NLRB Suspends Implementation of New Election Rule

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On the heels of yesterday's federal court decision invalidating the NLRB's new election rule that had taken effect April 30, the NLRB announced today that it is suspending implementation of the rule as a result of the court decision.  The NLRB stated that it is reviewing the court decision and considering how it will respond.  The NLRB's announcement is available here.  Stay tuned for further developments. 

Federal Court Invalidates NLRB’s New Election Rule

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The United States District Court for the District of Columbia issued a ruling yesterday invalidating the NLRB's new election rule.   The court held that the rule was not properly adopted because the NLRB lacked a quorum when it voted to adopt the rule.  Only two NLRB members voted on the rule.  A third had voiced opposition to the rule and made clear that his position was to oppose the rule's adoption.  However, he did not actually participate in the vote.  According to the court, this resulted in the lack of a quorum and rendered the rule's adoption ineffective.  As a result of the court's holding, for now the new election rule is invalid and representative elections will proceed under the old rules.  It is of course possible that the NLRB will simply hold a new vote on the election rule, and employers will be back in the same position shortly only to await legal rulings on substantive challenges to the election rule.  We'll keep you posted on further developments here.

California Court Holds Armendariz Still Applies After Concepcion

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This week a California court held that the United States Supreme Court's recent decision in AT&T Mobility v. Concepcion does not overrule California unconscionability standards for assessing employment arbitration agreements, including the standards generally prescribed by the California Supreme Court in Armendariz v. Foundation Health.  Armendariz is the leading case setting forth basic standards for assessing whether an employment arbitration agreement is unconscionable in California.  The case makes clear that in order to be enforceable, an agreement must include a mutual agreement to arbitrate, must provide for adequate discovery, must not impose costs on the employee that the employee would not normally bear in court, must provide for selection of a neutral arbitrator, and similar other fairness requirements.  In addition to Armendariz, the California Supreme Court issued a decision in a case called Gentry, providing grounds for assessing whether a class action waiver in an employment arbitration agreement is unconscionable and unenforceable.  Recently, the continued validity of these cases was called into question when the US Supreme Court issued its decision in Concepcion, overruling a California Supreme Court case known as Discover Bank, which is a case similar to Gentry but sets forth unconscionabilty standards for class action waivers in consumer (not employment) arbitration agreements.  The US Supreme Court held that the FAA preempts state laws that place unique restrictions on the enforceability of arbitration agreements.  Although Concepcion did not specifically address Armendariz or Gentry, their continued validity is called into question by the reasoning of Concepcion.  This week, one California court specifically held that Concepcion does not overrule Armendariz and that the Armendariz standards still apply to employment arbitration agreements in California.  The court relied on Armendariz to find the agreement at issue unconscionable and unenforceable, primarily because it was presented on a take it or leave it basis, required the employees (actually contractors) to arbitrate all claims but reserved a judicial forum for certain employer claims, shortened the statute of limitations for filing claims, and contained a unilateral fee-shifting provision requiring the workers to pay the employer's costs in certain circumstances.  The case is Samaniego v. Empire Today, and the full decision is here.  Stay tuned for further developments in this evolving area of law. 

California Supreme Court Limits Recovery of Attorneys’ Fees on Meal and Rest Claims

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Yesterday the California Supreme Court issued its opinion in Kirby v. Immoos Fire Protection, Inc., addressing whether a prevailing party in a rest break case is entitled to recover attorneys' fees incurred in litigating the case.  In this case, the defendant employer was the prevailing party on a claim by plaintiffs for alleged missed rest breaks in violation of Labor Code section 226.7.  The employer, as the prevailing party, sought to recover its attorneys' fees under Labor Code section 218.5, which on its face allows for an award of attorneys' fees to "the prevailing party" in "any action brought for the nonpayment of wages, fringe benefits, or health and welfare or pension fund contributions."  The trial court awarded attorneys' fees to the employer on multiple claims, but the court of appeal reversed claims covered by Labor Code section 1194 (minimum wage and overtime claims) and 2810 because each of these provisions specifically allow for only one-way fee shifting in favor of a prevailing plaintiff.  The court of appeal upheld the award of attorneys' fees to the employer on the rest break claim, holding that the claim sought additional "wages" and was, therefore, covered by Labor Code section 218.5 and its mutual fee shifting provision.  The plaintiffs sought review by the California Supreme Court, arguing that the rest break claim was governed by section 1194's unilateral fee shifting provision because it was really in the nature of an action for payment of less than the minimum wages required by law.  Plaintiffs also argued that because they had a separate claim for unpaid overtime covered by section 1194, that section should apply to the whole action, including the rest break claim.

The Supreme Court rejected the plaintiffs' argument that section 1194 applies to a rest break claim, reasoning that section 1194 expressly states that it only applies to claims for unpaid minimum wage or overtime compensation.  As such, the Court held that section 1194 does not provide a mechanism for a prevailing party to recover attorneys' fees on a rest break claim.  Turning to section 218.5, the Court similarly held that this fee shifting statute does not apply to rest break claims.  Using somewhat strained reasoning, the Court held that a claim for missed rest breaks is not a claim for "nonpayment of wages" within the meaning of 218.5 (even though the Supreme Court recently held that the premium pay owed for missed breaks is a "wage" and not a "penalty").  Nor is a claim for missed rest breaks a claim for nonpayment of fringe benefits or health and welfare contributions.  Instead, according to the Court, a claim for missed breaks is a claim for denial of a mandated break and, as such, is not covered by the express language of section 218.5 and 218.5 does not provide a mechanism for a prevailing party to recover attorneys' fees on a claim for missed breaks.

The Supreme Court's decision was bad news for the employer in the Kirby case, who had its attorneys' fee award reversed.  However, the result appears to be a good one for California employers in the larger sense because the decision precludes prevailing plaintiffs from using section 218.5 (or 1194) to recover attorneys' fees in connection with meal and rest break claims.  This should operate to drive down the incentive for the plaintiffs' bar in connection with such suits.  They may try to utilize PAGA or California Code of Civil Procedure section 1021.5's private attorney general theory as means to recover fees on these claims, but these avenues are not without hurdles and in many cases, will not work.

NLRB Takes Aim at Class Waiver in 24 Hour Fitness’ Arbitration Policy

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The NLRB filed a complaint today against 24 Hour Fitness, alleging the company's arbitration policy violates the NLRA.  According to the NLRB, the action was prompted by a complaint lodged with the NLRB by a 24 Hour Fitness employee in California.  24 Hour Fitness' arbitration policy, like those of many companies, contains a class action waiver provision that effectively requires employment disputes to be resolved individually.  As employers may recall, the NLRB recently issued a decision in a case called D.R. Horton, holding that class waiver provisions violate employees' section 7 rights to engage in concerted activity.  D.R. Horton has been appealed and it was not clear how active the NLRB was going to be in enforcing its position declaring class waiver provisions unlawful.  Well, the NLRB's complaint against 24 Hour Fitness may be a sign of  more to come.  Stay tuned.  For the NLRB's press release on the 24 Hour Fitness matter, click here.

Employer Cannot Be Compelled to Arbitrate Class Claims Absent Express Agreement to Do So

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Today a California court held that where an employment arbitration agreement is silent on the issue of whether class claims may be arbitrated, the employer may not be ordered to arbitrate such claims.  In Kinecta v. Sup. Ct., the employer and employee had an agreement that any disputes between them arising out of the employment relationship would be resolved by binding arbitration.  Notwithstanding the agreement, the plaintiff employee filed a wage and hour class action against Kinecta in California state court.  Kinecta moved to compel arbitration of the plaintiff's individual claims and to dismiss the class allegations from the complaint.  The trial court granted the motion to compel arbitration, but denied the motion to dismiss the class allegations, thereby effectively requiring Kinecta to arbitrate class claims.  Kinecta appealed and the court of appeal agreed with Kinecta that it should not have been ordered to arbitrate class claims.  The court of appeal relied on the United States Supreme Court 's decision in Stolt-Nielsen v. Animalfeeds Intl., 130 S.Ct. 1758 (2010), in which the Supreme Court held that a party cannot be compelled to arbitrate class claims unless the party has expressly agreed to do so.   The arbitration agreement between Kinecta and its employee was silent on the issue of classwide arbitration.  Because there was no express agreement to arbitrate class claims, the court held that they could not be compelled to arbitration based on Stolt-Nielsen.   As a result, the court of appeal issued an order directing the trial court to dismiss the class allegations. 

In its decision, the court of appeal considered whether the agreement's practical prohibition on an individual pursuing claims as a class action in any forum was enforceable under the California Supreme Court's decision in Gentry.   The court noted that "there is some question" whether Gentry is still good law or whether it is preempted by the United States Supreme Court's decision in AT&T v. Concepcion.  However, the court held that it need not decide that issue because even if Gentry is still good law, the plaintiff had failed to make an evidentiary showing that the waiver of class claims would be unenforceable under the standards set forth in Gentry.  The Kinecta decision is here.

Enforcement of Attendance Policy Does Not Violate ADA Where Attendance is Essential Function

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This week the Ninth Circuit held that where attendance is an essential function of the job (isn't it always?), an employer's enforcement of its attendance points policy as to a disabled employee does not constitute a failure to reasonably accommodate under the ADA.  In this particular case, the employee was a neonatal intensive care nurse who had an abominable attendance record due to a multitude of stated reasons, ranging from fibromyalgia to personal life issues.  Even though she worked part-time and only a couple of shifts per week, she was continually absent.  She also took a variety of leaves of absence, all accommodated by her employer.  The employer had an attendance policy that allowed up to five unplanned absences in a rolling 12 month period.  This employee regularly exceeded the limit and had a history of performance discipline for her unexcused absences.  The employer quite reasonably tried to work with the employee to save her, allowed several exceptions from the policy for her, and gave her numerous chances to improve her attendance and escape termination.  The employee nonetheless did not improve her attendance and admittedly continued to exceed the allowed unplanned absences under the attendance policy (she was even absent for a planned meeting to discuss her attendance).  She requested that her employer except her from the attendance policy and essentially allow her uncapped unplanned absences, apparently as a "reasonable accommodation" for some sort of disability.  The employer did not agree.  She was ultimately terminated (duh).  Not to be deterred, she filed a lawsuit claiming the employer violated her ADA rights by not excepting her from the attendance policy as a reasonable accommodation under the ADA.   

In the lawsuit, the employer did not dispute that the employee was disabled.  The dispute focused instead on whether the employer had a duty to except the employee from the attendance policy as a reasonable accommodation.  The trial court said no and granted the employer summary judgment.  The employee appealed to the Ninth Circuit, which agreed with the trial court.  The Ninth Circuit held that the employer had adequately established that regular attendance is an essential function of the position of a neonatal ICU nurse and that an employer is not required by the ADA to relieve a disabled employee from essential functions as an accommodation.  The case is Samper v. Providence St. Vincent and the decision is here. 

Employer Right to Modify Arbitration Agreement May Make It Unenforceable

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This week, a California court held that an employment arbitration agreement was unenforceable based on a provision in the agreement giving the employer the right to modify or revoke the agreement on 30 days' notice to the employee.  The court held that the termination right rendered the agreement illusory and lacking sufficient "mutual" agreement to arbitrate.  In Peleg v. Neiman Marcus, the employer's arbitration agreement provided that Neiman Marcus could modify or revoke the agreement on 30 days' notice to employees and that claims not "filed" with AAA by the end of 30 day period would not be subject to the agreement.  Thus, the agreement did place some limit on Neiman Marcus' ability to selectively avoid arbitration of claims.  Nonetheless, the court held that the notice provision was insufficient to save the agreement from being illusory.  The court held that a provision allowing the employer to modify/revoke the agreement must make clear that it applies prospectively only, and does not apply to claims that are "accrued" and/or "known" prior to the date of the change.  In the case of Neiman Marcus' agreement, the requirement that claims be "filed" within 30 days of notice of the change in order to be covered by the agreement to arbitrate impermissibly shortened the statute of limitations applicable to pursuing claims. 

Neiman Marcus' arbitration agreement had a provision in it stating that it was governed by Texas law.  The California court applied the choice of law provision (and Texas law) in holding that the modification provision rendered the agreement illusory and unenforceable.  However, the court held that application of California law would essentially lead to the same result.  The only difference is that under California law, if a modification provision is silent on whether it applies prospectively only, the court could "imply" or read into it that it operates prospectively only and thereby avoid a finding that it renders the agreement illusory.

Many employers' arbitration agreements contain clauses expressly giving the employer the right to make changes to the agreement, or to revoke it entirely.  In order to avoid a finding that this clause renders the agreement illusory and unenforceable, employers should review their clauses and revise, as appropriate, to make clear that any changes will be made with reasonable notice to employees, will operate prospectively only, and will not apply to claims arising prior to the date of the change. 

D.C. Circuit Temporarily Enjoins NLRB From Requiring Employee Rights Poster

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As we reported yesterday, a South Carolina District Court ruled that the NLRB did not have authority to mandate the Employee Rights Poster.  The ruling is in conflict with the only other court to rule on the issue thus far--the District Court for the District of Columbia--and that decision is on appeal.  Well, this morning the D.C. Circuit Court of Appeal granted the National Association of Manufacturers' request for a temporary injunction enjoining the NLRB's posting requirement pending appeal.  The court reasoned that the uncertainty regarding enforceability of the posting requirement counsels in favor of temporarily preserving the status quo pending appeal.  The NLRB has not yet affirmatively postponed its April 30 effective date for employer compliance, but with this ruling it appears employers will not need to comply effective April 30 and will instead need to stay tuned for developments in the ongoing legislation.  The D.C. Circuit Court of Appeal's decision is here.

Courts Finds NLRB Employee Rights Poster Unlawful

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Last week, a federal District Court in South Carolina ruled that the NLRB does not have the authority to require employers to post its Employee Rights Poster.  The ruling was issued in a lawsuit brought by the U.S. Chamber of Commerce challenging the validity of the posting requirement.  The judge held that the NLRA does not require any type of notice posting and that the NLRB's actions in requiring the posting were, therefore, not necessary to carry out the Act.  The judge also reasoned that the NLRB's role is intended to be a "reactive" one, responding to unfair labor practice charges, petitions and the like.  In requiring employers to post an employee rights notice, the NLRB is attempting to act in a "proactive" role and not in its intended reactive role.  While this ruling is good news for employers, it is not the final word on the validity of the notice.  Employers may recall that recently, another federal district court judge (District of Columbia) ruled that the notice was lawful.  That decision is currently on appeal before the Eleventh Circuit Court of Appeals, and it is likely that the NLRB will appeal the South Carolina District Court's adverse ruling.  With the newly issued adverse ruling, it is possible that the NLRB will again delay the effective date for the posting--which is currently April 30.  Employers should stay tuned for further developments on this issue.

Labor Commissioner Makes Further Changes to Wage Protection Act Notice

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California employers trying to comply with the recently enacted Wage Theft Protection Act should take note that the Labor Commissioner has again modified the notice template, effective April 12, 2012.  The new law, which went into effect January 1, 2012, requires California employers to provide non-exempt new hires with written notice of wage and related information.  Most of the information required to be provided is set forth in the statute itself.  However, the Labor Commissioner has authority to prescribe additional categories of information to be provided in the notice.  Given that authority, the Labor Commissioner was also tasked with publishing a template that employers can use to satisfy their notice obligations.  Causing challenge to employers is the fact that the Labor Commissioner waited until close to January 1 to publish any template and then prescribed additional content beyond that set forth in the text of the statute.  If that is not confusing enough, the Labor Commissioner's office cannot seem to make up its mind about the contents of the template or the requirements of the Act.  The Labor Commissioner has at least twice revised the FAQ on the Act's notice requirements, and has now issued a revised template.  Employers who downloaded the original template will want to review the newly published template and newly revised FAQ.  Most of the changes are fairly minor, but the newly revised template has different language on the subject of whether there is a written or oral employment agreement.  It appears that this was in response to concern from employers that checking one of these boxes suggests the employee actually has some sort of employment agreement, weakening the at-will nature of the employment relationship.  The new template (and FAQ) are revised to make clear that all this is referring to is whether the rate of pay is set forth in writing or was communicated only verbally.  The revisions also make clear that the acknowledgement of receipt portion is optional, not mandatory.  The new template and revised FAQ are available here and here.  Employers will want to review these forms to ensure compliance.  Unfortunately, there is no practical way for employers to stay apprised of continued changes by the Labor Commissioner going forward other than to periodically check the Labor Commissioner's website.  We will of course try to report on changes on this blog.

Breaking—The Brinker Decision:  Supreme Court Issues Favorable Meal Break Decision But Surprising Rest Break Decision

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Today the California Supreme Court issued its long-awaited decision in Brinker v. Superior Court, laying to rest some greatly litigated issues surrounding California’s meal break requirements.  The biggest issue on which employers were awaiting guidance is whether employers are required to provide non-exempt employees the opportunity to take a 30-minute meal break, or whether employers must ensure that employees comply and perform no work for a full 30 minute period.  On this issue, the Court held favorably for employers.  The Court held that an employer satisfies its obligations if it “relieves its employees of all duty, relinquishes control over their activities and permits them a reasonable opportunity to take an uninterrupted 30-minute break, and does not impede or discourage them from doing so.”  The Court specifically held that the law does NOT require employers to ensure no work is performed during the break, so long as the employer provided the break.  The employer will not be liable to an employee who voluntarily chooses to perform work during his or her break or who chooses not to take a full 30 minute break.  However, if an employer encourages the employee to do work during the meal break or otherwise effectively precludes the employee from taking a 30 minute meal break, the employer may then be liable for failing to provide required breaks.

The Court also addressed the issue of WHEN meal breaks must be provided.  The Court made clear that California law requires a meal break to be provided at or before the end of the fifth hour of work (unless the employee’s shift is no more than 6 hours and the employee has waived the meal break).  The Court rejected the plaintiff’s argument that employees are entitled to a second 30 minute meal break for every additional five hours worked.  The plaintiff had argued that if an employee takes an early lunch (e.g. after 2 hours of work) and then works five more hours, the employee would be entitled to a second 30 minute meal break.  The Court held that there is no such “rolling” five hour requirement for providing additional meal breaks.  (Employers should note, of course, that if an employee works a shift in excess of 10 hours, the employee is entitled to a second 30 minute meal break.)

In addition to addressing these meal break issues, the Court also addressed California’s rest break requirements.  In a somewhat surprising ruling, the Court interpreted California’s rest break requirements in a highly technical manner to require more than just the provision of a 10 minute rest break for every four hours worked (which is many employers’ understanding of the general rule).  The Court essentially held that employees are entitled to a rest break of at least 10 minutes for every four hours worked, or major fraction thereof (meaning more than 2 hours).  The exception is if the employees’ shift is not more than three and one-half hours, in which case no rest break need be provided.  This does not raise any big issue for the typical eight hour employee shift, where the employee is provided two ten minute rest breaks.  Where it gets complicated is a situation where an employee works, for example, six and one-half hours.  According to the Court’s interpretation of the rest break rules, the employee should be provided two 10 minute rest breaks in that situation because the employee is working one four hour shift and then a “major fraction” of another four hour shift.  In the words of the Court:  “Employees are entitled to 10 minutes rest for shifts from three and one-half to six hours in length, 20 minutes for shifts of more than six hours up to 10 hours, 30 minutes for shifts of more than 10 hours up to 14 hours, and so on.”

