Ninth Circuit refuses to enforce law-firm’s arbitration agreement with its employee.

The Ninth Circuit Court of Appeals recently refused to enforce an arbitration agreement between a paralegal and her law firm employer. In rejecting the firm's attempt to compel arbitration of the employee's claim for overtime compensation and denial of meal and rest periods, the court ruled that the arbitration agreement was both procedurally and substantively unconscionable, and thus unenforceable.

Specifically, the arbitration agreement at issue in Davis v. O'Melveny & Myers was deemed procedurally unconscionable because it was imposed on the employee as a condition of employment, with no opportunity to negotiate. The court also found that the agreement was substantively unconscionable because it:(1) shortened the statute of limitations applicable to the employee's claim; (2) contained an overbroad confidentiality provision which, among other things, limited the employee's ability to contact potential witnesses); (3) allowed the law firm, but not the employee, to seek certain injunctive relief in court; and, (4) prohibited the employee from filing claims with the federal Department of Labor or the California Labor Commissioner. Because these provisions could not be stricken without gutting the agreement, the entire agreement was deemed void and unenforceable.

For specific questions regarding the enforceability of arbitration agreements you may be using in the workplace, please contact us directly.

Court Issues Ruling Narrowly Interpreting Administrative Exemption.

On June 12, 2007, the Third District Court of Appeal further narrowed the administrative exemption that employers may use to exempt certain employees from California overtime requirements.In Eicher v. Advanced Business Integrators, Inc., (2007) ____ Cal. App. 4th ______, the plaintiff provided customer service and training concerning the defendant employer's software.The defendant classified the plaintiff as exempt under the administrative exemption. The Court of Appeal sustained the superior court's ruling that the plaintiff did not meet the requirements of the administrative exemption.

To qualify for the administrative exemption, an employee must, among other things, perform "office or non-manual work directly related to management policies or general business operations" of the employer or its customers.In Eicher, the court narrowly interpreted this requirement to insist that the employee have "personal effect on the policy or general business operations" of the employer.In Eicher, theplaintiff's primary responsibilities consisted of implementing and troubleshooting his employer's software at customer venues, as well as providingon-site and off-site customer support.The court opined that the plaintiff was more akin to a production worker previously found not to qualify for the administrative exemption because he was simply "engaged in the core day-to-day business" of the defendant.Because the plaintiff had nopersonal effect on policy or general business operations,the court found that the requirementwas not satisfied and, therefore, the administrative exemption did not apply.For more information concerning Eicher v. Advanced Business Integrators, Inc., click here.

Bradstreet Appointed California Labor Commissioner

On June 8, 2007, Gov. Arnold Schwarzenegger appointed Angela Bradstreet to serve as labor commissioner for the California Department of Industrial Relations.Bradstreet, a Democrat, must be confirmed by the state Senate.As labor commissioner, Bradstreet will have significant influence over California wage laws and enforcement policies.Bradstreet previously served as managing partner for a Bay Area law firm.For a link to Governor Schwarzenegger's official announcement, click here.

Federal Minimum Wage to Increase in July 2007

President Bush recently signed into law the Fair Minimum Wage Act of 2007. This legislation is designed to increase the federal minimum wage in three increments over the next two years. The first increase will be from the current rate of $5.15 to $5.85 per hour beginning July 24, 2007. The minimum wage will then increase to $6.55 per hour beginning July 24, 2008, and $7.25 per hour effective July 24, 2009. Employers should ensure that their mandatory postings reflect the newly adjusted minimum wages.

Note that this increase in the federal minimum wage will not affect the wages earned by California employees, who are currently entitled to the higher minimum wage of $7.50 per hour ($8.00 per hour effective January 1, 2008). Additionally, San Francisco employers must pay their employees the city's current minimum wage of $9.14 per hour.

United States Supreme Court Decides Key Equal Pay Case in Favor of Employers

On May 29, 2007, the United States Supreme Court decided Ledbetter v. Goodyear Tire & Rubber Co., Inc., a case involving a Title VII claim for sex discrimination. Lilly Ledbetter worked for Goodyear for 19 years and claimed that her past performance evaluations were discriminatory based on her sex because they caused her to be earning significantly less than her male counterparts at the time of her retirement in 1998. Ledbetter filed a EEOC questionnaire in March 1998. Relying on the "paycheck accrual rule," she claimed that the paychecks she received up to the date of her retirement were unlawful because they would have been larger is she had been evaluated in a non-discriminatory way prior to the EEOC charging period (180 days prior to her filing her EEOC questionnaire).

A split (5-4) U.S. Supreme Court held that because Ledbetter did not assert that any of the pay decisions made within 180 days of her filing of her EEOC questionnaire were discriminatory, her claims were time-barred. The Supreme Court held that "the EEOC charging period is triggered when a discrete unlawful practice takes place. A new violation does not occur, and a new charging period does not commence upon the occurrence of subsequent non-discriminatory acts that entail adverse effects resulting from past discrimination. But of course, if an employer engages in a series of acts, each of which is intentionally discriminatory, then a fresh violation takes place when each act is committed."

