inadequate due to their simultaneous involvement in two class actions against Ma Laboratories, a global distributor of computer components. The Lou case alleged FLSA and wage and hour claims, such as failure to pay overtime, failure to provide off duty breaks, failure to timely pay final wages, failure to keep accurate wage statements, and unfair competition. Similarly, Tian v. Ma Laboratories alleged nearly identical California wage and hour violations.
Before certifying a class, courts must consider whether the attorneys representing a proposed class are adequate. In doing so, a court will analyze (a) whether there are any conflicts of interest between counsel, the named plaintiffs or other class members, and (b) whether counsel can vigorously prosecute their case on behalf of the class. In federal court, Rule 23(A)(4) requires class counsel to “fairly and adequately protect the interests of the class.”
Ultimately, the court found a conflict of interest existed due to the attorneys’ simultaneous representation of two classes against the same defendant on many of the same claims. Given this conflict, class counsel could not fairly and adequately represent the interests of the class. The Lou court noted that class counsel “wield great power” in their strategic decisions concerning litigation and settlement and the class deserved “to be championed by its counsel unencumbered by their duties to other clients.” As a result, this denial of class certification for inadequacy of class counsel can be viewed as a victory for employers defending against multiple class actions in California for similar claims.
January 7, 2014
Posted by Cal Labor Law in Union-Management Relations
Yesterday, the NLRB announced that it will not seek Supreme Court review of the two Court of Appeals decisions invaliding the NLRB’s 2011 posting rule requiring private sector employees covered by the National Labor Relations Act to post a 11x17” poster outlining employees’ rights under the Act. In both of the Court of Appeals decisions, National Association of Manufacturers v. NLRB, 717 F.3d 947 (DC Cir. 2013), and Chamber of Commerce v. NLRB, 721 F.3d 152 (4th Cir. 2013), the appellate courts held that the NLRB exceeded its jurisdiction when it promulgated the posting rule and invalidated it. Most expected the NLRB to seek writs of certiorari with the United States Supreme Court on those decisions. The time for doing so expired on January 2, 2013. Yesterday, the NLRB announced that it would no longer be pursing the matter with an announcement on its website. For the full text of that announcement, please click here.
The NLRB may have given up this particular battle. However, we believe that the Board will continue to try to find new and imaginative ways to expand unionization, make it easier for employees to organize, and expand its reach into the non-union workplace through rulemaking and other creative measures. These activities will lead to further court battles, as employers’ groups test the scope of the NLRB’s authority and jurisdiction and challenge its broad pro-union interpretations of the NLRA. Union and non-union employers would be wise to continue to monitor the activities of the NLRB through at least the rest of the Obama administration in order to understand where the NLRB is looking to make its presence felt in both sectors.
Yesterday the IRS announced the 2014 optional standard mileage reimbursement rates. Beginning January 1, 2014, they decrease one-half cent from the current rates in effect, and are as follows:
- 56 cents per mile for business miles driven;
- 23.5 cents per mile driven for medical or moving purposes; and
- 14 cents per mile driven in service of charitable organizations (same as current rate in effect).
Employers using the standard IRS rates for mileage reimbursement purposes should adjust their expense reimbursement policies accordingly.
December 17, 2013
Posted by Cal Labor Law in New Laws & Legislation
San Francisco employers are reminded that the city's new Family Friendly Workplace Ordinance (FFWO) takes effect January 1, 2014 and requires employers to consider employee requests for flexible or predictable work arrangements to assist with caregiving responsibilities. Our prior post on this new ordinance is here. This new local ordinance requires San Francisco employers with twenty or more employees to post a poster setting forth the provisions of the ordinance. That poster has just been made available. Employers can access the poster here. For more information on the FFWO, click here.
Last week, the Ninth Circuit issued its decision in Muniz v. UPS, holding that the trial court did not abuse its discretion in awarding the plaintiff close to $700,000 in attorneys' fees, even though the plaintiff's damages recovery was only $27,000 and the defendant defeated the majority of plaintiff's claims prior to trial. This result is an unpleasant example of how an employer can be largely victorious in defending an employment suit yet still lose big on attorneys' fees.
In Muniz, the plaintiff was given a performance improvement plan and later demoted, based on unsatisfactory performance. Plaintiff sued, alleging "kitchen sink" discrimination based on age and gender, and also alleged retaliation and negligent supervision and training. Plaintiff's age discrimination, retaliation, and negligent supervision claims (as well as plaintiff's claim for punitive damages) were defeated and/or voluntarily dismissed prior to trial (meaning UPS prevailed on these claims). The only claim that was actually tried was plaintiff's claim for gender discrimination based on being given a performance improvement plan and later demoted. The jury determined that plaintiff's demotion was motivated by gender discrimination but awarded plaintiff damages of only $27,000 (much less than plaintiff's plea to the jury to award her $700,000). The jury also concluded that plantiff's performance improvement plan was motivated in part by gender discrimination, but that UPS would have taken the same action for legitimate, non-discriminatory reasons. As such, the plaintiff was not permitted to recover damages (alleged emotional distress) associated with the performance criticism.