In the specific case before the Court, Brinker had a rest break policy stating as follows:  “If I work over 3.5 hours during my shift, I understand that I am eligible for one ten minute rest break for each four hours that I work.”  The Court held that the plaintiff could establish this policy violated California law and denied a class of employees required rest breaks if “for example, Brinker under this uniform policy refused to authorize and permit a second rest break for employees working shifts longer than six, but shorter than eight, hours.”

As for general timing of rest breaks, the Court held that the only requirement for timing of rest breaks is that they be authorized and permitted to be taken as close to the middle of a four hour work period as is practicable. The Court rejected a strict rule that a rest break occur before a meal break.

Based on the Court’s rulings on meal and rest break requirements, California employers will want to review their policies and practices to ensure compliance, with particular attention to ensuring rest break policy language comports with the Court’s interpretation of the requirements.  The Brinker decision is available here.

California Supreme Court to Address Post-Concepcion Arbitration Issues

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As most California employers are aware, mandatory employment arbitration agreements have taken a lot of hits in California courts.  It seems that many (but certainly not all) judges will find any reason they can to refuse enforcement of the agreement.  In most cases where enforcement is denied, it is on the basis of a finding that the agreement is unconscionable—meaning that the employee has no meaningful choice but to sign the agreement and the agreement contains terms that are unfair to the employee in some way.  Most recently, courts began grappling with the inclusion of “class action waivers” in these agreements, often finding such waiver provisions unconscionable.  A class action waiver is a provision in the agreement that makes clear that the employee will be required to arbitrate any individual claims he or she may have against the employer, but will not be permitted to pursue any type of classwide or representative relief in the arbitration.  These class action waivers were, and are, common in both employment arbitration agreements and in consumer arbitration agreements.  The California Supreme Court issued a decision that became known as the Discover Bank rule, providing grounds to find most class waivers in consumer contracts unconscionable.  The California Supreme Court then issued a decision in a case called Gentry, which provided similarly reasoned grounds for finding class waivers in employment arbitration agreements unconscionable.  Because the rules were not “bright-line” prohibitions on such waiver provision, these provisions came to be analyzed on a case-by-case basis with some being enforced and some being found unconscionable and unenforceable.

The United States Supreme Court then provided what appears to be bright line guidance on this issue in AT&T Mobility v. Concepcion, in which the Court held that the Federal Arbitration Act preempts California’s Discover Bank rule and permits class action waivers in consumer arbitration agreements.  To be clear, the Court acknowledged that arbitration agreements may be found unenforceable on grounds that would apply to the enforceability of any contract (e.g. fraud, duress, unconscionability).  However, the Court emphasized that these doctrines may not be used to apply special standards simply due to the fact that an arbitration agreement is at issue. 

In the wake of Concepcion, there are unanswered questions about its scope and whether its reasoning applies with equal force to class action waivers in employment arbitration agreements.  In other words, is Gentry still good law?  There is not yet any published California state court opinion holding that Gentry has been effectively overruled by Concepcion, and many trial courts continue to apply the Gentry criteria to determine whether to enforce a class action waiver in an employment arbitration agreement.

Are employers going to get some guidance on the California Supreme Court’s take on the scope of Concepcion?  Perhaps.  The California Supreme Court has two cases before it that should require some guidance:  Sonic Calabasas v. Moreno, and Sanchez v. Valencia Holding Co.

The Sonic Calabasas case is an interesting one because it is an employment case in which the California Supreme Court held that an arbitration agreement foreclosing an employee’s right to pursue administrative relief for unpaid wages before the DLSE, was unconscionable and unenforceable.  Sonic Calabasas petitioned for review by the United Stated Supreme Court, which in turn remanded the case to the California Supreme Court with specific (and interesting) direction to reconsider its decision in light of Concepcion.  As a result, the California Supreme Court will have to determine the proper application of Concepcion in this employment context.

Also relating to Concepcion, the California Supreme Court just granted review in Sanchez v. Valencia Holding Co., which involves a class action waiver in a consumer arbitration agreement (similar to the Concepcion case).  In Sanchez, the trial court held that the class action waiver was unconscionable and unenforceable, notwithstanding Concepcion.  The court of appeal chose a different route and dodged the issue of Concepcion by finding the arbitration agreement as a whole unconscionable, without reaching the propriety of the class action waiver.  The court basically reasoned that many other terms (beyond the class waiver) were unconscionable under California state law and that this precluded enforcement of the agreement to arbitrate, even if the class waiver itself passed muster under Concepcion.  The California Supreme Court granted review and may provide guidance on its interpretation of the scope of Concepcion and the extent to which it believes California unconscionability law is (or is not) preempted.

California employers should stay tuned for further developments in this important area of evolving law.

California Bill Seeks to Expand CFRA Leave

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There have been many changes to leave laws in recent years, both under the FMLA and under California’s CFRA.  Proposed legislation recently has been introduced in California to further expand employees’ leave entitlements under CFRA.  CFRA currently allows eligible employees to take up to 12 weeks of leave in a year as needed for the birth or placement of a child, or to care for their own serious health condition or that of a child (up to 18 years of age or an adult dependent), parent (which includes a step parent and/or person who stands in loco parentis to the child), or spouse/domestic partner.  AB 2039 seeks to expand CFRA leave to allow employees to take such leave to care for siblings, parents in law, grandparents, and adult children.  If enacted, AB 2039 will obviously increase employee leaves, resulting in additional burden to California employers.  This is particularly true because California employers covered by CFRA are typically also covered by FMLA, meaning they have to comply with both laws and their employees are entitled to leave under the terms of both laws.  Because FMLA does not provide for leave to care for parents in law, siblings, and grandparents, an employee who uses leave for that purpose under CFRA will not have exhausted their FMLA leave because the CFRA leave could not be concurrently counted as FMLA leave.  In other words, the employee could theoretically take 12 weeks of leave under CFRA for a parent-in-law, grandparent or sibling, and then still be entitled to an additional 12 weeks of leave under FMLA for a spouse or child.  This very scenario already exists in California where leave is taken for disability caused by pregnancy or to care for a domestic partner.  Differences between CFRA and FMLA on these two categories result in leave not running concurrently under these two laws in these situations.  AB 2039 would add further differences between CFRA and FMLA, making leave tracking even more complicated for California employers.

The full text of AB 2039 is available here.  We will keep you posted on the status of this and other pertinent employment-related legislation pending in California.

California Court Invalidates Another Arbitration Agreement

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One of our last posts reported on a California court refusing enforcement of an employment arbitration agreement on unconscionability grounds.  Today we report on yet another example.  In Mayers v. Volt Management, the court invalidated an employee’s agreement to arbitrate his discrimination claims, finding the employer’s arbitration agreement too unconscionable to be enforced.  Why?  Because the arbitration agreement stated that arbitration would be conducted pursuant to the rules of the American Arbitration Association, but the employer did not provide the employee with a copy of those rules or direction on where the employee could access those rules.  Additionally, the agreement stated that the prevailing party could recover attorneys’ fees at arbitration.  The court found that this provision exposed the employee to greater fee exposure than he would face if proceeding in court (because a court would simply apply the statutory language of the applicable discrimination statute, FEHA, which for the most part only permits a prevailing plaintiff to recover fees).  The court refused to simply sever the offending fee shifting provision and instead invalidated the entire arbitration agreement, allowing the employee to proceed with his claims in court.

This is not the first California case to find unconscionable an agreement that incorporates rules published elsewhere without providing an employee a copy of those rules.  However, this has not been a predominant, or even common, basis for invalidating arbitration agreements in California.  The Mayers case serves to highlight that some California courts will look for any reason to invalidate a mandatory arbitration agreement.  California employers should strive to draft their agreements as cautiously as possible to avoid any such ground for a court to invalidate the agreement.

Federal Court Upholds NLRB Employee Rights Poster

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On March 2, the United States District Court for the District of Columbia issued a ruling upholding the NLRB’s employee rights poster.  The ruling was issued in a lawsuit brought by the National Association of Manufacturers (NAM) to challenge the NLRB’s authority to mandate such a poster.  In its ruling, the court held that the NLRB was within its authority to issue a rule requiring employers to post the employee rights notice.  The court rejected NAM’s argument that the posting requirement violates employers’ free speech rights. 

Although the court upheld the posting requirement, it did place some limits on the NLRB’s enforcement efforts.  The court held that an employer’s failure to post the notice, in and of itself, may not be automatically deemed an unfair labor practice by the NLRB.  However, an employer’s “knowing and willful” failure to post the notice may be considered as evidence supporting a finding of an unlawful motive on the part of the employer in a case alleging some other unfair labor practice by the employer.

The court also invalidated a portion of the NLRB rule providing that the statute of limitations would be tolled in unfair labor practice actions against employers who failed to post the notice.  The court held that the NLRB’s effort to extend the clear six-month statute of limitations provided for in the NLRA exceeded the NLRB’s authority.

The court’s ruling in the case brought by NAM is the first ruling in one of several cases challenging the validity of the NLRB’s employee rights poster.  Another ruling is expected in the near future in a lawsuit brought by the Chamber of Commerce in South Carolina.  It may well be that the ruling in the NAM case will be appealed as well.  Employers should stay tuned for further legal developments with respect to the notice.  In the meantime, the current effective date for employer compliance is April 30, 2012.  No court has halted or invalidated that posting deadline.  As such, employers are advised to begin posting the employee rights notice effective April 30 barring contrary legal developments before that time.  The poster is available on the NLRB's website here.

Oral Argument Scheduled in Kirby v. Immoos

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The California Supreme Court has scheduled oral argument in Kirby v. Immoos for March 6, 2012 at 9:00 a.m. in San Francisco.   This case involves the important issue of whether employers may recover their attorneys' fees after prevailing in a case alleging denial of meal and rest breaks.  The plaintiffs in Kirby had brought a lawsuit alleging unpaid overtime wages under Labor Code section 1194 as well as claims for missed meal and rest breaks under Labor Code section 226.7.  The employer prevailed and sought to recover its attorneys' fees under Labor Code section 218.5, which on its face is a bilateral fee-shifting provision that allows a prevailing party to recover its fees in wage cases, except in certain circumstances.  One of the circumstances excepted from section 218.5 is claims for unpaid overtime covered by section 1194.  Section 1194 has its own fee-shifting provision and provides that only a prevailing plaintiff may recover fees.

The lower court in Kirby held that based on these two Labor Code sections, the prevailing employer was entitled to its fees incurred in defending the meal and rest break claims, but not fees incurred in defending the overtime claim.  The Supreme Court granted review and is expected to decide whether a prevailing employer may properly recover fees for meal and rest break violations under section 218.5, and whether fees are precluded if the meal and rest break claims are brought in the same lawsuit as claims for overtime governed by section 1194.  Stay tuned for the outcome of this case.

DOL Issues Proposed Regulations Expanding FMLA’s Military Caregiver Leave and Other Provisions

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The Department of Labor this week announced proposed regulations that would expand the military caregiver leave provisions of the FMLA, and also create special rules for FMLA eligibility for airline flight crew employees. The proposed regulations would implement amendments to the FMLA set forth in the National Defense Authorization Act for Fiscal Year 2010.  The proposed regulations set forth the following changes to current FMLA leave provisions:

Military Caregiver Leave

According to the DOL, “The proposed regulations would extend the entitlement of military caregiver leave to family members of veterans for up to five years after leaving the military.  At this time, the law only covers family members of ‘currently serving’ service members.”

The proposed regulations would also expand the military family leave provisions of the FMLA by extending qualifying exigency leave to employees whose family members serve in the regular armed forces. Currently, the law only covers families of National Guard members and reservists.

The DOL’s proposed regulations also contemplate other changes to the military caregiver leave provisions, including that qualifying exigency requires the service member to be deployed in a foreign country.  The regulations would also expand the definition of “serious injury or illness” to include conditions that existed prior to military service but were aggravated by military service.
 

Airline Flight Crew Employees

According to the DOL, the proposed regulations would make the benefits of the FMLA more accessible to airline flight crew employees by adding a special hours of service eligibility requirement for them and specific provisions for calculating the amount of FMLA leave used, in consideration of the “unique and often difficult to track” hours worked by crew members.  Specifically, airline flight crew employees who have worked or been paid for not less than 60 percent of the applicable total monthly guarantee and worked or been paid for not less than 504 hours (not including personal commute time or time spent on vacation, medical, or sick leave) during the previous 12 months satisfy the hours of service eligibility requirement for FMLA.

For more information on the proposed regulations, you can review the DOL’s FAQ here.

So, do employers need to worry about any of these changes now?  According to the DOL, yes.  Some of the changes technically are already in effect by virtue of the passage of the NDAA.  The extension of qualifying exigency leave to employee’s whose covered service member is in the Regular Armed Services is in effect.  Additionally, the new requirement for qualifying exigency leave that the service member be deployed in a foreign country is in effect.  Finally, the expanded definition of “serious illness or injury” to include aggravations of pre-existing conditions, is currently in effect.  According to the DOL, the only military caregiver leave change not yet in effect (until the proposed rules are approved and implemented) is the extension of caregiver leave for veterans as opposed to current service members.

As for the FMLA changes pertaining to airline flight crew employees, the DOL is taking the position that these changes are also effective now, per the passage of the Airline Flight Crew Technical Corrections Act (AFCTA).

We will keep you posted as to developments with these proposed regulations.  In the meantime, employers will want to review their policies and procedures for compliance.

California Court Says Professional Recruiters Are Exempt Commissioned Salespersons

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In Muldrew v. Surrex Solutions, a California court held this week that certain professional recruiters qualified for California’s commissioned salesperson exemption, thereby defeating their claim for alleged unpaid overtime wages.  Surrex Solutions is in the business of recruiting—locating qualified candidates to fill job positions for Surrex’s clients.  The plaintiffs in the case worked as recruiters for Surrex.  In that capacity, they located qualified candidates and tried to place them with Surrex clients.  Surrex’s clients paid Surrex a fee (generally a percentage of a placed employee’s annual compensation) if they hired a candidate proposed by Surrex.  Surrex in turn paid the recruiter a percentage of the fee as “commission.”  The plaintiffs in Surrex filed a lawsuit alleging that they worked overtime hours without being paid overtime compensation.  Surrex defended the suit on the ground that the recruiters were exempt commissioned salespersons and not entitled to overtime compensation under California law. 

California’s commissioned salesperson exemption provides an exemption from overtime pay for employees who earn more than one and one-half times the minimum wage and whose total compensation is derived more than 50% from commissions.  Courts have held that in order to qualify for the exemption, an employee must be principally engaged in sales duties and must be paid a percentage of the price of goods sold.  The plaintiffs in the case argued that they did not meet the test for exemption because they were not engaged in “sales” and their pay was not based on a percentage of the price of a product.  The court rejected both arguments.

First, the court held that the recruiters’ job duties constituted “selling” within the meaning of the exemption.  The recruiters’ job was essentially to locate and “sell” a candidate to Surrex clients.  The court further held that job duties such as researching candidates and meeting with them were directly related to and part of their sales duties.

Second, the court held that Surrex’s method of paying its recruiters satisfied the definition of “commission” pay.  Surrex placed two types of candidates with its clients:  employees and consultants.  If a candidate was hired as an employee by a Surrex client, then Surrex received a flat fee for the placement and in turn paid a percentage of that fee to the recruiter.  The plaintiffs conceded that this payment qualified as a “commission” for purposes of the exemption.  The plaintiffs, however, challenged the payment system used in the case of a consultant who was placed with a client. In the case of consultants, Surrex employed them and provided their services to clients based on hourly rates.  Surrex then paid the recruiter a percentage of the “adjusted gross profit” earned by Surrex (revenue minus Surrex’s costs associated with employing the consultant).  The plaintiffs argued that because the formula considered factors other than a straight percentage of the fee, it could not be considered commission pay.  The court rejected this argument, holding that the concept of commissions is broad enough to include a formula such as Surrex’s that takes into account a reduction for overhead in calculating commission pay.

Finally, the court rejected the plaintiffs’ argument that Surrex’s commission plan was not really a bona fide commission plan because it involved paying the recruiters a guaranteed draw against commissions.  The plaintiffs argued that the plan was designed in a way to ensure that recruiters would essentially earn close to the amount of the draw.  The court rejected this argument, holding that Surrex produced evidence showing that recruiters’ commission often far exceeded the draw amount.  The court held that this evidence was sufficient to support a finding that Surrex’s commission plan was a bona fide commission plan.

The Muldrow v. Surrex decision is a positive one for California employers, in that it rejects an overly restrictive interpretation of elements of the commissioned salesperson exemption.  Employers who rely on the exemption for certain employees are reminded, however, that satisfying the exemption is more complex than it seems.  Given the litigation climate in California concerning overtime exemptions, it is advisable to have commissioned salesperson classifications reviewed by counsel.

Confusion Surrounds California’s New Wage Notice

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As we previously posted on this blog, a new California law was passed in October requiring California employers, effective January 1, 2012, to provide new hires with a written notice containing certain wage and other information.  The new law is codified as Labor Code section 2810.5 and requires employers to provide newly hired non-exempt employees with the following  categories of information (in one self-contained writing):

1. The rate or rates of pay and basis thereof, whether paid by the hour, shift, day, week, salary, piece, commission or otherwise, including any rates for overtime;

2. Allowances, if any, claimed as part of the minimum wage, including meal or lodging allowances;

3. The regular payday designated by the employer;

4. The name of the employer, including any “doing business as” names used by the employer;

5. The physical address of the employer’s main office or principal place of business, and a mailing address, if different;

6. The telephone number of the employer;

7. The name, address, and telephone number of the employer’s workers’ compensation insurance carrier; and

8. Any other information the Labor Commissioner deems material and necessary.

Employers are required to begin providing the foregoing information to non-exempt new hires effective January 1.  If there are changes to any of the information provided, written notice of the change must be provided to employees within 7 calendar days.  The information must be provided in the language normally used by the employer to communicate employment-related information.  The new law exempts from the notice requirement State workers and most unionized employees covered by the terms of a collective bargaining agreement, as well as employees who are exempt from overtime.

While the foregoing seems fairly straightforward to apply, some confusion has arisen over the eighth category of prescribed information listed—“any other information the Labor Commissioner deems material and necessary.”  The Labor Commissioner waited until late December to post anything substantive about this new law and has since revised its position at least once regarding the scope of the new law, leaving employers with less than clear guidance over compliance.  Under the new law, the Labor Commissioner is charged with creating a template that employers may (but are not required to) use to comply with the new notice requirement.  The Labor Commissioner waited until almost the end of December to publish this template, which is available here.  Interestingly, the Labor Commissioner’s template includes several additional categories of information (beyond those enumerated in the actual statute):

1. The employee’s hire date and position;

2. The business form of the employer (e.g. corporation, partnership, LLC, etc.);

3. Specified information about other businesses or entities the employer uses to hire employees or to administer wages or benefits;

4. Whether the employee’s employment agreement is written or oral; and

5. The employer’s workers’ compensation policy number.

Adding more to the confusion, the Labor Commissioner also posted (at the eleventh hour) some “Frequently Asked Questions” about the new law, including guidance stating that the notice needed to be provided to all current employees, not just to new hires as indicated in the statute.  It appears that the Labor Commissioner’s office then realized it had overstepped its authority in exceeding the scope of the statute by extending its coverage to current employees, so the Labor Commissioner (without explanation) revised the FAQ to delete this reference.  The most current FAQ published by the Labor Commissioner’s office is here.  Employers should review both the template and FAQ.