This decision is helpful to employers as it helps define how statutes of limitations will be analyzed in discrimination cases where continuous violations are alleged. In addition, it will likely help eliminate employees from bringing stale claims back to life simply by adding continuous violations type allegations that are not supported with real evidence. However, this decision may have the practical effect of prompting employees to file Title VII charges more quickly because of the Supreme Court's strict statute of limitations ruling. It should be noted that this case is limited to Title VII pay claims and it is unclear whether the reasoning of Ledbetter will be adopted in other contexts. In addition, employees may still make disparate pay claims under other federal and state laws which may have different statute of limitations and administrative exhaustion requirements.

Carothers DiSante & Freudenberger LLP Attorneys To Speak on Privacy Issues in the Workplace

On July 24, 2007, Vanessa W. Whang and Jennifer D. Barrera will conduct a seminar for California employers on workplace privacy issues.The seminar will take place in Stockton, California and will cover a variety of topics, including: pre-employment screening, drug testing, monitoring the electric workplace, identity theft, and protecting trade secrets.For more information or to register click here.

Court Issues Opinion Focusing on CFRA Notice/Reasonable Accommodation

Earlier this month, the California Court of Appeal issued its decision in Faust v. California Portland Cement Company, reversing a grant of summary judgment for the employer due to the Company's failure to give proper CFRA leave notice to an eligible employee on a medical leave of absence. The court criticized the Company for failing to engage in the interactive process concerning any reasonable accommodations which may have existed prior to terminating the employee.

Importantly, the court highlighted the fact that an employee need not specifically mention the CFRA (or the FMLA for that matter) to trigger their right to CFRA leave. The court found that the burden rests with the employer to make that determination, and, if appropriate, provide the employee with CFRA benefits. This case underscores the importance of ensuring proper CFRA/FMLA notice is provided to eligible employees and reminds employers that their supervisors and HR personnel must be trained to know what circumstances trigger the right to these leaves. Further, since virtually all employees who are unfit to return to work following a 12 week FMLA/CFRA leave have a protected disability under California law, this case also highlights the importance of ensuring "reasonable accommodations" are considered prior to terminating an employee who cannot timely return from a FMLA/CFRA leave of absence due to their own medical condition.

For a copy of the full opinion click here.

California Division of Labor Standards Enforcement Issues New Wage and Hour Guidelines

The California Division of Labor Standards Enforcement ("DLSE") is the regulatory agency that enforces California's wage and hour laws.The DLSE's enforcement positions are available online in its "Division of Labor Standards Enforcement Polices and Interpretations Manual."(click here to view the DLSE Manual). Because these interpretations affect its own enforcement actions and also single plaintiff and class action wage and hour lawsuits, the DLSE Manual should be required reading for all human resource executives and California labor attorneys (even if you don't agree with it).

On May 2, the DLSE made some very important changes to the Manual to reflect its view of Murphy v. Kenneth Cole Productions, Inc. The two most important changes are: (1) Meal period and rest period pay, split-shift pay, and reporting time pay are wages like overtime and therefore may support claims for statutory attorneys' fees and interest.DLSE Manual §; and (2) California Labor Code section 203 waiting time penalties of up to 30 days of wages may be imposed on employers for failing to provide owed meal or rest period pay, split-shift pay and reporting time pay at termination of employment.DLSE Manual § DLSE is continuing its position that employers must pay one hour's wage for any meal period violations in a single day and an additional one hour's wage for any rest period violations in a single day.DLSE Manual §§ 45.2.8; 45.3.7.This issue (whether a missed meal period and missed rest period in the same day requires one or two hours of pay) has yet to be interpreted by the courts.

While we are on the topic of DLSE Manual revisions, we should note a couple other relatively recent revisions that have not received a lot of press.First, in November 2005, the DLSE revised its position on vacation accrual caps.The DLSE's position once was that all employers had to give employees nine months after the end of the year to use vacation (without supporting legal authority).This effectively created an accrual cap for vacation equal to 175% of each employee's annual vacation.Former DLSE Manual § (Revised Nov. 22, 2005)While this requirement has been withdrawn, the DLSE has, unfortunately, not yet provided guidance regarding what cap it views as acceptable.

In December 2006, the DLSE revised section 54.8.1 regarding the professional exemption.The DLSE, without supporting legal authority, formerly had made the "learned" professional exemption only applicable to those individuals who had a degree above a BA or BS.With that requirement deleted, this exemption may now be available to a number of engineers, chemists, biologists, researchers, medical professionals, and other employees who otherwise were previously nonexempt in California. The DLSE also expanded its "artistic" professional exemption to include artistic endeavors using "evolving media such as music synthesizers and computer graphic and art design programs.DLSE Manual § 54.10.1.