In sum, the defense largely prevailed in the case, having defeated all but one of plaintiff's claims and substantially limiting plaintiff's recovery. That is, until plaintiff filed a motion for recovery of attorneys' fees for prevailing on one FEHA discrimination claim. Plaintiff outrageously sought $1.9 million in fees for her limited success, including a claimed lodestar (number of hours expended times hourly rates) of $1.3 million (which included time spent litigating the claims that were defeated) and a requested 1.5 upward enhancement. The trial court denied the requested 1.5 multiplier and limited its analysis to the reasonableness of the $1.3 lodestar. In this regard, the trial court found that plaintiff's counsel's proffered hourly rates were unreasonable and reduced them slightly. The trial court also found that plaintiff's counsel had not sufficiently proven the number of hours expended on the litigation and, therefore, reduced the compensable total hours by 20 percent, bringing the fee award down to $773,000. At that point, the court considered UPS' argument that the fee award needed to be substantially reduced to account for plaintiff's very limited success and the extreme disproportion between the plaintiff's damages and the amount of fees sought. The trial court reduced the fees by only 10 percent and awarded plaintiff nearly $700,000 in fees.
UPS appealed to the Ninth Circuit, arguing primarily that the fee award should have reduced more than 10 percent to account for plaintiff's limited success. The Ninth Circuit disagreed, relying heavily on the deferential standard of review which gives a trial court broad discretion to set the amount of fees awarded. The Ninth Circuit held that the trial court could have reduced the fee award more, but that it could not be said that it was an abuse of discretion for the trial court not to do so. The court reasoned that a reduction for time spent on unsuccessful claims is proper only to the extent it can be demonstrated that certain hours were spent exclusively on the unsuccessful claims. Time spent, for example in discovery, on both successful and unsuccesful claims should not be reduced from a fee award. The Ninth Circuit concluded that the trial court properly considered these issues and did not abuse its discretion in determining the amount of fees to award.
The Muniz case is another one for the plaintiffs' bar arsenal. It will make it more difficult for employers fighting FEHA claims in California federal courts to successfully limit any award of attorneys' fees to a prevailing plaintiff, thereby effectively increasing the incentive to settle such claims early on. The full decision is here.
Today, the Fifth Circuit issued its decision in D.R. Horton v. NLRB, invalidating the NLRB's holding that D.R. Horton's arbitration agreement violated the NLRA by prohibiting employees from pursuing employment claims on a class or collective basis. The NLRB had reasoned that disallowing class and collective claims in arbitration and in court precludes employees from exercising their right under the NLRA to engage in collective, concerted activity for mutual aid and protection. The Fifth Circuit disagreed.
Relying on recent United States Supreme Court decisions starting with AT&T Mobility v. Concepcion, the Fifth Circuit held that the Federal Arbitration Act (FAA) requires that arbitration agreements be enforced according to their terms and that a provision prohibiting class-wide arbitration is an enforceable term. The Fifth Circuit further held that nothing in the NLRA or its legislative history evinces any Congressional intent to ovveride the FAA, and that general language in the NLRA relating to "mutual aid and protection" could not be interpreted as an expression of Congress' intent to override the FAA.
The NLRB argued that its ruling was valid because it did not require employers to allow class-wide arbitration. Instead, it simply required employers to allow employees to pursue relief on a class-wide basis either in arbitration or in court. The Fifth Circuit held that there was nothing in the NLRA suggesting that a prohibition on class-wide claims violates the NLRA. The court also held that requiring employers to allow employees to pursue class-wide claims (either in court or in arbitration) has the effect of disfavoring arbitration, in contravention of the FAA.
The Fifth Circuit's decision was not an all-out win for D.R. Horton, however. The Fifth Circuit held that D.R. Horton's arbitration policy reasonably could be interpreted as preventing employees from pursuing administrative claims with the NLRB (based on broad language explaining that the employee was waiving the right to file a lawsuit "or other civil proceeding" relating to an employment dispute). As a result, the court held that the NLRB properly ordered D.R. Horton to take corrective action to revise its policy to clarify that employees are not prohibited from filing charges with the NLRB.
The Fifth Circuit's decision in D.R. Horton is the first circuit court decision addressing the D.R. Horton issue in a direct appeal from a NLRB action. However, many courts throughout the country, including many in California and in the Ninth Circuit have similarly rejected the NLRB's D.R. Horton analysis and refused to follow it. It remains to be seen what the NLRB will do in response to the Fifth Circuit's decision. The NLRB could petition for review to the United States Supreme Court. In the meantime, the NLRB may continue to follow and apply its D.R. Horton analysis to invalidate class waivers in jurisdictions outside the Fifth Circuit. Alternatively, the NLRB could abandon its attack on class waivers consistent with the weight of court decisions rejecting the NLRB's analysis in this regard. Time will tell.
For now, arbitration agreements with class action waiver provisions remain an effective tool for employers to prevent class-wide employment claims.
The Fifth Circuit's decision is available here.