Although employers are not required to use the Labor Commissioner template as a form notice, they are advised to make sure that any written notice they create includes all categories of information indicated on the Labor Commissioner template.  To be clear, it appears that the Labor Commissioner does have the authority (prescribed by the express language of the statute) to broaden the categories of information that must be provided in writing to new hires.  At this time, the notice must only be provided to new hires and not to current employees.  However, changes to any of the information provided in the new hire notice will need to be provided to current employees within 7 calendar days of the change.

Employers should note that although the new law does not provide for any specific penalties for non-compliance, it appears that the law can be enforced through California’s “catch-all” penalty provision, known as the Private Attorneys’ General Act (PAGA).  PAGA allows for recovery of substantial penalties for non-compliance with provisions of the Labor Code.  Employers should review the Labor Commissioner template and guidance and ensure that they have a compliant notice in place, if they have not already done so.  Employers are advised to include language in their notice to make clear, as applicable, that the employment relationship is at will and that nothing in the notice should be construed as creating a contract of employment or for the promise of any particular term or condition of employment, and that the employer has the right to change the terms and conditions of employment at any time with both employer and employee having the right to terminate the employment relationship with or without cause or advance notice.  Employers should also monitor the Labor Commissioner website from time to time in the event there are changes to the content of the notice requirement that may be prescribed by the Labor Commissioner.

NLRB Enters Fray on Non-Union Employment Arbitration Agreements

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Last week the increasingly controversial NLRB issued a decision holding that class action waivers in employment arbitration agreements (non-union) violate employees' rights to engage in protected concerted activity under the NLRA.  The case involved a national homebuilder, D.R. Horton, Inc.  Like many employers, D.R. Horton several years ago started requiring its employees, as a condition of employment, to agree to resolve any employment-related disputes by way of binding arbitration.  Also like most similar agreements, D.R. Horton's agreement contained a class action waiver provision--a provision that precludes arbitration of collective or class claims.  There has been much litigation both in California and on the federal level concerning the enforceability of class action waivers, the most recent important decision being that of the United States Supreme Court in AT&T Mobility v. Concepcion.  In the AT&T Mobility case, the Supreme Court upheld the validity of class action waivers in consumer arbitration agreements, holding that the Federal Arbitration Act (FAA) preempted a California state law invalidating such class action waivers in consumer agreements.  Although the AT&T Mobility case was not an employment case, its reasoning may be applied to similarly support the enforceability of class action waivers in employment arbitration agreements.  There have been numerous legislative efforts both in California and in the United States Congress to bar mandatory arbitration agreements in the employment context but none of these legislative efforts have succeeded to date.  With the NLRB's decision in D.R. Horton, it appears the NLRB is now presenting a new attack on the validity of such agreements, at least insofar as the agreements contain a class action waiver. 

In the D.R. Horton case, the employees were required to sign an agreement to arbitrate any and all employment disputes arising between them and the company.  The agreement included a provision indicating that arbitration proceedings had to be conducted individually and not on a collective or classwide basis.  Notwithstanding this provision, an employee by the name of Michael Cuda advised the company that he intended to initiate arbitration of a claim for unpaid overtime on behalf of himself and all similarly situated employees who were allegedly misclassified by the company.  D.R. Horton took the position that the demand for arbitration was invalid because the arbitration agreement precluded class claims and mandated that any claim in arbitration be pursued individually.  Cuda filed an unfair labor practices charge with the NLRB, alleging that the class action waiver provision violated the employees' rights under the NLRA.  The NLRB agreed.

The NLRB first held that the arbitration agreement violated the NLRA because its scope could be interpreted by employees as precluding them from filing unfair labor practice charges with the NLRB.  If this were the sole finding of the NLRB, it would not be much cause for alarm because employers with mandatory arbitration agreements could simply revise them to clarify that the agreement does not prohibit the filing of unfair labor practice charges with the NLRB.  Most administrative claims (for example, EEOC claims and claims filed with similar state agencies) are already exempted from the scope of arbitration agreements by virtue of applicable law.   The NLRB did not so limit its holding, however.   Instead, the NLRB went on to hold that the agreement's class action waiver further violated employees' rights to engage in concerted activity to improve the terms and conditions of employment on matters such as wages, hours and working conditions.  According to the NLRB, an individual pursuing a lawsuit on behalf of other employees is one such means of concerted activity:  "Clearly, an individual who files a class or collective action regarding wages, hours or working conditions, whether in court or before an arbitrator, seeks to initiate or induce group action and is engaged in conduct protected by Section 7."

The NLRB held that neither the FAA nor the Supreme Court's decision in AT&T Mobility compelled a different conclusion.  The Board held that the FAA does not require enforcement of arbitration agreements where a party is precluded from vindicating substantive rights protected by statute.  The NLRB reasoned that the class action waiver impairs employees' substantive right to band together to improve working conditions as set forth in Section 7 of the NLRA.  The NLRB similarly distinguished the AT&T Mobility case, reasoning that it did not involve the compatibility of two federal statutes (the FAA and the NLRA) and harmonizing their purposes.  Instead, the AT&T Mobility case involved the issue of federal law (the FAA) preempting a state law disfavoring enforceability of arbitration agreements. 

The NLRB did not go so far as to say that all employment arbitration agreements violate the NLRA.  The NLRB instead said that agreements prohibiting employees from pursuing collective or classwide relief in any forum violate the NLRA.  So long as the agreement allows employees to pursue collective/classwide relief in some forum--arbitral or judicial--it will not violate the NLRA.  This is of course of little practical utility to employers utilizing arbitration agreements. 

Does the NLRB's D.R. Horton decision mean that employers should stop including class action waivers in their arbitration agreements?  Not so fast.  It should be expected that the NLRB's decision will be appealed to the Eleventh Circuit Court of Appeals and possibly further reviewed by the United States Supreme Court.  This is amidst much other controversy surrounding the current NLRB and many of its other recent actions.  There is so much current uncertainty regarding the NLRB and the validity of its recent actions that employers should stay tuned and monitor continuing developments on this front.         

California Supreme Court Issues Long Awaited Administrative Exemption Decision

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Today the California Supreme Court issued its decision in Harris v. Superior Court (Liberty Mutual Insurance Co.), a case addressing whether insurance claims adjusters qualify for the administrative exemption under California law.  The Court's decision focused solely on the issue of the "administrative/production worker dichotomy" and whether employees who fall on the "production" side can qualify for the administrative exemption.  [By way of background, the administrative/production worker dichotomy is a doctrine whereby the court looks at the employee's duties as compared to the business of the employer.  If the employee's work centers on "producing" the product or service the company chiefly exists to provide, then the employee is a production worker.  Thus, in the insurance context, if the company is solely in the business of adjusting claims, the claims handlers who provide that very service are production workers.]  The lower court held that because the claims adjusters at issue serviced individual claims and did not provide advice on general policies or operations of the company, they were production workers and could not qualify for the administrative exemption as a matter of law. 

Today, the California Supreme Court reversed, holding that the lower court erred in applying the administrative/production worker dichotomy so simplistically and using it to hold that claims adjusters were non-exempt as a matter of law.  The Court did not go so far as to eliminate the administrative/production worker analysis, but made clear that this analysis was not dispositive of whether an employee qualifies for the administrative exemption.  The Court emphasized that this was the error of the lower court.  The lower court relied heavily on an earlier decision, Bell v. Farmer's Insurance Exchange, which had similarly applied the administrative/production worker dichotomy to find that claims adjusters were non-exempt production workers.   The Supreme Court today held that the lower court's reliance on Bell was misplaced, given that the Bell case dealt with an older version of the applicable Wage Order--a version that provided very little guidance on the meaning of an administrative employee, justifying the court in that case in resorting to guidance outside the Wage Order (such as caselaw and opinion letters on the administrative/production worker dichotomy) to interpret the exemption.  In contrast, in this case, the applicable Wage Order (4-2001) contains much more explanation of the administrative exemption and also specifically incorporated several federal regulations interpreting the exemption.  As such, the starting point for analyzing the exemption should simply be the express language of the Wage Order and referenced regulations, and not the judicially created administrative/production worker dichotomy.  Notably, the Court declined to decide whether the claims adjusters at issue actually qualified for the administrative exemption.  However, the Court cited with approval several federal cases finding claims adjusters to be administratively exempt.  The Court noted that an employee's role in "servicing" a company, such as a claims adjuster does, may well be exempt if sufficiently important and the employee's duties involve the regular use of discretion and independent judgment.  The Court suggested that an employee does not have to advise the company on its overall policies or operations in order to meet the test for exemption.  Nonetheless, the Court made clear that its ruling was limited to holding that the lower court erred in finding that the "production" worker analysis barred exempt status as a matter of law.  The Court held that the trial court on remand would have to undertake a factually intensive analysis of the claims adjusters' actual duties (regardless of whether deemed "production" duties) and determine whether they meet the test for exemption as defined in the Wage Order and the regulations incorporated therein.

The Court's decision in Harris is a positive one in that it limits both the application and importance of the administrative/production worker dichotomy--a doctrine that has been used by many courts to find employees did not qualify for the administrative exemption.  However, the Court's decision falls short in providing much specific guidance (and certainly not any bright lines) on how to define or apply the administrative exemption.  It seems clear that determination of exempt status will continue to necessitate an individualized fact-intensive inquiry based on the circumstances involved in any particular case.  The full text of the Harris case is available here. 

Labor Commissioner Publishes Optional Notice for Employer Use to Comply With Wage Theft Protection Act

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Effective January 1, 2012, California employers will have to comply with newly enacted Labor Code section 2810.5(a).  This new law, known as the Wage Theft Protection Act of 2011, requires employers to provide employees with written information at the time of hire concerning wages and related information.  California's Labor Commissioner was tasked with creating a template employers may use to provide the required information.  The Labor Commissioner has just published the optional template, which is available here.  For more information on the requirements of the new law, click here and here.

Court Favorably Resolves Claims for Reporting Time and Split Shift Pay

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This week, a California court summarily adjudicated claims for reporting time pay and split shift pay brought by former employees of AirTouch Cellular.  The employees claimed that AirTouch owed them reporting time pay for having to show up to scheduled meetings that were less than 2 hours long.  The employees also claimed that AirTouch failed to pay them split shift pay on days when they worked split shifts.  The trial court threw out the claims and awarded attorneys' fees to AirTouch under Labor Code section 218.5.  A California appellate court agreed with the trial court's rulings on the reporting time and split shift claims, but reversed the award of attorneys' fees.

As for the reporting time pay claim, the facts were undisputed that on certain occasions the employees were required to attend scheduled meetings that were less than two hours in length, and that was their entire "work" for the day.  The plaintiffs claimed that California's wage orders required AirTouch to pay them for a minimum of two hours as reporting time pay.  The court disagreed, holding that reporting time pay is only required where an employee is furnished with less than half the scheduled day's work.  Because the employees' scheduled day was two hours or less, as long as the employees were furnished and paid for at least half of that time, no additional reporting time pay was owed.

As for the split shift claim, the facts were similarly undisputed that the employees on occasion worked a split shift.  However, the parties disputed whether a split shift premium was owed in the circumstances.  California's wage orders state as follows:  "When an employee works a split shift, one hour's pay at the minimum wage shall be paid in addition to the minimum wage for that workday..."  AirTouch's position was that because the employees' regular wages were well over the minimum wage, they were paid more than the minimum wage for all hours worked plus one additional hour and, as a result, there was no requirement to pay an additional split shift premium.  The court agreed, endorsing the following example: 

"As an example, on November 26, 2005, Krofta worked a total of eight hours.  Because he was making $10.58 per hour at the time, he was paid a total of $84.64 (8 x $10.58).  The minimum wage at the time was $6.75, so a minimum wage worker would be paid wages of $54 (8 x $6.75) plus, pursuant to subdivision 4(C), one additional ―hour‘s pay at the minimum wage, for a total of $60.75 ($54 + $6.75).  AirTouch contended that since subdivision 4(C) by itself required no greater payment for the workday than $60.75, the pay for an employee who earned more than that amount (like Krofta) would not be affected.  We agree that this analysis, which was followed by the trial court, is correct."

The court's analysis of these split shift and reporting time pay issues is favorable for California employers confronting these claims.  Notably, the court also issued a favorable ruling on the validity of another employee's release of claims.  The employe had signed a general release in favor of AirTouch and AirTouch argued that the release barred the employee's claims for reporting time and split shift pay.  The employee argued that Labor Code section 206.5 invalidated the release.  The court disagreed, holding that Labor Code section 206.5 only invalidates a release of wage claims where the entitlement to wages is undisputed.  Because the employee's reporting time and split shift claims were far from conceded by AirTouch, the claims were in dispute and could be included in the scope of an otherwise valid general release.

While the court issued favorable rulings on the foregoing issues, the court also issued an unfavorable ruling on the issue of an employer's ability to recover attorneys' fees for defeating a wage claim.  The trial court had awarded AirTouch its attorneys' fees under Labor Code section 218.5's fee shifting provision.  The appellate court reversed, holding that section 218.5 did not apply and that claims for reporting time pay and split shift pay fall under Labor Code section 1194 (which applies to actions to recover minimum wage and overtime compensation).  Because Labor Code section 1194 has a one-way fee shifting provision (entitling only a prevailing employee to recover fees and not a prevailing employer), the court held that AirTouch was not entitled to recover its fees. 

This author predicts more litigation and court decisions regarding all of these issues addressed by the court in the AirTouch case.  We will continue to keep you posted of such developments.  In the meantime, the Aleman v. AirTouch case is available here. 

Court Allows Post Oral Argument Briefing in Brinker

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In a relatively rare circumstance, the California Supreme Court has allowed the California Employment Law Council to file a post oral argument amicus brief.  The supplemental brief was filed on December 2 and addresses the limited issue of whether the Court's ruling on the "rolling 5 hour" issue will be retroactive or prospective only.  Many who watched the oral argument gleaned that at least some of the Justices surprisingly seemed to be leaning toward a finding that California law requires a meal break to be provided on a rolling basis for every 5 consecutive hours worked.  (This is a different and separate issue than the main issue being decided by the Court--what it means to "provide" a meal break.)  If that is in fact the ruling of the Court, it would mean that an employee who takes an early lunch and then works five more hours would be entitled to another meal break.  Most lawyers, employers, and courts have not interpreted the law in this fashion.  Thus, if the Court rules in this manner and the ruling is retroactive, it is sure to expose California employers to a new onslaught of lawsuits on this meal break issue as well as potentially huge liability.  The California Employment Law Council's amicus brief argues against such a result and suggests that any such ruling should operate prospectively only.   The parties to the case have 30 days (from December 2) to file responsive briefs.  Given the allowance of supplemental briefing, it is unlikely a decision will be rendered in Brinker much earlier than the February deadline. 

Minimum Pay for Exempt Computer Professionals Goes Up January 1

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California's Department of Industrial Relations has announced that the minimum pay required for computer professionals to qualify for overtime exemption in California is increasing effective January 1, 2012.  The increase is 2.5% higher than the current minimum pay rate and requires that these employees be paid at least $38.89 per hour, which translates to a monthly salary of $6,752.19 and an annual salary of $81,026.25.  Employers should note that these minimum pay thresholds are applicable to only to California computer professionals.  The minimum rate of pay under federal law is different (the hourly rate being $27.63 per hour).  Employers with exempt computer professionals in California should review their pay practices to ensure compliance with the increased pay requirements. 

California employers are cautioned that not all employees who work in the computer field qualify for overtime exemption, regardless of how much they are paid.  In order to qualify, these employees (in addition to being paid at least the minimum pay detailed above) must meet very specific duties tests, generally involving programming, software development, as opposed to installation, maintenance, repair, and the like.  (Click here for a more detailed description of these duties on the California Department of Labor Standards Enforcement website.)  The duties tests under California law are, again, somewhat different than those applied under the federal computer professional exemption.  As such, employers with California computer professionals who are or will be classified as exempt, should carefully review the duties and pay to be sure exempt classification is proper.   

San Francisco’s Minimum Wage Goes Up In January 2012

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San Francisco's minimum wage, which currently is $9.92 per hour, is increasing to $10.24 per hour effective January 1, 2012.  This makes San Francisco the first city in the country with a minimum wage in excess of $10 per hour.  The minimum wage increase is tied to a new law passed by San Francisco voters in 2004 which automatically increases the city's minimum wage in accordance with inflation.  Employers with employees who work more than two hours in a workweek inside San Francisco city limits should ensure their payroll practices are updated to reflect the new minimum wage.

Individual Supervisors Not Liable for Military Service Discrimination

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On this Veteran's Day, employers are appropriately reminded that various laws prohibit discrimination against employees on account of military service.  One of these laws is California Military & Veterans Code Section 394.  This law prohibits employment discrimination against members of the armed forces because of their membership or service.  Yesterday, in a case of first impression, a California court addressed whether individual supervisors may be sued and held personally liable for discrimination under Section 394.  In Haligowski v. Superior Court (Pantuso), the plaintiff was a Lieutenant in the Navy and was called to active duty in Iraq during the course of his employment with defendants.  After returning from a 6 month tour of duty, plaintiff was informed his employment was terminated.  Unsurprisingly, plaintiff sued for discrimination.  He sued not only his employer, but also his immediate supervisors.  The individual supervisors asked the trial court to throw out the claims against them individually, but the trial court refused, holding that Section 394 allows for personal liability against individual supervisors.  The supervisors appealed.

On appeal, the California appellate court reversed, holding that Section 394 only allows for liability against an employer, not against individual supervisors.  The court reasoned that although Section 394 prohibits discrimination by any "person," that does not necessarily mean that liability may be imposed against any "person."  The court explained that California's primary law prohibiting employment discrimination, FEHA, similarly prohibits discrimination by any person, yet it is well-established that only employers (not individual supervisors) may be held liable for discrimination under FEHA.  The court held that there was no reason to treat employment discrimination under Section 394 any differently.

To be clear, the court in no way addressed the propriety of the employee's claims against the employer, much less held that the employer acted properly in terminating the employment relationship.  The court simply held that the employee would have to pursue his claims only against the employer and not against his individual supervisors. 

Labor Commissioner to Issue Template for Compliance With New Wage Notification Requirement

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We previously posted on California's passage of the Wage Theft Protection Act of 2011 (AB 469), which requires California employers to start providing written notice to new hires of wage payment information as well as various other categories of information.  Our prior post is here.  California's Labor Commissioner is required to prepare a template for employers to use for this purpose.  The Labor Commissioner has published on its website (here) that this template, along with guidance on compliance, will be available in mid-December.  We will post this information as soon as it becomes available.

California Governor Vetoes Several Bad Employment Bills, But Signs Law Limiting Use of Credit Reports and a Few Others

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In pleasant news for California employers, Governor Brown vetoed several unappealing employment bills this past weekend.  The bills he vetoed include (1) AB 267, which would have invalidated forum selection and choice of law provisions in employment contracts with California employees, (2) AB 325, which would have required California employers to provide bereavement leave, and (3) SB 931, which would have imposed new requirements for use of payroll cards.  That is the good news.