Although the DLSE's interpretation of Murphy adds more disappointment for employers, the DLSE appears to be taking a more reasoned approach to some of its other, more vexing, interpretations.Hopefully, that is a trend that will continue.

Getting Corporate Counsel To Think Like a Trial Lawyer

Corporate counsels are often tasked with the awesome responsibility of picking outside counsel to defend the corporation in a matter that may ultimately have to be decided by a jury. Often this selection has to do with prior relationships, reputation of the firm, history of pre-trial procedural success and the like. More particularly in the employment litigation context, the expectation of a lawyer's ability to dispose of a matter through summary judgment is a big consideration. Consequently, corporate counsels tend to view litigation as a series of procedural steps leading to summary judgment: response to the complaint; discovery; attempt at mediation; summary judgment. However, the prospect of heading to court should the case or some of it survive summary judgment should lead to a highly different set of criteria about who should try that matter. In the same vein corporate counsel may have the tendency to view a trial pretty much the way they view the procedural steps leading to it: a process including jury selection, opening statement, examination of witnesses, closing argument, deliberations and verdict (hopefully a good one).

To maximize the probability of a successful outcome, I propose that you accept the radical idea that litigators and trial lawyers are not the same being. Therefore, to select a trial lawyer to defend your corporation before a jury may require some understanding and appreciation of how the two are different.

Trial lawyers are personalities. They take up space physically and emotionally (even trial lawyers small in stature). Trial lawyers love to tell stories gathered from complex facts and offer analogies to make points to a jury. Trial lawyers think big. For example, In a wrongful termination lawsuit against a small to medium size company, a case is not just about this plaintiff and this defendant and fine points tossed back and forth about implied contracts but calls into question the entrepreneurial spirit of this country and how extortionist lawsuits threaten everything this country encourages about risk taking, individualism and economic prosperity. No lawyer will win a case on personality alone, but judicial history is replete with examples of where it was a factor among others that saved the day.

Trial lawyers talk in themes. A theme is a short summation of a case that characterizes what the case is all about and thereafter becomes the filter for the evidence to be presented. Sometimes this is referred to as the "theory of the case." The case's theme should be one or two sentences stated in plain and simple English. For example, in a discrimination case, "Mr. Smith hired the plaintiff, Ms. Jones, eighteen months ago so how can she now say he terminated her because of her gender?" A theme should make sense to you, a jury, a judge, a newspaper reporter and your neighbor. It is the punch line that gets the jury interested and open to hear the evidence in support of it after the opening statement.

Trial lawyers use focus groups. Because trial lawyers talk in themes they are also obsessed with making sure that theme resonates with the community in which the case is being tried. The best way to do that is through a focus group. Note that a focus group is not a mock trial. The difference is significant. A mock trial involves a mini presentation of the case (including a stand - in arguing the plaintiff's side) from beginning to end and can take a number of days to complete. A focus group, on the other hand can be done in a day where "both" sides present what they believe is the hot issue or hot document or key witness examination (usually video of a key deposition) and then get feed back from the mock jury. Both provide reliable information but the mock trial is significantly more expensive than the focus group presentation. Additionally, there are ways a good trial lawyer can cut the costs even further by modifying the set up and presentation of the focus group. The point is that it is standard practice to use some form of focus group presentation before the actual trial and many consider not doing so akin to walking into court guessing about everything.

A jury trial is unlike any other legal proceeding your company will face. While even a seasoned trial lawyer cannot guarantee a result in a jury trial, an inexperienced litigator in front of a jury is almost always certain disaster. A runaway verdict may be overturned on appeal or reduced by the trial judge or court of appeals but the publicity of an adverse outcome may cause insurmountable media damage and may have wasted enormous human and financial capital within the organization. It is, therefore, important to think like a trial lawyer when selecting counsel to stand up and represent your organization at trial.

California Supreme Court’s Ruling in Murphy v. Kenneth Cole

Earlier this week, the California Supreme Court issued its long awaited ruling in Murphy v. Kenneth Cole, deciding that fines arising from meal and rest break violations in California constitute "wages," for which there is a three-year statute of limitations, rather than a "penalty," which would have carried only a one-year statute of limitations. (For your convenience, a link to the decision appears below.) Not only does this obviously triple the time period for the recovery of such wages, it also triggers potential liability for "waiting time" penalties for employees who have terminated during the prior three years, additional related penalties, and attorneys' fees. To make matters worse, such claims typically include an allegation of unfair competition (B&P Code Section 17200), which carries a four year statute of limitations.

The California Supreme Court's decision even further underscores the importance of ensuring that employers'meal and rest break policies are compliant with California law, as well as the importance of ensuring those policies are being followed by all employees. In addition, employers may want to consider paying out the extra hour of pay to employees when it is clear that they were denied a meal break or denied the opportunity to take a rest break. Unfortunately, we expect this ruling will result in a significant increase in class action filings.

If you have any questions about how this ruling affects you, please do not hesitate to call or write any of the attorneys that you work with at CDF LLP.

Link to decision:

Cal Labor Law

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


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