The bad news is that Governor Brown signed into law AB 22, which limits California employers’ ability to use credit reports for employment purposes.  Under the new law, employers (with the exception of certain financial institutions) are prohibited from obtaining or relying on credit reports for applicants and employees, unless the report is sought in relation to (1) a position in the California Department of Justice; (2) a managerial position (defined as a position that qualifies for the executive exemption from overtime); (3) a sworn peace officer or other law enforcement position; (4) a position for which credit information is required by law to be disclosed or obtained; (5) a position that involves regular access (other than in connection with routine solicitation of credit card applications in a retail establishment) to people’s bank or credit card account information, social security number, and date of birth; (6) a position in which the employee would be a named signatory on the employer’s bank or credit card account, authorized to transfer money on behalf of the employer, or authorized to enter into financial contracts on behalf of the employer; (7) a position that involves regular access to cash totaling $10,000 or more of the employer, a customer, or client during the workday; and (8) a position that involves access to confidential or proprietary information (defined as a legal “trade secret” under Civil Code 3426.1(d)).

Even if the employer is permitted to obtain a credit report under one of the exceptions outlined above, the employer must first provide written notice to the applicant or employee, specifying the permissible basis for requesting the report and providing a box for the employee/applicant to check off to request a copy of the report, which must be provided free of charge and at the same time the employer receives its copy of the report.  If employment is denied based on information in a credit report, the employer must advise the applicant/employee and provide the name and address of the credit reporting agency that supplied the report.

Other labor and employment legislation signed into law by the Governor in the last few days includes the following:

SB 459 (Misclassification of Independent Contractors):  This new law creates stiff penalties for willful misclassification of employees as independent contractors.  The law defines “willful” as “voluntarily and knowingly misclassifying” an individual.  The law also makes it unlawful for an employer to charge an individual who has been willfully misclassified any fees or other deductions from compensation if those fees and deductions (e.g. for licenses, space rental, equipment) would have been prohibited had the individual been properly classified as an employee. In the event of a finding of willful misclassification, penalties may be assessed in the range of $5,000 to $25,000 per violation.  Additionally, an employer in violation may be ordered to display prominently on its Internet web site (or other area accessible to employees and the general public) a notice that explains the employer has been found guilty of committing a serious violation of the law by willfully misclassifying employees, along with other prescribed information. The new law also imposes joint and several liability on individuals who, for money or other valuable consideration, knowingly advise an employer to treat an individual as an independent contractor to avoid employee status.  Excepted from liability are employees who provide advice to their employer, and licensed attorneys providing legal advice to the employer.

AB 469 (Notice of Pay Details):  This new law requires employers to provide each employee, at the time of hire, with a notice that specifies (1) the pay rate and the basis, whether hourly, salary, commission or otherwise, as well as any overtime rate, (2) allowances, if any, claimed as part of the minimum wage, including meals or lodging, (3) the regular payday, (4) the name of the employer, including any “doing business as” names used by the employer; (5) the physical address and telephone number of the employer’s main office or principal place of business, and a mailing address if different, and (6) the name, address and telephone number of the employer’s workers’ compensation carrier.  The employer must notify each employee in writing of any changes to the information set forth in the notice within 7 days of the changes, unless such changes are elsewhere reflected on a timely wage statement or other writing required by law to be provided.

AB 887 (Gender Identity and Expression):  This new law amends the Fair Employment and Housing Act (as well as various other laws) to make clear that discrimination on the basis of gender identity and “gender expression” is prohibited.  Gender expression refers to a person’s gender-related appearance and behavior, whether or not stereotypically associated with the person’s assigned sex at birth.  The new law also requires employers to allow an employee to appear or dress consistently with the employee’s gender expression.

AB 1236 (E-Verify):  This new law prohibits the state, or a city or county, from requiring employers to use E-Verify as a means of verifying employees they hire are authorized to work in the United States.

AB 243 (Farm Labor Contractors):  This new law requires employers who are farm labor contractors to disclose to employees the name and address of the legal entity that secured the employer’s services.  This information must be disclosed as part of the employees’ itemized wage statements required by Labor Code section 226.

SB 126 (Agricultural Labor Relations):  This new law deals with petitions objecting to the conduct of an election before the Agricultural Labor Relations Board and specifies that where the ALRB refuses to certify an election because of employer misconduct that, in addition to affecting the results of the election, would render slight the chances of a new election reflecting the free choice of employees, the labor union shall be certified as the exclusive bargaining agent for the bargaining unit.

Unless otherwise specified most new laws take effect January 1, 2012.  California employers will want to familiarize themselves with these new laws as applicable to their workforces and operations, and revise policies and procedures accordingly.

New California Law Requires Written Contract for Commission Pay Arrangements

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Late last week, Governor Brown signed into law AB 1396, which requires commission pay arrangements to be set forth in a written contract.  All employers must comply by January 1, 2013. Under the new law, whenever an employer enters into a contract of employment with an employee for services to be performed in California and the employee’s compensation involves commissions, the contract must be in writing and set forth the method by which the commissions will be computed and paid.  The employer must give a signed copy of the contract to the employee and must retain the employee’s signed receipt of the contract.  In the event the contract by its terms expires but the parties nevertheless continue to work under the expired contract, its terms are presumed to remain in full force and effect until the contract is expressly superseded by a new contract or the employment relationship is terminated.  For purposes of the new law, “commissions” are defined in accordance with Labor Code section 201.4 as compensation paid to any person in connection with the sale of the employer’s property or services and based proportionately upon the amount or value thereof.  However, the new law specifies that “commissions” does not include short-term productivity bonuses nor bonus and profit-sharing plans, unless they are based on the employer’s promise to pay a fixed percentage of sales or profits as compensation for work.

There has been a fair amount of litigation in California over the meaning of “commissions” in cases dealing with the overtime exemption for certain commissioned salespersons.  This new law may well invite more litigation concerning commission pay within the state.  Employers who have employees performing work in California and who are even arguably paid in whole or in part with commissions should be provided a written contract (with an acknowledgement form for the employer to retain) setting forth the formula and timing for earning and payout of commissions.  Failure to comply could subject an employer to an action for penalties of $100 per pay period per aggrieved employee under the Private Attorneys General Act.

California Employers Must Now Provide Health Benefits for Four Months for Pregnancy Disability

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This week, California Governor Jerry Brown signed into law SB 299, legislation requiring California employers to continue group health coverage to employees on pregnancy disability leave for up to four months.  California employers with five or more employees have long been required to comply with California's law permitting employees disabled by pregnancy to take a leave of absence of up to four months for the disabling condition.  This leave is in addition to traditional "maternity leave," which separately provides the employee up to 12 weeks of leave for baby bonding (if the employer has 50 or more employees and is covered under FMLA/CFRA).  Prior to passage of SB 299, employees on pregnancy disability leave were entitled to the same benefits provided by an employer to employees on other types of disability leaves.  With respect to continuation of group health benefits, many employers limit the continuation of such coverage to 12 weeks, as this is the required time period for continuation of coverage under the FMLA/CFRA for family and medical leaves of absence.  With the passage of SB 299, effective January 1, 2012, California employers must extend the continuation period to four months for pregnancy disability leaves.

As specified in the legislation, group health benefits must be continued on the same terms and conditions as if the employee continued actively reporting to work.  Therefore, if the employer pays the entire premium for employee coverage, it must continue to do so for up to four months of pregnancy disability leave.  If the employee normally pays a portion of the premium, the employee may be required to continue making such contributions (either for self or for dependent coverage) during the leave.  Additionally, if the employee fails to return from pregnancy disability leave, the employer may recoup from the employee the premiums the employer paid to continue the employee's coverage during the leave, unless the reason the employee did not return is because of a continuing disability or because the employee took a separate protected leave (e.g. maternity leave) under the FMLA/CFRA.

California employers should review their policies and procedures relating to pregnancy disability leaves to ensure compliance with this new law.

NLRB Postpones Start Date for Contested New Poster

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The NLRB announced today that it is postponing the implementation date for its recently issued employee-rights notice.  The new effective date is January 31, 2012.  The NLRB's stated reason for the postponement is to "allow for further education and outreach" in light of "queries from businesses and trade organizations . . . about which businesses fall under the Board's jurisdiction."   Coincidentally, however, the NLRB's newly required poster currently is under both legislative and legal attack.  As reported in our prior post, legislation has been introduced to block implementation of the new poster, and lawsuits have been filed by various groups seeking to enjoin implementation.  Stay tuned for further developments on this contested issue.

Oral Argument in Brinker Scheduled for November

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The California Supreme Court has finally scheduled oral argument in Brinker v. Hohnbaum for November 8, 2011.   Employers can reasonably expect a decision in the case sometime between December 2011 and February 2012, as the Court generally has 90 days following oral argument to issue its decision.  The long-awaited decision is expected to provide much needed clarity on an issue that has fueled countless lawsuits and caused operational headaches for employers as well as inconvenience for employees.  Specifically, the Court will decide whether California meal period laws require employers to ensure that employees take at least a 30 minute, uninterrupted meal break at or before completing five hours of work, or whether employers are simply required to provide their employees the opportunity to take such a break, which the employee may voluntarily decide to skip with no adverse consequence to either the employer or the employee.

Most courts that have decided this issue have held that the law simply requires the employer to provide the opportunity for a meal break, but a few courts (along with the DLSE for a period of time) have held that employers must ensure such breaks are taken, regardless of whether an employee wants to take them.  As a result, employers have had no clear direction on the proper interpretation of the law and most have taken the conservative approach and forced employees to take breaks, even disciplining them for failing to do so, much to the displeasure of many employees.  Employer friendly groups have caused numerous bills to be introduced before the California legislature in the last two or three sessions to try to clarify this issue in a way that is operationally manageable and beneficial to employers and employees alike, but the legislature has refused to pass almost any bill that would provide the greatly needed relief--much to the appreciation of the California plaintiffs' bar which has profited wildly from the cottage industry of meal break litigation.

Stay tuned for further developments on this important case for California employers.

New Employment Laws on the Horizon in California

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In the final week of California's 2010-2011 legislative session, a number of employment bills have been passed by the legislature and have been signed by Governor Brown or await his signature:

AB 240 (Liquidated Damages): This bill, which has now been signed into law, permits an employee to recover liquidated damages of twice the amount of wages improperly withheld plus interest in proceedings before the Labor Commissioner involving claims for underpayment of minimum wage.

SB 559 (Genetic Information Discrimination): This bill, which has now been signed into law, prohibits discrimination in employment (among other areas) on the basis of genetic characteristics. This is California's version of the recently enacted federal law known as GINA (the Genetic Information Nondiscrimination Act).

AB 267 (Forum Selection Clauses): This bill has been passed by the legislature but not yet signed into law by Governor Brown. If signed, it will prohibit forum selection or choice of law clauses in employment contracts or similar documents where an employee would be required to agree to a forum or law of a state other than California for resolution of disputes arising in California. Agreement to such clauses will not be permitted to be required as a condition of employment. However, an employee will be able to agree to such a clause if not a condition of employment and if independent consideration is provided to the employee.

AB 325 (Bereavement Leave): This bill is still being considered by the legislature in the final days of session. If passed, it will require employers to provide up to 3 days of unpaid bereavement leave to employees upon the death of specified family members.

AB 22 (Use of Credit Reports): This bill is still being considered by the legislature in the final days of session. If passed, the bill will prohibit the use of credit reports for employment purposes, except in limited circumstances.

AB 1396 (Commissioned Employees): This bill has been passed by the legislature and presented to the Governor for signature. This bill will require that all employers who have employees performing services in California involving pay on a commission basis put the commission agreement in a writing that sets forth how commissions will be computed and paid. This requirement would go into effect January 1, 2013.

SB 931 (Payroll Cards): This bill is still being considered by the legislature in the final days of session. If passed, it will change the requirements employers must comply with for payment of wages using payroll cards.

We will keep you posted with further developments and details regarding these bills. You can access the text of these bills at http://www.leginfo.ca.gov

Court Says Law Clerk Exempt from Overtime Pay

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A California court ruled this week that a law school graduate who had not yet passed the bar was a "learned professional" and thereby exempt from overtime compensation and similar benefits afforded only non-exempt employees. The plaintiff in the case began working for a law firm after graduating law school and while awaiting bar exam results and admission to the bar. During this time period, the law firm classified the plaintiff as an exempt professional employee and paid him a set salary. As an exempt employee, plaintiff was not paid overtime. The plaintiff later sued for unpaid overtime compensation, claiming the firm had misclassified him as an exempt employee. The firm moved for summary judgment, arguing plaintiff had been properly classified and was not entitled to overtime compensation. The trial court judge agreed and threw out the case. Plaintiff appealed.

The appellate court agreed with the trial court that the plaintiff's claims had no merit. Plaintiff argued that California's professional exemption only applies to licensed attorneys (who have passed the bar and been admitted to practice) and cannot be applied to law school graduates prior to bar admission. The court flatly rejected this argument, holding that California'sprofessional exemption applies not only to certain licensed professionals, but also to "learned professionals" who do not necessarily need to be licensed to qualify. The court held that the plaintiff's job duties (equivalent to those of a first year attorney) along with his salary clearly qualified him for exemption as a learned professional. The court's decision was limited to the facts at hand, which involved a law school graduate who was awaiting bar admission. The court did not address applicability of the learned professional exemption to law school students who work at law firms during summer breaks.

The case is Zelasko-Barrett v. Brayton-Purcell LLP and the decision is here.

Court Says “Me Too” Evidence Admissible in Harassment Case

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Last week, a California court held that evidence of alleged inappropriate gender-related conduct directed at female employees outside the plaintiff's presence (and of which the plaintiff was not even aware) was admissible to prove the plaintiff was sexually harassed and fired because of her gender. In Pantoja v. Anton, the plaintiff sued her former employer, an attorney, for (among other things) sexual harassment and gender discrimination, alleging she was subjected to a hostile work environment and fired because she is female. The case went to trial and the trial judge granted the employer's motions to keep out evidence of profanity and alleged touching directed at other female employees. The judge ruled that unless the conduct occurred in the plaintiff's presence or somehow affected the plaintiff, it was not admissible. As for evidence directed to the plaintiff, she alleged that the defendant employer touched her inappropriately and regularly used profanity around her, some of it arguably gender based. The employer testified that he never touched the plaintiff sexually and that while he may have used profanity, he never directed it at the plaintiff. Instead, he might use profanity when describing a situation, which is different than calling someone a profane name or similar use of profanity. The jury ultimately found for the employer and against the plaintiff on her claims for harassment and discriminatory firing. The plaintiff appealed, arguing that the trial court erroneously excluded "me too" evidence.

The appellate court agreed with the plaintiff and held that the trial judge had abused his discretion in excluding "me too" evidence of harassing conduct directed at female employees other than the plaintiff. The court held that it did not necessarily matter if the conduct did not occur in the plaintiff's presence or otherwise directly affect the plaintiff. The court held that such evidence was relevant to show the alleged harasser's "intent." Interestingly, "intent" generally is not relevant to proving harassment. Harassment can occur and be proven regardless of whether the harasser intends his conduct to be harassing. This is what is commonly referred to as the "inoccent harasser." What is relevant is the victim's perception (and the perception of an objectively reasonable person) of the conduct. Thus, the court's ruling that harassment towards others is relevant to prove the harasser's intent is at odds with fundamental harassment law. Now, to be clear, the plaintiff also had a discrimination claim based on allegations she was fired because of her gender. Intent is, of course, relevant to proving a discrimination claim because the decision-maker's intent behind the termination decision is critical. But the courtnonetheless treated the two claims the same for purposes of analysis of the admissibility of this "me too" evidence.

This case is a good reminder of the dangers of "me too"evidence in the harassment arena and of the murkiness in this area. Employers should continue to fight for exclusion of "me too" evidence on the grounds that it is inadmissible character evidence that cannot be used to prove the alleged harasser's propensity to engage in harassing behavior.

Is Sabbatical a Form of Vested Vacation Benefits?

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Employers who offer paid sabbaticals to their long-term employees probably should not be sued, but apparently they are not immune. In Paton v. Advanced Micro Devices, Inc., the plaintiff resigned his employment with AMD and then brought a class action against AMD alleging that the company failed to pay out earned but unused sabbatical pay. According to the plaintiff, the sabbatical pay was just another form of accrued vacation that was required to be paid out on termination of employment.The trial court threw out the claim, finding that AMD's sabbatical program was not the equivalent of vested vacation and that sabbatical pay did not have to be paid out on termination of employment. The plaintiff appealed.

On appeal, the court held that there was insufficient evidence before the court to find that AMD's time off program was a true sabbatical program and not vacation. The court discussed the differences between vacation and sabbaticals, explaining that vacation is not conditioned upon anything other than the employee's rendering of service and vacation does not impose conditions on how the employee uses the time away from work. Sabbaticals, on the other hand, tend to be purpose-driven and aimed at providing the employee with incentive for professional growth and continued employment. However, the court recognized that many private companies are providing sabbatical leaves that provide for an extended amount of time off (longer than any typical vacation) but are not necessarily tied to any special learning opportunity. The court indicated that this type of sabbatical program is harder to distinguish from a vacation program. Nonetheless the court laid out several factors to be considered in assessing whether a leave program is a sabbatical: (1) the leave must be granted infrequently, e.g. every seven years; (2) the leave time is longer than a typical vacation; (3) the leave must be granted in addition to regular vacation that is comparable to that offeredcomparable employees in the regular market; and (4) the leave program should specify that the employee is expected to return to work for the employer after the sabbatical is over.

Analyzing the specific sabbatical program before it, the court held that there was insufficient evidence to support a finding that the leave qualified as a sabbatical as a matter of law. AMD's policy originally provided for an 8-week sabbatical leave after seven years of employment, but was later changed to provide for a 4-week sabbatical after five years of service. The policy provided for continued accrual of vacation during the sabbatical leave and for return to work upon conclusion of the leave. The policy's express purpose was to encourage continued employment by providing time away for revitalization and enrichment. The court found that the length of the sabbatical leave and frequency upon which it could be taken were areas that reasonable minds could differ as to whether the leave was qualitatively different than traditional vacation leave. Furthermore, the court did not have evidence as to AMD's motivation in adopting the policy or how AMD's vacation policy compared to that of competitors. As such, the court remanded the case to the trial court.

Employers with sabbatical programs should carefully review these programs to ensure that they are adeqately distinguished from traditional vacation to avoid costly claims for unpaid "vacation" pay on termination of employment.

Organ Donation and Bone Marrow Leave Requirements Clarified

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As many employers will recall, California implemented a new employee leave entitlement last year requiring employers to provide employees with time off for purposes of donating an organ (30 days in a one-year period) or bone marrow (5 days in a one-year period). Last week, Governor Brown signed new legislation clarifying some issues surrounding this new leave. Specifically, the new legislation clarifies that the one-year period is a rolling 12-month period measured forward from the date an employee uses the leave. The legislation also clarifies that the leave entitlement is measured in business days, not calendar days, and that leave taken pursuant to these leave provisions is not considered a break in service for purposes of benefit accruals and seniority. Finally, the legislation clarifies that an employer mayrequire an employee taking bone marrow leave touseup to five days of accrued paid time off, and an employee taking organ donation leave to use up to two weeks of accrued paid time off.

The new legislation, SB 272, is here.

California Supreme Court Reinforces Employees’ Right to Compete Post-Employment

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Today the California Supreme Court issued its much anticipated decision in Edwards v. Arthur Andersen and held that California law prohibits agreements restraining competition, regardless of how narrow or reasonable the restraint may be. The Court flatly rejected the "narrow restraint" exception that California federal courts have in some instances applied to uphold agreements limiting an employee's ability to compete.

The Court explained that under the "plain meaning" of California Business and Professions Code section 16600, "an employer cannot by contract restrain a former employee from engaging in his or her profession, trade, or business unless the agreement falls within one of the exceptions to the rule" [referring to statutory exceptions that allow non-compete agreements in the context of a sale or dissolution of a corporation, partnership, or limited liability company]. The Court declined to read into the statute an exception permitting narrow, reasonably tailored restraints on competition: "Section 16600 is unambiguous, and if the Legislature intended the statute to apply only to restraints that were unreasonable or overbroad, it could have included language to that effect. We reject Andersen's contention that we should adopt a narrow-restraint exception to section 16600 and leave it to the Legislature, if it chooses, either to relax the statutory restrictions or adopt additional exceptions to the prohibition-against-restraint rule under section 16600."

Based on this interpretation of section 16600, the Court held that the non-compete agreement Arthur Andersen required Edwards to sign was invalid. The agreement at issue prohibited Edwards from performing professional services for certain clients of Arthur Andersen for a period of 18 months post-termination. The Court explained that this provision clearly restrained Edwards' ability to practice his professions and was, therefore, invalid under section 16600.

Notably, the Court did not address the enforceability of restrictions tied to the protection of trade secrets (such as provisions prohibiting an employee from using the employer's trade secrets to solicit customers), or restrictions against recruiting co-workers to work for a competitor. The Court did, however, cite with approval Thompson v. Impaxx, Inc., 113 Cal.App.4^th 1425 (2003), which held that non-solicitation of customer provisions are only lawful to the extent they are tied to the protection of trade secrets. Thus, although the Court's decision does not directly address the validity of traditional non-solicitation of customer provisions, it certainly does not disturb California precedent holding that such provisions are only enforceable if tied to trade secrets.

California employers who require employees to sign "non-interference" and/or "non-compete" type agreements should ensure that such agreements do not run afoul of section 16600, as strictly interpreted by the California Supreme Court.

Attorneys’ Fees Properly Awarded to Prevailing Employer in Wage Case

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In Kirby v. Immoos Fire, a California court held that attorneys' fees were properly awarded to an employer who prevailed in a putative class action alleging missed rest breaks. The court relied on the bilateral fee-shifting provision of Labor Code section 218.5, which provides that the prevailing party in an action alleging violations of certain provisions of the Labor Code is entitled to recover its attorneys' fees. Section 218.5's fee-shifting provision excludes actions alleging claims for unpaid minimum wages or overtime wages covered by Labor Code section 1194 (which has a unilateral fee shifting provision allowing only a prevailing plaintiff to recover attorneys' fees). In this case, the plaintiff alleged (among other things) a claim for unpaid overtime wages, as well as a claim for missed rest periods. The court held that the employer could not recover its fees incurred in defending the overtime claim, but could recover its fees incurred in defending the rest period claim.
This case presents a positive development for employers by providing precedent for an award of attorneys' fees in actions alleging meal and rest period violations should the employer prevail.

Class Waiver Upheld by California Court Post-AT&T v Concepcion

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A California court ruled yesterday that a class waiver in an employment arbitration agreement was enforceable in a wage and hour putative class action. This is the first published California decision addressing the issue since the United States Supreme Court issued its decision in AT&T Mobility v. Concepcion and held that the Federal Arbitration Act preempts state unconscionability rules interfering with enforceability of arbitration agreements.

In Brown v. Ralphs Grocery Co., the court addressed whether plaintiffs, who sought to represent a class of current and former employees suing for various wage and hour violations, could be compelled to arbitrate their claims on an individual basis as a result of a class action and representative action waiver in the company's arbitration agreement. Importantly, the plaintiffs alleged claims for violation of various Labor Code provisions, a piggy back claim for violation of the unfair competition law, and a representative action under PAGA. In passing on the enforceability of the class action waiver, the court applied the framework for enforceability set forth by the California Supreme Court in Gentry. The court held that Gentry requires the plaintiffs seeking to avoid the class action ban to make an evidentiary showing under Gentry as to why enforcing the class waiver would amount to a waiver of statutory rights. The court took the easy way out and held that the plaintiffs had failed to make any evidentiary showing upon which the court could find the class waiver to result in a waiver of statutory rights. On this basis, the court held that the class action waiver was not unenforceable. The court refused to decide whether AT&T v Concepcion separately mandated a finding of enforceability of the class action waiver based on preemption by the FAA. The court essentially punted the issue, though dropping an interesting parenthetical hinting its belief that had plaintiffs satisfied the Gentry standards, AT&T might not require preemption and enforceability because Gentry is concerned with waiver of statutory rights and not just unconscionability, which was the focus of the AT&T case. (In this author's opinion, this type of effort to distinguish Gentry from AT&T Mobility is a stretch.)

Although the court held that the class action waiver was enforceable as to the class claims, the court decided differently as to the PAGA claim, which is a "representative" claim, not a class claim. As to that claim, the court held that the arbitration agreement's ban on representative actions was not enforceable and that AT&T Mobility v. Concepcion did not apply to this type of waiver. The court relied on the intent behind PAGA to essentially allow private enforcement actions to be maintained without satisfying class certification requirements, with the goal of furthering enforcement of state wage and hour laws. The court held that AT&T Mobility applies to consumer cases brought as class actions and not to private enforcement actions. The result? Expect wage and hour cases to universally include PAGA claims going forward, in an effort to thwart preclusion of pursuit of classwide relief.

Stay tuned for more developments in this arena, which will surely be the subject of much litigation in the coming year.

Court Weighs In on Meaning of Split Shifts

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California requires that extra compensation be paid to employees who are required to work "split shifts," generally referring to daily work shifts that are separatedby several hours ofnon-worktime. In SecuritasSecurity Services v. Superior Court (Holland), a group of employeesbrought a class action against their employer, alleging the employer failed to pay them required split shift premiums. Thealleged split shift? Working consecutive overnight shifts starting in the evening and ending in the morning. The employer defined its workday to begin at midnight each day and the employees therefore argued that by ending one shift in the morning and starting another in the evening of the same day, they were working "split shifts" and had to be compensated accordingly. The court appropriately rejected the plaintiffs' tortured interpretation of a split shift and held that split shift pay need not be paid in such circumstances involving consecutive overnight shifts. The Securitas decision is here.

IRS Mileage Rate Increases July 1

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The IRShas announced a 4.5 cent increase in the standard mileage rate to be in effect for the last six months of 2011. Effective July 1, 2011, employers who use the IRS rate to reimburse employees for business mileage must pay 55.5 cents per mile. We will post any further changes here.

Unlicensed Accountants May Qualify for Overtime Exemptions

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In Campbell v. PricewaterhouseCoopers (PwC),plaintiffs, a classof some2,000unlicensed junior accountants, sued their employer under California law for alleged unpaid overtime wages. Plaintiffs filed a motion for summary judgment,asking the court to find, as a matter of law, thatplaintiffs wereentitled to overtime compensation as they did not qualify for any overtime exemption. PwC opposed the motion,arguing that there weretriable issues of fact and that the plaintiffsqualified for theprofessional and/oradministrative exemptions. Thedistrictcourt disagreed, holding that unlicensed accountants are categoricallyineligible forthe professional exemption and thatthere was insufficient evidence to support a finding that they met the administrative exemption.

The Ninth Circuit disagreed.With respect to the professional exemption, the court held thatunlicensed accountants are not categoricallyineligible forthe exemptionsimplybecause of their unlicensed status.The court held that unlicensed accountants mayqualify as "learned professionals." The court did not go so far as to holdthat the plaintiffs in this case actually qualifiedfor the exemption asa matter of law, but rather held that the plaintiffs, orsome of them, could qualify depending on their actual job duties and thus the district court had erred in ruling that no unlicensed accountant could qualifyfor the professional exemption inany circumstance. According to the court, such a holding "ignore[s] the potential for substantial variance [in job duties] from one unlicensed accountant to another."The courtemphasizedthat "[e]ach case will require afact-specific inquiry into whether the unlicensed accountant meets the subsection's various benchmarks--e.g.,engaging in work that is 'predominantly intellectual and varied in character." The court held that the evidencebefore it revealed significant differences in skill level, responsibility and experience among theclass member accountants.

With respect to the administrative exemption, the court similarly concluded that PwC had demonstrated a triable issue of fact regarding the plaintiffs' actualjob duties and whether they met the test for the exemption.The court specifically noted conflicting evidence on the issues of whether plaintiffs performed work under only general supervision and whether their work was of substantial importance to their employer's clients. The court heldthat these factual issues had to be decided by a jury and that the districtcourt had erred in deciding, as a matter of law, that the unlicensed accountants did not qualify forthe administrative exemption.

The Ninth Circuit's decisionis a favorable one for California employers, both on thescope of the professionaland administrative exemptions, and for purposesof trying to defeat class certification given the substantial focus of thedecision on the need toindividually examine whether a particular employee qualifies forexempt status based on a review of the employee's actual job duties and how the employee spends his or her time.

Supreme Court Reverses Class Certification in Dukes v. Wal-Mart

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Today the United States Supreme Court handed down its decision in Dukes v. Wal-Mart, holding that discrimination claims on behalf of some 1.5 million female Wal-Mart employees could not properly be pursued as a class action. The case challenges Wal-Mart's promotion and pay practices. Pay and promotion decisions are generally committed to the discretion of local managers, whom the plaintiffs claim exercise that discretion in a manner that favors male employees. The U.S. District Court of the Northern District of California certified the case as a class action, and the Ninth Circuit substantially affirmed. Today the Supreme Court reversed the Ninth Circuit's ruling and found that class treatment was not appropriate. Justice Scalia delivered the opinion of the Court.

In holding that class treatment was not appropriate, the Court began with the requirement set forth in Federal Rule of Civil Procedure 23 (a)(2) that in order for a class to be maintained, there must be questions of fact or law that are common to the class. The Court explained that"commonality" requires the plaintiff to demonstrate that class members have suffered the same injury, and that this injury depends upon a "common contention--for example, the assertion of discriminatory bias on the part of the same supervisor."The Court further explained: "That common contention, moreover, must be of such a nature that it is capable of class wide resolution--which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke." According to the Court, what matters to class certification is not the mere existence of common questions, but rather "the capability of a class wide proceeding to generate common answers apt to drive the resolution of the litigation."Dissimilarities among proposed class members may preclude such common answers.

Addressing the specifics of the class before it, the Court noted that the plaintiffs seek to sue"about literally millions of employment decisions at once." "Without some glue holding the alleged reasons for all those decisions together, it will be impossible to say that examination of all the class members' claims for relief will produce a common answer to the crucial question why was I disfavored?" The Court explained that in discrimination cases, this generally requires a showing of a discriminatory policy or practice of discrimination, e.g. use of a biased testing procedure. The Court held that there was no such evidence of a company wide policy or practice of discrimination on the part of Wal-Mart. Instead, the evidence showed that Wal-Mart allowed local managers to exercise subjective discretion over pay and promotions, which is the exact opposite of a uniform policy or practice. The Court reasoned that one manager's discretion may not be exercised using the same criteria or reasoning as any other manager, and the reasoning behind the decision-making is the crux of proving discrimination. As such,a class proceeding would not generate "common answers"applicable to the whole class.

The Court separately addressed the plaintiffs' contention that a class could be certified under Rule 23(b)(2) because the plaintiffs sought injunctive and declaratory relief against Wal-Mart and their claims for back pay were, according to plaintiffs, "incidental" to their request for injunctive relief.A unanimous Court rejected this argument, holding that claims for individual monetary relief such as those before the Court, could not be certified under the injunctive relief provisions of 23(b)(2).

Today's Dukes v. Wal-Mart decision is a positive development for employers fighting employment claims sought to be pursued as class actions.

Supreme Court Makes It More Difficult for Employers to Recover Attorneys’ Fees

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This week, the United States Supreme Court issued its decision in Fox v. Vice, limiting employers' ability to recover attorneys' fees incurred in defending claims that are to some degree frivolous. The Fox case is not an employment case, buta civil rights case brought under Section 1983 by acandidaterunning for public officewho claimed the incumbentengaged indirty tricks amountingto a violation of his civil rights (a federal claim). Healso suedfor defamation (a state law claim). The defendant made a motion to the court arguing that the federal Section 1983 claim was frivolous and should be dismissed. The plaintiff essentially conceded the claim was not valid and the court in turn granted the motion and threw out the federal claims. The court made no rulings on the state law claims, but instead remanded those claims to state court to proceed in that forum.

Following his victory on the Section 1983 claim in federal court, the defendant requested that he be awarded his attorneys' fees incurred to defend the claim. The standard for awarding a defendant attorneys' fees in a Section 1983 case is the same as the standard for awarding a prevailing employer attorneys' fees in a discrimination case brought under Title VII or FEHA--fees may only be awarded if the claims are found to be frivolous, unreasonable, or without foundation. In this case, the court found that the 1983 claim wasfrivolous and awarded the defendant his fees.

The case was appealed to theFifth Circuit, which upheld the award of fees. The Supreme Court then granted review and reversed the lower courts' decisions. TheSupreme Courtheld that recovery of attorneys' fees is based on a "but for" standard, meaning that the defendant must show that the fees would not have been incurred "but for" the frivolous claims. The Court noted that the entire case had not been found frivolous, just the federal Section 1983 claim. Indeed, the state law claims had not yet even been resolved. The court held that where only certain claims are found to be frivolous, the defendant can only recover fees spent exclusively defending the frivolous claim. If fees were incurred to simultaneously defend frivolous and non-frivolous claims, the fees may not be awarded. Stated differently, if the fees would have been incurred anyway in connection with defending non-frivolous claims, they cannot in any amount be awarded to the defendant for defending a frivolous claim.

The Supreme Court'sdecisionobviously makes recovery of fees very difficult for a prevailing defendantin a multi-claim case because most litigationtasks (e.g. a deposition) are devoted to defending all claims in a case, not just one. Although the Fox case is not an employment case, the standards applied by the Court will likely be applied in employment cases alleging statutory claims for discrimination and the like under Title VII and FEHA.

Another California Court Says Meal Breaks Must Be Provided, Not Ensured

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As California employers continue to await the California Supreme Court's decision in Brinker regarding the extent of an employer's obligation to "provide" mealbreaks to employees, another court has decided the issue favorably for employers. In Flores v. Lamps Plus, Inc., a California court of appeal held that class certification was properly denied in a case alleging meal and rest break violations on behalf of a putative class of some 2,600 employees across the state. Citing to numerous federal cases, the court held that California law does not require employers to ensure meal breaks are taken, but rather requires employers to provide employees the opportunity to take them. Based on this standard, the court held that individual issues predominated as to why any particular employee may have missed meal and/or rest breaks. As such, class treatment was inappropriate. The court similarly held that class treatment was inappropriate for the plaintiffs' other claims, including failure to provide accurate wage statements, off the clock work, and failure to timely pay wages on termination of employment.

The court also held that a stay of the proceedings (including ruling on class certification) was properly denied, nothwithstanding the pendency of the Brinker decision before the California Supreme Court. The Lamps Plus case is another positive case for employers as we continue to await a definitive determination on meal break requirements from the state's high court.

Ninth Circuit Asks For California Supreme Court’s Guidance on Outside Sales Exemption

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Several class action lawsuits are pending before the Ninth Circuit and federal district courts in California challenging the exempt classification of pharmaceutical sales representatives under the outside salesperson exemption and administrative exemption. One of these cases, D'Este v. Bayer Corporation is currently before the Ninth Circuit.Earlier this week the Ninth Circuit certified questions of California law to the California Supreme Court regarding the scope of these exemptions, reasoning that it is unclear under California law whether these exemptions apply to pharmaceutical sales representatives and the outcome of several pending cases depends on clear guidance on these issues. The specific questions certified to the California Supreme Court are as follows:

1. The Industrial Welfare Commission's Wage Orders 1-2001 and 4-2001 define "outside salesperson" to mean"any person, 18 years of age or over, who customarilyand regularly works more than half the working timeaway from the employer's place of business selling tangibleor intangible items or obtaining orders or contracts forproducts, services or use of facilities." 8 Cal. Code Regs.,tit. 8, §§ 11010, subd. 2(J); 11040, subd. 2(M). Does apharmaceutical sales representative (PSR) qualify as an"outside salesperson" under this definition, if the PSRspends more than half the working time away from theemployer's place of business and personally interactswith doctors and hospitals on behalf of drug companiesfor the purpose of increasing individual doctors' prescriptionsof specific drugs?
2. In the alternative, Wage Order 4-2001 defines a personemployed in an administrative capacity as a person whoseduties and responsibilities involve (among other things)"[t]he performance of office or non-manual work directlyrelated to management policies or general business opera-tions of his/her employer or his employer's customers"and "[w]ho customarily and regularly exercises discretionand independent judgment." Cal. Code Regs., tit. 8§ 11040, subd. 1(A)(2)(a)(I), 1(A)(2)(b). Is a PSR, asdescribed above, involved in duties and responsibilitiesthat meet these requirements?

The California Supreme Court has discretion whether to accept the Ninth Circuit's request for certification. We will continue to monitor and post any developments.

Mandatory Paid Sick Leave Legislation Passes Assembly Judiciary Committee

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Paid sick leave legislation has been proposed and defeated in recent legislative sessions in California. This legislation has been proposed again this year, and just passed the Assembly Judiciary Committee largely along party lines. The proposed legislation, whichwould require California employers to providepaid sick days to employees (otherthan those covered by collective bargaining agreements)is now before the Assembly Appropriations Committee. We summarized the proposed legislation here, and will continue to post developments on this blog.

US Supreme Court Gives New Life to Class Action Waivers in Arbitration Agreements

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There has been substantial litigation in California over the enforceability of class action waivers in consumer arbitration agreements and in employment arbitration agreements. California courts, including the California Supreme Court, have invalidated these class action waivers based on a finding that they are unconscionable and unenforceable under California contract law.Yesterday, the United States Supreme Court, in a 5-4 decision authored byJustice Scalia,dealt a swift blow to this California jurisprudence andheld that the Federal Arbitration Act (FAA) preempts California law that interferes withtheFAA's purpose of promoting arbitration.

The case, AT&T Mobilityv. Concepcion, is not an employment case but a consumer case involvingthe propriety of sales taxcharged by AT&T to consumers for "free" phones. AT&T's customers signed contracts including an agreement to arbitrate any and all disputes.The agreement required that any dispute be pursued individually and prohibited class claims. Theplaintiffs in the case had sought to pursue a class action against AT&T regardingthe allegedly impropercharges. AT&Tmovedto compel arbitration.Thetrial court denied AT&T's motion, finding the arbitration agreementand in particular, theclass actionwaiver, unconscionable and unenforceable under Californialaw.AT&T appealed to the Ninth Circuit,but the NinthCircuit affirmed, agreeing the provision was unconscionable. Both courts relied onCalifornia Supreme Court precedent startingwith a case called Discover Bank, in which the Court explained the circumstances in which classwaivers in consumerarbitration agreementswould be deemed unconscionable. AT&T petitioned for review by the United Stated Supreme Court.

Yesterday, the Supreme Court handed down its decision, reversing the Ninth Circuit and holding that the FAA preempts California law insofar as the law operates to interfere with the purpose of the FAA, which is to promote arbitration as a streamlined procedure for resolving disputes. The Court held that the operation of California law to void the class action waiver in AT&T's contract nullified the parties' agreement to arbitrate and ran afoul of the FAA. The Court held that the FAA requires arbitration agreements to be enforced according to their terms and on the same footing as any other type of contract. The Court explained that defenses to enforceability (fraud,duress, unconscionability)still existbut may not be applied in a manner so as to discriminate against the type of contract at hand. The Courtsuggested that California courts have applied the doctrine of "unconscionability" to disfavor arbitration agreements and avoid their enforcement, contrary to the FAA.

The Court further explained that the FAA permits parties to agree to limit the types of issues to be arbitrated, including limiting class or collective claims, to further the arbitral goal of providing an efficient, streamlined procedure for resolution of disputes. The Court further stated that any rule, like California's,"[r]equiring the availability of classwide arbitration interferes with fundamental attributes of arbitration and thus creates a scheme inconsistent with the FAA."

So what does this mean for California employers? As noted, the AT&T case is not an employment case and did not involve the enforceability of a class action waiver in an employment arbitration agreement. That said, the Court's reasoning should apply equally to the enforceability of class action waivers in employment arbitration agreements. This will no doubt be more definitively determined in other cases in the near future. In the meantime, employers continuing to battle the cottage industry of wage and hour class actions in California should certainly revisit their arbitration agreements and ensure that a class action waiver is included. These provisions stand much greater likelihood of enforceability in the wake of the AT&T decision. Employers are cautioned, however, that the AT&T case does NOT hold that all California unconscionability standards relating to arbitration agreements are preempted by the FAA. It is likely that the scope of preemptionwill be the subject of much litigation to come, with the focus being whether the standards are applied or operate inamanner that frustrates thepurpose of the FAA.For now,employers should continue to ensure that their arbitration agreements meet general standards of fairness for employment disputes, generally prescribed by the California Supreme Court in Armendariz v. Foundation Health Psychcare Services.

Ninth Circuit Reaffirms No Duty to Provide Indefinite Leave of Absence

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In Department of Fair Employment and Housing v. Lucent Technologies, Inc., the Ninth Circuit held this week that disability discrimination and failure to accommodate could not be proven against an employer who terminated an employee after a year of leave due to the employee's disability. The employee at issue, Steven Carauddo,was an installerwho became injured in the course of his job duties. The employee's injuries indisputably rendered him incapable of performing the essential duties of his position. As a result, Lucent placed him on a leave of absence. Lucent had a policy whereby employees who were unable to return to work after 12 months due to disability were terminated from employment. However, the employee could apply for an extended leave with a doctors' note indicating a prognosis for a full recovery within 6 months.

Lucent stayed in communication with Carauddo regularly throughout his leave of absence regarding his continued physical restrictions and inability to perform the essential functions of his job. One of the essential functions of his job was that he regularly lift up to 50 pounds. Carauddo remained unable to perform this function, according to his doctors, throughout the entire 12 month disability period. When Carauddo was unable to return to work after 12 months, Lucent terminated his employment pursuant to its policy. Over the next two months, Lucent continued to have communications with Carauddo's doctors regarding his lifting restriction, and Carauddo's doctor at that point cleared him to return to work with no restrictions. However, Lucent did not reinstate him.

The following year, the Department of Fair Employment and Housing sued Lucent on Carauddo's behalf for disability discrimination, failure to accommodate, and failure to engage in the interactive process. Lucent removed the case to federal court and the court granted Lucent summary judgment, throwing out the DFEH's claims. Notwithstanding its well-known pro-employee stance, the Ninth Circuit agreed with the lower court and affirmed the judgment in Lucent's favor. In so doing, the Ninth Circuit held that Lucent clearly and regularly engaged in the interactive process with Carauddo to determine whether he could perform the essential functions of his job or an alternative job. Lucent also reasonably accommodated him by giving him a 12-month leave of absence. Carauddo was still unable to perform the essential functions of his job (or any other available job) at the end of that 12 month period. As a result, the court held that Lucent lawfully terminated his employment because it was not required to provide an indefinite leave of absence or modify the duties of Carauddo's position in order to accommodate his disability.

The Ninth Circuit's decision is an unusually favorabledecision for employers tackling disability discrimination cases. The full decision is available here.

Class Certification Properly Denied in Overtime Exemption Case

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Trial courts are given significant discretion to determine whether class treatment is appropriate in wage and hour cases. Last week, one California appeals court upheld a trial court's determination that class treatment was not appropriate in a case alleging that a retail chain misclassified its store managers as exempt from overtime compensation requirements. In Mora v. Big Lots Stores, Inc., the plaintiffs worked as store managers in various Big Lots stores throughout California. They sued Big Lots alleging their employer misclassified them as exempt employees to avoid payment of overtime compensation (among other related claims).The plaintiffs sought to sue as a class on behalf of all store managers throughout California. Their primary argument in favor of class treatment was that Big Lots uniformly classified all of the managers as exempt and utilized the same job description and work rules for all managers, with no attention paid to how any individual manager actually spent his or her work time. Big Lots presented evidence that even though its managers were uniformly classified as exempt, the amount of time the managers spent on various job duties (exempt versus non-exempt) varied widely depending on a number of factors, including number of employees, store volume, season, etc.

The trial court denied class certification, finding that the evidence presented by Big Lots (declarations from store managers as well as an expert study based on observation of randomly selected managers in various storesperforming their job duties) showed that the actual time spent on exempt and non-exempt job duties materially varied from one manager to the next, such that common issues could not be said to predominate, making class treatment unmanageable and inappropriate. Notably, the court devalued the evidence (declarations) submitted by the plaintiffs in support of class certification, based on the fact that the declarations were largely boilerplate and there was significant evidence of discrepancies between the declarations and deposition testimony by the same individuals.

On appeal, the court upheld the trial court's ruling, largely based on the deferential standard of review allowing the trial court wide discretion in deciding whether to allow class treatment. The Big Lots case is a favorable decision for California employers fighting the continued cottage industry of wage and hour class actions in this state. The case provides further authority for the position that the lawfulness of exemptclassification requires an individualized analysis of how an employee spends his or her time, and the mere fact that a class of employees is classified as exempt and given the same job description does not end the inquiry.

Failure to Provide Permanent Light Duty Found to be Disability Discrimination

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Many employers offer light duty assignments to employees who are temporarily unable to perform the essential duties of their positions due to disability. Notably, however, there is no legal obligation for an employer to offer permanent light duty or to create a new position for an employee who becomes permanently disabled from returning to his or her normal position. In Cuiellette v. City of Los Angeles, a California court held that notwithstanding these rules, an employer discriminated against an employee on the basis of the employee's disability by failing to provide the employee with a permanent light duty assignment. The wrinkle in the case was that there was evidencethe employer actually had funded and available permanent light duty positions for the very purpose of accommodating employees (police officers) who became disabled from performing the duties of a police officer and that the employer routinely provided such assignments to disabled officers. The employer nonetheless argued that it had never provided a permanent light duty position to an officer who had a workers' compensation rating of 100% disability--the rating given to the officer in this case. The court dismissed the employer's argument, reasoning that a workers' compensation disability rating does not absolve the employer of the obligation to engage in the interactive process and determine whether the employee can perform the essential functions of an open alternative position. As such, the employer's decision to rely on the workers' compensation disability rating (and the advice of a third party workers' compensation administrator to terminate the employee) was the employer's downfall.

The Cuiellette decision is a good reminder for employers that workers' compensation obligations and disability accommodation obligations are not one and the same and do not always coincide. Employers determining whether they can accommodate disabled employees should always focus on the employee's actual restrictions in relation to the essential functions of the employee's existing position and/or open alternative positions. Furthermore, although there is no legal requirement to provide permanent light duty, if an employer has a practice of providing permanent light duty and/or treats it as a separately existing position, the employer may thereby obligate itself to provide permanent light duty assignments to employees who are rendered permanently disabled from performing their usual jobs.

Beware of Designating Workweek to Avoid Payment of Overtime

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A California court held this week that an employer failed to properly pay overtime to its employees by artificially designating the workweek so as to avoid payment of overtime due for the 7th consecutive day of work. The court further held that on-call time needed to be paid ashours worked where employees were required to sleep aboard the employer's ships and otherwise be within 45 minutes of the ship.

In Seymore v. Metson Marine, Inc., the plaintiffs worked14 day "hitches" (alternating with 14 day rest periods) on the employer's ships, performing cleanup of oil spills and other environmental hazards.The employer designated the workweekto start and end in such as way as to avoid paying7th day overtimecompensation on the 14th day of work.As a result, the plaintiffs only received the 7th day premium on the 7th day of work, but not the 14th.Although the court acknowledged variouslegalauthorities supporting anemployer's right to designate the workweek for payroll purposes, the court held that where the purposeof the designation appears designed solely for the purpose of evading overtime compensation, it is not permissible. The court held that in this case there was no evidence presented that thedesignation was for anyreason otherthan evading overtime compensation requirements.

The court also held that the employer failed to properly compensate employees for on-call time. Within the 14-day work period, the plaintiffs had periods of "off-duty, standy-by" time where they were permitted to leave the ship and do personal errands and the like. However, they were required to carry a cell phone or pager, refrain from alcohol consumption,and be within 30-45 minutes of the ship in the event of an emergency. The court held that this stand-by time was hours worked and needed to be paid as such because the employees were subject to the control of the employer.

The only good news for the employer in this case was that the court at least acknowledged that the employees' sleep time on the ship was not compensable as hours worked. Plaintiffs had actually sought to be paid for this eight hours of sleep time each day.

It would not be surprising if the employer seeks review of this decision by the California Supreme Court. In the meantime, employers should use caution in designating their workweeks in such a way as to evade overtime compensation requirements. Employers with on-call employees are advised to review the Metson opinion as well.

Employer May Terminate Disabled Employee for Threatening Conduct Even if Caused by Disability

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Employees engaging in workplace misconduct such as violence or threats of violence are not immune from termination simply because a mental disability may have caused the misconduct. This was the holding of a California court this week in Wills v. Orange County Superior Court.

In Wills, the plaintiff was a clerk for the County. She had a mental disability--bipolar disorder--that caused her to take several leaves of absence during her employment, all of which the County accommodated. Shortly before her last leave of absence, the plaintiff showed up at work one day and became very angry at having to stand in the heat outside before someone unlocked the door. She told one or more co-workers that she was going to put them on her "Kill Bill" list as a result. Within a couple of days, the plaintiff took a leave of absence and provided a note indicating that her conduct was caused by her mental disability. While out on leave, the plaintiff sent several disturbing emails and text messages to her co-workers, which were also threatening. The plaintiff's doctor eventually gave her a full release to return to work and explained she was not a threat. The County nonetheless terminated the plaintiff's employment based on findings that she had violated workplace conduct rules prohibiting threatening and inappropriate behavior.

The plaintiff sued for disability discrimination and related causes of action. The trial court granted summary judgment in favor of the County and threw out the case. The plaintiff appealed, but failed in the appellate court as well. The California appellate court agreed that the plaintiff's claims had no merit. The court only addressed the merits of the disability discrimination claim, having held that all other claims were barred due to the plaintiff's failure to exhaust administrative remedies. With respect to the disability discrimination claim, the court rejected the plaintiff's argument (as well as Ninth Circuit precedent) that misconduct caused by disability is protected from adverse consequences just the same as the disability itself. The court held that an employer may discipline, and even terminate, a disabled employee for violence or threats of violence, regardless of whether the conduct was indisputably caused by a mental disability. As the court properly reasoned, the employer is disciplining the conduct not the disability.

The Wills case is a positive development for California employers, juggling the need to enforce workplace conduct rules while not running afoul of disability discrimination statutes.

Refusing to Hire Applicant Who Fails Drug Test Not an ADA Violation

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Many employers require new hire candidates to undergo, and (believe it or not) pass, a drug test prior to commencing employment. There has been a fair amount of litigation over employers' decisions not to hire candidates who fail drug tests. These candidates most commonly sue, claiming their drug use is tied to some sort of disability and, therefore, is "protected" under the law. Fortunately, this is one of the few areas of law where courts have generally decided the cases favorably to employers.The California Supreme Court has upheldan employer's right to refuse employment to applicants who test positive for marijuana, evenwhere the employee subsequently claims"medical" marijuana use.Last week, the famously liberal Ninth Circuit also upheld an employer's right to deny employment to an applicant whofailed a drug test, even where the applicant claimed protectionunder the Americans WithDisabilities Act (ADA).

In Lopez v. Pacific Maritime Association,the Ninth Circuit held that an employer's "one-strike" rule permanently barring employment for any applicant who fails a drug test, did not violate the ADA. The plaintiff applied to be a longshoreman in 1997. At that time, he was apparently addicted to drugs and alcohol and unsurprisingly failedthe employer's drug test, disqualifying him from employment. A few years later,Plaintiff allegedly decided to become clean and sober and re-applied for employment as a longshoremanin 2004. The employer rejected Plaintiff's application because it had a one-strike rule, wherebyapplicants who fail adrug test, even once,are permanently disqualified from employment. Plaintiff sued, claiming the employer violated the ADA by discriminating against him based on his protected status as a rehabilitated drug addict. The Court threw out the claim, holding that there was no ADAviolation. The employer's policy treated all test failures the same--whether the failure was due to a disability or mere recreational drug use. The employer did not even know of any disability or rehabiliated status at the time of the drug test or subsequent rejection of his employment application. As a result, the employer could not have discriminated against Plaintiff on this basis. The Lopez v. Pacific Maritime decision is here.

The bottom line for employers is that drug testing policiesbarring employment based ontest failures should be bright-line policies and administered as such. In the absence of such a policy, employers remain exposed to claims based on alleged disability discrimination.

Supreme Court Endorses “Cat’s Paw” Theory of Discrimination

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In a unanimous ruling, the United States Supreme Court has endorsed the cat's paw theory for proving employment discrimination. Under the cat's paw theory, a plaintiff can prove discrimination even though there is no evidence the ultimate decisionmaker harbored any discriminatory animus. The theory is based on evidence that a differentemployee (not the ultimate decisionmaker) harbored discriminatory animus and influenced the"innocent" decisionmaker therebycausing the adverse employment action to occur.

In Staub v. Proctor, the plaintiffwas a medical technician for Proctor. He was also a member of the Army Reserves, which requiredhim to attend drill sessions oneweekendper month as well as trainings for two to three weeks peryear. Plaintiff's employment with Proctor was ultimatelyterminated based on a decision by Human Resources.Plaintiff sued fordiscrimination under the USERRA, which prohibits employment discrimination based on military service. Plaintiff didnot have any evidence thatHuman Resources was motivated by adesire to discriminate. The evidence demonstrated that the termination decision itself was not made for discriminatory reasons. However,Plaintiff argued that his immediate supervisors harbored a discriminatoryanimus and that they ultimately triggered the termination because they had issued him a bogus written warning that played a role in the decision to fire him. The lower courts disagreed on whether the evidence was sufficient to entitle the Plaintiff to a trial on his discrimination claim. The Seventh Circuit held that Proctor was entitled to summary judgment because the evidence showed that the ultimate termination decision was made by someone with no discriminatory animus who independently reviewed the facts and that the decision wasn't wholly dependent on the written warning that had been issued by Plaintiff's supervisor.

The United States Supreme Court reversed, holding that the evidence was sufficient to support a finding that the termination decision was proximately caused by the written warning, and that there was some evidence that the written warning was discriminatorily motivated. As a result, the Court held that an employer cannot shield itself from liability simply by demonstrating that the ultimate decisionmaker did not discriminate. If there is evidence that the ultimate decisionmaker was influenced by other supervisors who had such a motive, a plaintiff can prove discrimination based on such a theory.

Although the Staub decision is a USERRA case, its reasoning will apply equally to discrimination cases brought on a cat's paw theory under Title VII and similar federal and state statutes prohibiting employment discrimination. The Staub case will make it more difficult for employers to obtain summary judgment in discrimination cases.

California Supreme Court: Arbitration Agreement Cannot Preclude Administrative Proceedings for Unpaid Wages

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The California Supreme Court ruled today that employment arbitration agreements cannot be used to preclude an employee from seeking administrative relief from the Department of Labor Standards Enforcement for claims for unpaid wages. The Court held that such a preclusion would violate California law and is, therefore, unconscionable. Notably, the Court also held that this unconscionability determination is not preempted by the Federal Arbitration Act ("FAA").The case is Sonic-Calabasas A, Inc.v. Moreno and the decision is here.

Plaintiff Moreno is a former employee of Sonic-Calabasas. As a condition of employment, Moreno signed an agreement requiring him to arbitrate any and all disputes arising out of the employment relationship. The agreement exempted administrative proceedings before the EEOC/DFEH, but was silent as to administrative claims for unpaid wages. After Moreno's employment ended, he filed a claim for alleged unpaid vacation wages with California's Department of Labor Standards Enforcement ("DLSE"). Sonic-Calabasas filed a motion to compel arbitration, arguing that the arbitration agreement Moreno had signed required arbitration of the dispute.

The California Supreme Court ruled today thatan arbitration agreement, even if otherwise enforceable, cannotbe used toprevent an employee from pursuing administrative relief forunpaidwages through the DLSE. Thus,employees are entitledto an administrative hearing through the DLSEto resolve claims for unpaid wages. However, the Court held thatin the event of an appealof the DLSE's decision (following the administrative hearing), that appeal can be compelled to arbitration pursuant to avalid and enforceable arbitration agreement.

TheSupreme Court also addressed and rejected the employer's argument that the FAA preempts California law and requires enforcement of the arbitration agreement inthis context.In a lengthydiscussion, the Court reasoned that its holding simply promoted "delaying" arbitrationpending exhaustionof administrative remedies; it did not disfavorarbitration entirely. Stay tuned on theFAA preemption issue as the United States Supreme Court is expected to soonissue a decision on this issue in AT&T Mobility v. Concepcion. In that case, the Ninth Circuitruled that a class action waiver in an arbitration agreement was unconscionable and unenforceable under Californialaw. The issue before theSupreme Court is now whether the FAA preemptsstate law unconscionability standardsthat thwart thepurpose of the FAA.

We will continue to post developments on thisimportant topic.

Court Says Arbitration Agreement With Independent Contractor Invalid

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This week a California court held that a mandatory arbitration provision in an independent contractor agreement is subject to the same standards as arbitration agreements in the employment context. In Wherry v. Award, Inc., the court held refused to enforce an agreement to arbitrate between Award, Inc. andtwo of its independent contractors, finding the agreement procedurally and substantively unconscionable under Armendariz standards. The plaintiffs were salespersons who worked for Award, Inc. asindependent contractors.Each of their independent contractor agreements contained a mandatory arbitration provisionfor resolving any disputes between them and Award, Inc. AfterAward, Inc. terminatedthe plaintiffs' services, the plaintiffs sued forgenderdiscrimination and harassment under FEHA. Award, Inc. moved to compel arbitration.

The courtrefused toorder the case to arbitration,finding the arbitration agreement unconscionable and unenforceable. The court reasoned that the agreementwas presented on a take it or leave it basis with no real opportunity to negotiate terms, and included ashortened statute of limitations and afee-shifting provision that were contrary to FEHA. Notably, the courtfurther held that the fact that plaintiffs were independent contractors, not employees, made no difference to the analysis of enforceability of the arbitration agreement.

The Wherry v. Award, Inc. decision is here.

Court Says No Attorneys’ Fees for Prevailing Employer in Wage Case

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This week a California court held that an employer prevailing in a wage and hour case is not entitled to recover its attorneys' fees under Labor Code section 218.5, notwithstanding the fact that section 218.5 expressly provides that the prevailing party is entitled to recover such fees. In McGann v. UPS, the plaintiff sued for alleged unpaid overtime, missed meal and rest period pay, and non-compliant wage statements. The employer prevailed on summary judgment on all claims except the overtime claim, which went to trial. At trial, the employer prevailed on that claim as well. Following trial, the employer requested an award of attorneys' fees for the amounts incurred in defense of all claims except the overtime claim. The employer conceded that fees were not recoverable on the overtime claim because overtime claims are governed by Labor Code section 1194, which only allows for recovery of attorneys' fees by a prevailing employee (not by a prevailing employer). The employer, however, argued that the remaining non-overtime claims were governed by Labor Code section 218.5, which on its face provides for the recovery of attorneys' fees by "the prevailing party" (regardless of whether the prevailing party is the employee or the employer).

The court rejected the employer's request for an award of attorneys' fees, holding that because the plaintiff alleged an overtime claim, the entire action was governed by section 1194's unilateral fee-shifting provision and that section 218.5 simply did not apply. Moral of the story? Employees should always allege a frivolous overtime claim in any wage-related lawsuit.

Employers may recall a recent decision this past year upholding an award of attorneys' fees for the employer under section 218.5 after the employer prevailed in a meal and rest breakcase. That decision, Kirby v. Immoos, is currently before the California Supreme Court. (Our prior post on the Kirby case is here.) The Kirby decision should provideclear (and hopefully better) guidance on this issue for California employers.

Court Follows Logic of Brinker in Denying Class Certification

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Another California court has followed the logic of Brinker, in holding that employers need only provide their employees the opporunity to take a lunch break and need not ensure that such breaks are taken. In Tien v. Tenet Healthcare, class certification was denied in a case alleging claims for failure to provide meal and rest breaks. The court held that individual issues predominated over common issues because the evidence demonstrated there could be numerous individualized reasons why a meal or rest break was not taken on a given day, and the mere fact that time records revealed missed breaks was not enough to establish liability. Even though the Brinker and Brinkley cases are pending review by the California Supreme Court on the issue of what it means to "provide" a meal period, the Court of Appeal held that the trial court was permitted to follow the logic and reasoning of these cases in determining the propriety of class certification.

The Tien case is another in the line of recent cases showing a trend of courts in following the logic of Brinker/Brinkley. In the meantime, California employers continue to await the California Supreme Court's definitive ruling on the issue.

Two Hours of Premium Pay Per Day for Missed Breaks

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The California Labor Code generally requires employers to provide non-exempt employees with the opportunity to take a rest break for every four hours of work, as well as a lunch break for shifts in excess of five hours. The Labor Code further provides that if a meal or rest break is improperly denied, the employee may recover one hour of pay as a "premium" (in plain english, known as a penalty). What is unsettled in California is how many hours of premium pay an employee may recover in one day--one hour regardless of how many breaks are missed, one hour per missed meal break and one hour per missed rest break, or one hour for all meal breaks and one hour for all rest breaks? One court decided last week that an employee may recover up to one hour of pay per day for missed meal breaks and one hour of pay per day for missed rest breaks. The court relied on its interpretation of the plain language of the IWC Wage Orders and the administrative/legislative history behind them. The case is United Parcel Service, Inc. v. Superior Court (Allen) and the decision is here.

Starbucks Gets a Break in Frivolous Wage Case

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As has been widely reported, Starbucks has seen more than its fair share of wage and hour lawsuits in California. At least one frivolous one has now been thrown out. In Price v. Starbucks, the court threw out a former barista's claims for alleged inaccurate wage statements, reporting time pay, and waiting time penalties, finding they had no merit as a matter of law and were not worthy of a trial. The plaintiff, David Price, worked at Starbucks for less than a month and couldn't manage to make it to work as scheduled during that time. He was asked to report to work for a meeting, at which time his employment was terminated. The termination meeting lasted about 45 seconds. Starbucks paid Price two hours of reporting time pay for the meeting. Price apparently felt he should have been paid even more for not working, so he tried to pursue a class action against Starbucks for failure to comply with reporting time pay requirements, failure to issue timely pay on termination of employment, and for waiting time penalties. A class was, of course, never certified because the court found that Price did not have meritorious individual claims against the coffee giant, much less claims that were appropriate for class treatment.

With respect to his reporting time pay claim, Price claimed that he should have been paid for half of his average scheduled day, or for three hours instead of the two hours he was actually paid (for being there 45 seconds). The court rejected Price's argument and held that Starbucks properly paid Price for two hours of reporting time pay and was not required to pay anything more. The court reasoned that Price did not report to work expecting to work a scheduled shift. He was told to report to work for a meeting, which is what he did. In the circumstances, Starbucks was only required to paythe minimum reporting time pay (2 hours) provided for under California law.

With respect to Price's claim for inaccurate/incomplete wage statements, the court easily disposed of this claim because Price failed to allege that he was injured in any way as a result of any alleged incompleteness. The court emphasized that a claim for non-complaint wage statements requires proof of injury.

With respect to Price's claim for waiting time penalties, the court similarly disposed of this claim with ease. Price tried to argue that he was "terminated" when he was removed from the work schedule a few days before he was actually terminated. The court held that being removed from the work schedule did not amount to a termination, that he was actually terminated when he reported to work for the meeting, and that he was timely issued his final paycheck that day.

Although this case is a deserved win for Starbucks, it is also a reminder that the cottage industry of wage and hour lawsuits,even frivolousones, is alive andwell in California, andeven a "win" costs a lot of money in litigation expense. Employersneed to be as diligent as ever in trying to ensure compliance with California's wage and hour laws.

Meal Break Case Ordered Depublished

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On October 30, 2010, we posted on the newly published case, Hernandez v. Chipotle, holding that employers need not ensure employees take meal breaks so long as they are provided an opportunity to take the breaks. The California Supreme Court has now granted review of the Chipotle case and ordered it depublished, pending the Court's long-awaited decision in Brinker v. Hohnbaum. In Brinker, the California Supreme Court is expected to decide whether California law requires employers to ensure non-exempt employees take a full 30 minute lunch break and are liable even if employees voluntarily choose to skip such breaks, or whether employers are simply required to provide employees the opportunity to take such breaks. Although the Brinker case has been fully briefed and before the Court for months, it is not yet set for oral argument. As such, a decision is not expected until at least Summer 2011. We will continue to post developments on this important topic.

Ninth Circuit Issues Two More Employee-Friendly Decisions

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Widely reputed as an employee-friendly forum, the Ninth Circuit furthered that reputation this week by issuing two new employee-friendly decisions. In Collins v. Gee West Seattle, the court held that employees who voluntarily resign after learning the employer might cease operations, have suffered an "employment loss" within the meaning of the WARN Act, thereby entitling them to 60 days' notice (pay) under the Act. Although the employer notified all employees of a potential cessation of operations, the employer only provided a couple weeks' notice under the faltering business exception to the WARN Act's 60 day notice requirement. The employer notified employees that it was actively seeking a buyer for the business in order to continue operations. After receiving the notice, the vast majority of employees quit, rather than waiting to see whether a sale materialized. Affected employees later sued for violation of the WARN Act, arguing the employer was required to give them 60 days' notice (and/or pay). The employer argued that because the suing employees had voluntarily resigned, they were not covered and therewas no "employment loss" as to them within the meaning of WARN. Although a district court agreed with the employer, the Ninth Circuit reversed the decision, giving virtually no credence whatsoever to the employer's argument. The court reasoned that the WARN Act's 60 day notice requirement is triggered at the time the employer reasonably foresees a significant employment loss triggering coverage under the Act (i.e. plant closureormass layoff). In this case, the employerhad that foresightbutprovidedless thanthe 60 days notice required. Thecourt held that the fact that employees voluntarily resigned on belief they were about to be laid off, does not vitiate the employer's notice obligations under the Act.

In Harris v. Maricopa County Superior Court, the Ninth Circuit sharply curtailed an employer's ability to recover attorneys' fees for a frivolous discrimination lawsuit, holding that only fees exclusively attributable to defending a frivolous claim may be recovered. As many employers know, it is already rare for an employer to be able to recover its attorneys' fees after prevailing in a discrimination lawsuit. In order to recover fees, the employer must prove that the discrimination claims were frivolous, which is a high standard to meet. A claim is not deemed "frivolous" simply because the employee ultimately loses. In the Harris case, the Ninth Circuit further tightened the screws on employers by holding that even where the employer meets the standard for fees by proving one or more claims was frivolous, the employer can only recover fees expended exclusively on defending a frivolous claim. Thus, if the employee brings a discrimination claim and a harassment claim, and only the harassment claim is deemed frivolous, the employer can only recover fees proven to be exclusively devoted to defense of the harassment claim. If fees relate to both claims (e.g. deposition time) this will not be considered exclusive and, therefore, the fees will not be recoverable. In other words, if this Ninth Circuit caselaw holds up, employers litigating discrimination claims in this circuit will be hard pressed to ever have meaningful recovery of attorneys' fees in discrimination cases--even frivolous ones.

EEOC Issues GINA Regulations

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Last month, the EEOC issued final GINA regulations which take effect January 10, 2011. GINA refers to the Genetic Information Nondiscrimination Act that was signed into law in 2008 and took effect in November 2009. GINA, which applies to employers (both private and public) with 15 or more employees, prohibits employers from using genetic information in making decisions about terms, conditions and privileges of employment. The Act also specifically prohibits employers from requesting, requiring, purchasing, or disclosing employees' genetic information.

Under GINA, the term "genetic information" includes (1) information about an individual's genetic tests; (2) information about genetic tests of an individual's family members; (3) information about a genetic disease or disorder of an individual's family members; (4) an individual's request for, or receipt of, genetic services, or participation in clinical research relating to genetic services; and (5) genetic information of a fetus carried by an individual.

Importantly, GINA's prohibition against acquiring genetic information does not apply to information that is "inadvertently" acquired by the employer (e.g. in response to a lawful request for medical certification under the FMLA). However, the final regulations make clear that in order for an employer to show inadvertence and avail itself of this safe harbor, an employer requesting medical information from an employee or medical provider must specifically advise the employee or health care provider not to disclose genetic information. The regulations provide the following sample language that can be used in medical certifications and/or letters requesting medical information to satisfy this safe harbor requirement:

"The Genetic Information Nondiscrimination Act of 2008 (GINA) prohibits employers and other entities covered by GINA Title II from requesting or requiring genetic information of an individual or family member of the individual, except as specifically allowed by this law. To comply with this law, we are asking that you not provide any genetic information when responding to this request for medical information. "Genetic Information" as defined by GINA includes an individual's family medical history, the results of an individual's or family member's genetic tests, the fact that an individual or an individual's family member sought or received genetic services, and genetic information of a fetus carried by an individual or an individual's family member or an embryo lawfully held by an individual or family member receiving assistive reproductive services."

Employers are advised to modify their medical certification forms and similar letters seeking medical information (e.g. with respect to a request for accommodation) by January 2011. If they have not already done so, employers are also advised to revise their policies to add genetic characteristics to the list of protected classes for equal opportunity employment and non-discrimination/harassment purposes.

The new regulations also provide guidance on other types of "inadvertent" disclosure, including learning of genetic information through social media or in the course of casual conversation. If an employer learns of an employee's genetic information through voluntary disclosure by the employee, it will be considered inadvertent. However, if the employer affirmatively solicits the information or requests more specifics than volunteered by the employee, the acquisition may no longer be considered inadvertent. The key is that employers are prohibited from purposefully seeking genetic information.

Employers who have voluntary "wellness programs" tied to certain health-related conditions should have those programs reviewed for compliance with GINA. The EEOC regulations do not prohibit such programs, but they do limit the employer's ability to request genetic information (e.g. through a health survey) in connection with such programs.

To review the full text of the GINA regulations, click here.

Court Issues Favorable Decision on Executive and Administrative Exemptions

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California employers litigating wage cases involving alleged misclassification of employees have a new and favorable published case in their arsenal. In Taylor v. United Parcel Service, Inc., a California Court of Appeal rejected a UPS supervisor's claims that he was improperly classified as an exempt employee and should have instead been paid overtime and ensured meal and rest breaks. The court held, as a matter of law, that the employee qualified for both the administrative and executive exemptions from overtime laws. The court further held that the employee did not have sufficient evidence to support his claims to even warrant a trial on the issues.

The Taylor case contains a lot of good language on issues pertinent to the administrative and executive exemptions, including issues surrounding authority to hire and fire (as pertains to the executive exemption) and the administrative/production worker dichotomy (as pertains to the administrative exemption). Notably, the court rejected a strict application of the administrative/production worker dichotomy as a bar to a finding of administratively exempt status.

Although the Taylor case is a positive decision for California employers on exempt/non-exempt issues, employers are still cautioned to carefully review their exempt classifications because the wage and hour litigation flood continues in California.

California Court Says Employer Does Not Have to Ensure Breaks Are Taken

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While California employers continue to await the California Supreme Court's decision in Brinker, one Court of Appeal has issued a published decision holdingthat an employer does not have to ensure its employees take their meal breaks so long as they are provided the opportunity to take them. The court also denied class certification to a putative class of employees alleging meal break violations. The decision is Hernandez v. Chipotle Mexican Grill, and is here.

Meanwhile, the Brinker case has not yet been set for oral argument before the Supreme Court, which means that a decision is not expected until at least Spring 2011. That decision is expected to resolve the question of whether California law requires employers to "ensure" meal breaks are taken, or simply provide the opportunity to take them (with no liability if an employee chooses to skip the break or take a short break). We will continue topostdevelopments on this important topic.

Meal Period Legislation Among New Laws Signed by California’s Governor

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In the last two days, Governor Schwarzenegger signed and vetoed several more pieces of employment legislation, including signing legislation that exempts certain categories of unionized employees from California's meal period laws. AB 569, which will take effect January 1, 2011, exempts construction employees, security officers in the security services industry, commercial truck drivers, and employees of electrical and gas corporations and local publicly owned electric utilities from California's meal period requirements if the employees are covered by a valid collective bargaining agreement containing meal period provisions. This is an important new law that will greatly benefit employers in these industries, many of whom have been affected by the wave of meal period litigation in California in recent years and whose operations are impaired by efforts to strictly comply with California's meal period laws on threat of additional litigation.
AB 569 contains more specific definitions of the occupations exempted from meal period requirements under this law. Employers who may benefit from this new law should review it carefully before changing policies or practices and must also understand that in order for it to apply, there must be a valid collective bargaining agreement in place containing its own meal period provisions. Although California's meal period rules are in need of much broader revamping to the benefit of all employers and employees, this new legislation is at least a start in the right direction.

In addition to signing AB 569 into law, Governor Schwarzenegger also signed SB 1304, which requires private employers with 15 or more employees to provide up to 30 days of paid leave per year to an employee for purposes of donating an organ, and up to 5 days of paid leave per year to an employee for puposes of donating bone marrow.

Finally, Governor Schwarzenegger signed AB 2364, which slightly broadens eligibility for unemployment compensation by providing that employees who leave their employ to protect his or her family from domestic violence abuse are eligible for benefits.

The Governor did not sign all proposed legislation increasing employee benefits, however. Notably, Governor Schwarzenegger vetoed AB 2340, which would have required employers to provide bereavement leave to employees.

The Governor also vetoed SB 1474, which would have increased union representation in the agricultural industry by allowing the Agricultural Labor Relations Board the ability to set aside electionsbased on employer misconductand to certify a labor organization as the exclusive bargaining agent based solely on signed authorization cards. In his veto message, the Governor stated that the bill's provisions represent a "serious departure from existing law" and "tip the scale in favor of the union by allowing the ALRB to consider any misconduct, which is not defined, by the employer when making the determination to set aside the election, but does not take into consideration the possibilty that the employer may have similar allegations of election misconduct by the labor organization."

Future Enforceability of Class Action Waivers in Arbitration Agreements

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There is an insightful article in this week's National Law Journal regarding recent and upcoming United States Supreme Court decisions on the enforceability of class action waivers in pre-dispute arbitration agreements. To view the article, click here.

As we recently reported on our blog, the United States Supreme Court will be reviewing the Ninth Circuit's decision in AT&T Mobility v. Concepcion this term. In that case, the Ninth Circuit held that a class action waiver in a consumer arbitration agreement was unconscionable and unenforceable under California law. The Supreme Court is expected to decide whether the Federal Arbitration Act preempts California law in this area, thereby rendering class action waivers of this nature valid and enforceable. Although the Concepcion case is a consumer case, not an employment case, the ruling certainly has the potential to impact the enforceability of class action waivers in the employment arbitration context. Thus far, California courts have generally held that class action waivers in the employment arbitration arena are often unconscionable and unenforceable, except in limited circumstances. A ruling that the FAApreempts California unconscionability jurisprudence would be very significant for California employers.

Stay tuned for the Supreme Court decision in the AT&T v. Concepcion case, expected in the Spring of 2011.

Ninth Circuit Addresses Successor in Interest Rule Under FMLA

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In Sullivan v. Dollar Tree Stores, Inc., the Ninth Circuit addressed whether Dollar Tree was a successor in interest and thereby required to provide FMLA leave to employees who previously worked for a company whose leasehold interests were purchased by Dollar Tree in the course of bankruptcy proceedings. The plaintiff was a former employee of Factory 2-U, which filed for bankruptcy in 2004. Plaintiff stopped working for Factory 2-U in September 2004, at which time she was hired by Dollar Tree. Plaintiff had no period of unemployment between the two jobs. Dollar Tree had purchased Factory 2-U's leasehold interest in the same location (as well as several other locations) as the Factory 2-U store. However, Dollar Tree did not purchase any other assets of Factory 2-U.

About eight months after she started working at Dollar Tree, Plaintiff requested leave to care for a family member with a serious health condition. Dollar Tree gave her some time off, but refused to give her a full 12 weeks of leave under the FMLA, on the ground that Plaintiff had not worked for Dollar Tree for 12 months and, therefore, was not eligible for FMLA leave. The issue before the Ninth Circuit was whether Dollar Tree was a successor in interest to Factory 2-U for purposes of the FMLA. If a successor in interest, then an employee's service time at Factory 2-U would have to be counted to determine whether an employee was eligible for FMLA leave at Dollar Tree. If not a successor in interest, then Dollar Tree was not required to provide FMLA leave.

The court applied the Department of Labor regulation, 29 CFR 825.107, detailing factors to be considered in determining whether an employer is a successor in interest to another entity. The court held that even though Dollar Tree purchased Factory 2-U's leashold interest, operated a similar business out of the same location, and hired some of Factory 2-U's employees, Dollar Tree still was not a successor in interest under the FMLA. The court reasoned that Dollar Tree did not purchase any other assets or inventory of Factory 2-U, it required Factory 2-U's employees to apply for jobs with Dollar Tree (it did not automatically hire all employees), it closed the store for a month to renovate and train employees for new operations, it brought in a new store manager, and it brought in all new inventory. Based on these findings, the court held that Dollar Tree was entitled to summary judgment in the case.

Interestingly, prior to the lawsuit being filed, the plaintiff had filed an administrative charge with the Department of Labor complaining about being denied FMLA leave. The Department of Labor issued a finding that Dollar Tree was a successor in interest to Factory 2-U and should have provided FMLA leave. The court held that this finding was hearsay, was untrustworthy in the circumstances, and was not sufficient to defeat Dollar Tree's motion for summary judgment.

The Sullivan v. Dollar Tree Stores opinion is here.

Governor Vetoes Several Employment Bills

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California employers will be relieved to know that Governor Schwarzenegger has vetoed a number of unfavorable employment bills that were passed by the California Legislature this session. Here is a list of bills he has vetoed:

AB 482: This legislation would have prohibited employers from using credit checks for employment purposes, except in limited circumstances. The Governor vetoed the bill, stating that existing law already provides protections for employees from improper use of credit reports and that this bill would "significantly increase the exposure for potential litigation over the use of credit checks."

AB 1881: This legislation would have increased the liquidated damages recoverable in an action for unpaid minimum wage. In the Governor's veto message, he said that existing law already provides for liquidated damages, interest, other penalties and attorneys' fees, and there is no evidence that that current enforcement and protections are insufficient.

AB 2187: This bill would have criminalized a person or employer's failure to pay all wages owed to an employee within 90 days of separation of employment. The Governor vetoed the bill, stating that the legislation is unecessary because there are already mechanisms in place (e.g. waiting time penalties) for enforcement of an employer's obligation to timely pay final wages.

We will continue to post developments on other employment-related bills currently before the Governor.

Labor and Employment Bills Before California’s Governor

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September 30 is the last day for Governor Schwarzenegger to sign or veto bills passed by the legislature this session. The following are labor and employment related bills currently before the Governor:

AB 482 (Mendoza): If signed by the Governor, this legislation will prohibit employers (with the exception of certain financial institutions) from using credit reports for employment purposes, unless (1) the applicant/employee would have access to money or other assets, and (2) the applicant/employee would be employed in either a managerial position, a position in the state Department of Justice, a sworn peace officer or law enforcement position, or a position for which credit information is required to be obtained by the employer.

AB 2187 (Arambula): If signed by the Governor, this legislation would add a provision to the Labor Code criminalizing an employer's willful failure to pay all wages due to an employee who has been discharged or who quit, within 90 days of the wages becoming due. Wage disputes before the Labor Commissioner and/or in a civil action are exempted. The legislation provides for jail time and/or fines up to $10,000.

AB 1881 (Monning):If signed by the Governor, this legislation will increase the liquidated damages that an employee can recover in an action for nonpayment of minimum wage. Whereas current law provides that an employee may recover liquidated damages equal to the amount unpaid plus interest, new law would provide for liquidated damages equal to twice the amount unpaid plus interest.

AB 2340 (Monning): If signed by the Governor, this legislation will require employers to allow employees to take up to three days of unpaid bereavement leave upon the death of a spouse, child, parent, sibling, grandparent, grandchild or domestic partner. Although the leave is unpaid, the employee is entitled to use any accrued paid time off he or she has available.

AB 1680 (Saldana): If signed by the Governor, this legislation will make pre-dispute arbitration agreements unenforceable as to disputes that involve violence or intimidation by threats of violence against a person because of that person's political affiliation, position in a labor dispute, sex, race, color, religion, ancestry, national origin, disability or medical condition (actions under the Ralph Civil Rights Act and/or Bane Civil Rights Act).

SB 1474 (Steinberg): If signed by the Governor, this legislation is expected to increase union representation of agricultural employees by providing the Agricultural Labor Relations Board the ability to set aside an election if it finds misconduct by the employer, and to certify a labor organization as the exclusive bargaining representative if the union previously presented the Board with authorization cards signed by more than 50% of employees.

SB 1304 (DeSaulnier): If signed by the Governor, this legislation will require private employers with 15 or more employees to provide up to 30 days paid leave for organ donation, and up to 5 days paid leave for bone marrow donation. Such leave would not run concurrently with any leave taken under the FMLA/CFRA.

AB 2284 (Evans): This is not a labor and employment bill per se, but it provides for a new means of trying civil cases in California, including employment cases. If signed by the Governor, this legislation will allow parties to a civil action (post-dispute) to agree to an expedited jury trial, including a jury of 8 or fewer members, a limit of 3 peremptory challenges per side, and a limit of 3 hours for each side to present its case. The verdict is binding, subject to any high/low agreement entered into by the parties. The parties would also waive rights to appeal and to file motions for direct verdict or similar post-trial motions.

We will post updates regarding whether Governor Schwarzenegger signs or vetoes these bills.

New Workers’ Compensation Posting Requirements for California Employers

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Effective October 8, 2010, California employers must comply with new workers' compensation posting requirements as a result of recently passed regulations. All California employers must post a new "Notice to Employees--Injuries Caused by Work" poster by October 8. All employers must also distribute a new "Your Rights to Workers' Compensation Benefits" pamphlet to all new employees who start work on or after October 8. Additionally, employers must begin using a revised DWC-1 Claim Form/Notice of Potential Eligibility. Finally, employers who utilize or who are implementing, changing or terminating a medical provider network (MPN) must create a MPN Notice to post and distribute to injured employees. Failure to comply with the new posting requirements can lead to fines of up to $7,000. For more information on the posting requirements and for sample forms, click here,here,and here.

Employees Cannot Sue Under Labor Code 351 for Alleged Tip Pooling Violations

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Today the California Supreme Court issued its decision in Lu v. Hawaiian Gardens Casino, holding that Labor Code section 351 does not provide private litigants a direct right to sue for an alleged taking of their gratuities by their employer.

The Lu case is a tip pooling case, in which the plaintiff alleged that his casino employer unlawfully required the plaintiff to contribute 15-20% of his tips to a tip pool that was then distributed among various employees. The plaintiff alleged that the tip pooling arrangement violated Labor Code section 351, which mandates that tips are the property of the employee for whom they are left. The trial court and the appellate court both held that the plaintiff's Labor Code section 351 claim was not a viable claim because there is no private right to sue to enforce that provision. This holding conflicts with another California appellate court decision, Grodensky v. Artichoke Joe's, which held that Labor Code section 351 does provide a private right of action.

The California Supreme Court granted review to resolve the narrow issue of whether Labor Code section 351 provides a private right of action. The Court answered this question in the negative, reasoning that neither the express language of the statute nor the legislative history reveals that a private right of action was created. The Court rejected the plaintiff's argument that this leads to an absurd result because employees are arguably left without a vehicle to enforce violations. The Court stated that in appropriate circumstances, employees can still pursue a tort claim for conversion and/or the Legislature was free to amend the Labor Code to add a private right of action.

The Court made clear that its opinion was limited to the issue of whether a private right of action exists under section 351. The Court expressed no opinion on the lawfulness of tip pooling arrangements or the parameters for tip pooling plans.

Although the Lu opinion is a positive development for employers, it should not be interpreted as eliminating the ability of employees to sue for alleged tip pooling violations. Employees may still bring suit under California's Unfair Competition Law and/or under a tort theory such as conversion. However, the remedies are different than those available under the Labor Code and , significantly, employees do not have the same ability to recover attorneys' fees in such a lawsuit as they do in cases brought under the Labor Code.

California Supreme Court Limits “Stray Remarks” Doctrine

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Today the California Supreme Court issued its decision in Reid v. Google, an age discrimination case decided favorably for Google at the trial court level. The trial court threw the case out on summary judgment, finding that the plaintiff's evidence of "stray remarks" by non-decisionmakers and/or unrelated to the decision-making process, was insufficient evidence of discrimination to merit a trial. The appellate court reversed the order granting Google summary judgment and held that the evidence of stray remarks was admissible and could be considered by the court in finding sufficient evidence of discrimination to deny an employer's motion for summary judgment. Today the California Supreme Court agreed and rejected strict application of the stray remarks doctrine in California discrimination cases. The Court also held that a party's objections to evidence (lodged in the trial court) are preserved on appeal, even if the trial court does not rule on those objections. (However, objections that are not specifically ruled upon are deemed presumptively overruled on appeal.) This post focuses on the decision as relates to the stray remarks doctrine.

Under the stray remarks doctrine, which is widely accepted in federal courts, evidence offered by a plaintiff that a co-worker or a non-decisionmaker made discriminatory remarks is not enough to defeat an employer's motion for summary judgment. Thus, by way of example, if a plaintiff is suing for age discrimination and the employer makes a motion for summary judgment, arguing that plaintiff's termination was the result of poor performance and not any discriminatory motive, the plaintiff may try to defeat summary judgment by presenting evidence that co-workers or a supervisor not involved in the termination decision made ageist comments in the workplace. Under the stray remarks doctrine, such evidence would be considered irrelevant and inadmissible because it is not deemed probative of establishing discriminatory animus on the part of those actually involved in the decision-making process leading to termination. As such, this type of evidence would not be enough to defeat the employer's motion for summary judgment.

Today's decision in Reid v. Google makes it more difficult for California employers to rely on the stray remarks doctrine because the Supreme Court specifically rejected strict application of the doctrine in California discrimination cases. The Court instead held that evidence of stray remarks is admissible and must be considered along with the totality of the facts and inferences to be drawn from those facts, in determining whether the plaintiff has presented sufficient evidence of discrimination to necessitate a trial on the merits. On the specific facts of the case before it, the Court held that Reid had presented sufficient evidence of age discrimination to make summary judgment inappropriate for Google. Notably, Reid presented more than just stray remark evidence. Reid presented statistical evidence arguably suggesting age discriminationand also presented evidence that Google provided him shifting reasons for the termination decision. In terms of "stray remarks," Reid additionally offered evidence that his superiors remarked that he was not a "cultural fit," that his ideas were "obsolete," and that he was "slow," "fuzzy," "lethargic," and did not display a "sense of urgency." Co-workers allegedly called him an "old man" and "old fuddy duddy" on some occasions. Although there was a lack of evidence tying any of these alleged remarks to the termination decision itself or to those responsible for making the decision, the Court held that this evidence, combined with other evidence, was admissible and sufficient evidence of discriminatory intent to defeat Google's motion for summary judgment. To be clear, however, the Court did not rule that Google discriminated against Reid. The Court simply held that there was sufficient evidence to proceed to a trial on that issue.

The Reid case is not a positive development for California employers' ability to win employment discrimination cases on summary judgment. However, the case should not be misinterpreted as suggesting that stray remarks are, in and of themselves, sufficient evidence to always defeat summary judgment. Rather, the case simply holds that stray remarks may be considered, along with other evidence, in assessing whether the plaintiff has enough evidence upon which a jury could conclude that discrimination was the motivating factor behind the adverse employment action.

Employer Prevails in Class Action Alleging Incomplete Wage Statements

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A recently published California case, Morgan v. United Retail Inc., illustrates just how ridiculous the wage and hour litigation front in California has gotten. In this case, the plaintiff brought a putative class action against her employer alleging the employer's pay stubs failed to comply with California Labor Code section 226 because the stubs did not have a separate line listing the employee's total hours worked. Instead, the stubs separately listed the total regular hours and the total overtime hours, but did not also provide the sum total of those two numbers on a separate line. The plaintiff succeeded in getting a class certified but then lost the war when the court granted the employer's motion for summary judgment. In finding for the employer, the court held that the employer's pay stubs satisfied the requirements of Labor Code section 226 by listing the total regular hours and the total overtime hours. The fact that the stubs did not separately list the sum total of these hours was insufficient to establish a violation of section 226.

Because the court found that the stubs complied with section 226, the court refused to decide two other arguments made by the employer--that the plaintiff was in no way injured by the omission of the sum total of hours on the pay stub, and that the employer's omission of the sum total was not knowing or intentional. Perhaps these issues will be decided in another one of the many cases now alleging hyper-technical wage statement violations.

Requiring Fitness for Duty Exam for Erratic Behavior Did Not Violate ADA

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In Brownfield v. City of Yakima, the Ninth Circuit held that the City did not violate the ADA by requiring a police officer employee to undergo a fitness for duty exam following several incidents of erratic behavior by the employee. The police officer in question had sustained a head injury causing him to be out of work for some time before being fully released to work. He returned to duty and worked for three years essentially without incident and received positive performance reviews. The following year, he had several incidents involving confrontations with co-workers and/or others during which he was visibly angry. He also told a co-worker he was so angry during a traffic stop that at the time he did not know what he was going to do. Based on these incidents, the City required the officer to undergo a fitness for duty exam. The exam resulted in a reported finding that the officer was not fit for police duty due to disability and that the disability was permanent. The officer's employment was ultimately terminated. He filed suit for, among other things, violation of the ADA.

The question before the Ninth Circuit was whether the City violated the ADA by requiring the officer to undergo a fitness for duty exam prior to the officer having any real performance problems. The court held that an employer does not have to wait until an employee's work performance declines before requiring a fitness for duty exam "if the employer is faced with significant evidence that could cause a reasonable person to inquire as to whether the employee is still capable of performing his job." The court cautioned that the employee's behavior cannot be merely annoying or inefficient. Rather, there must be objective evidence leading the employer to reasonably believe that the employee may not be capable of performing his job duties. In this case, the repeated instances of erratic behavior and angry outbursts by the officer were sufficient to lead the City to have such a belief even in the absence of specific performance problems on the part of the officer.

Employers should use caution when requiring "prophylactic" fitness for duty exams of employees. To pass muster under the ADA, a fitness for duty exam must be based on a showing of business necessity and it is always the employer's burden of proving business necessity.

Conducting Civil Discovery May Result in Waiver of Right to Arbitrate

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In Zamora v. Lehman, a California court held this week that a party to an arbitration agreement waives the right to compel arbitration by engaging in conduct inconsistent with the agreement to arbitrate. In this case, one of the parties to a lawsuit waited until four months before trial to seek to compel arbitration of the dispute. Prior to requesting arbitration, the party conducted discovery in the court proceedings. The court noted that the parties' arbitration agreement did not allow for discovery in arbitration and that by conducting discovery in the court action, the party acted inconsistently with the agreement to arbitrate. As such, the court found that the party had waived the right to compel arbitration of the dispute. The party seeking arbitration argued that any waiver would have to be "knowing" and that there was no knowing waiver because the party forgot that there was an arbitration agreement and did not recall the existence of the agreement until four months before trial and after conducting discovery. The party argued that upon "discovering" the agreement, she diligently pursued arbitration. The court rejected this argument and held that any right to arbitrate had been waived.

This case serves as a good reminder that parties to arbitration agreements must act diligently to pursue the right to arbitrate. Conduct inconsistent with arbitration may result in a finding of waiver.

San Francisco Healthcare Ordinance Stands

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The United States Supreme Court has denied review of the Ninth Circuit decision upholding San Francisco's employer mandated healthcare ordinance. In Golden Gate Restaurant Association v. City and County of San Francisco, the Ninth Circuit rejected the GGRA's legal challenge to the ordinance and held that the ordinance was not preempted by ERISA. Our prior post on the case is here. With the Supreme Court's denial of review of the Ninth Circuit decision, the GGRA is without further legal avenues to challenge the enforceability of the ordinance.

Legislation Limiting Employer Use of Credit Reports Pending in California

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AB 482, which would restrict the use of credit reports for employment purposes, is pending before the California Legislature this session. If enacted in its current form, AB 482 would prohibit employers, with the exception of certain financial institutions, from obtaining a consumer credit report for employment purposes unless the information is (1) substantially job-related, meaning that the position of the person for whom the report is sought has access to money, other assets, or confidential information; and (2) the position of the person for whom the report is sought is a position in the state Department of Justice, a managerial position, that of a sworn peace officer or other law enforcement position, or a position for which the information contained in the report is required to be disclosed by law or to be obtained by the employer. This legislation would significantly curtail the ability of employers to obtain or use credit reports in the hiring and background check process. A hearing on the proposed legislation is scheduled for June 29 in the Senate Judiciary Committee. We will continue to monitor this legislation and post developments here.

Public Hearings Next Week on Proposed Pregnancy Disability Regulations

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California's Fair Employment and Housing Commission (FEHC) has published proposed regulations concerning California's pregnancy disability leave requirements. The proposed regulations cover issues such as eligibility forleave, length of leave and minimum increments of leave,reasonable accommodation issues such asjob transfers, use of paid time off duringleave, and theparameters surrounding the rightto reinstatement upon return from leave. The FEHC is holding public meetings to solicit feedback regarding the proposed regulations on June 1at 10:00 a.m. in Los Angeles, and on June 2at 10:00 a.m. in San Francisco. For details regardingthe locations for these two publichearings, click here.

California employers should review the proposed regulations and consider having a representative attend one of the public hearings to offer feedback on any areas of concern. Employers may also submit written feedback and comments by email addressed to regs@fehc.ca.gov. The deadline for submitting written comments is 5:00 p.m. on June 2.

Court of Appeal Publishes Arenas Case Denying Class Certification

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This week, a California Court of Appeal agreed to publish the previously unpublished Arenas v. El Torito Restaurants, Inc.decision denying class certification of a putative class of restaurant managers who alleged they were misclassified as exempt employees. Our prior post on the Arenas case is here. The newly published decision is here. This is good news for California employers faced with defending wage and hour litigation.

EEOC’s Proposed Rule on “Reasonable Factors Other Than Age” Under ADEA

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The EEOC recently issued a proposed rule explaining the "reasonable factors other than age" (RFOA) defense under the Age Discrimination in Employment Act (ADEA). The RFOA defense shields an employer from liability in a disparate impact age discrimination case where the employer establishes that the challenged practice, even though shown to have a disparate impact on older workers, was facially neutral and based on reasonable factors other than age.

Under the EEOC's proposed rule, for the RFOA defense to apply, the challenged practice must be found to be objectively reasonable in the eyes of a reasonable employer in similar circumstances. The proposed rule lists several factors to be considered in evaluating whether the employer relied on reasonable factors other than age, including (1) the commonality of the business practice used by the employer; (2) the manner in which the practice was administered; (3) the employer's awareness of the possible adverse impact of the decision on older workers; (4) steps the employer took to assess and mitigate the impact of the decision on older workers; (5) the existence of less discriminatory alternatives; (6) the extent to which management engaged in age-related stereotyping; and (7) the extent to which the employer trained management on how to avoid discrimination.

The EEOC is accepting public comment on the proposed rule until April 19, 2010. To access the proposed rule, click here.

California Labor Commissioner Issues Opinion on Faltering Company Exception to WARN Act

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California's Department of Labor Standards Enforcement issued a new opinion letter this week analyzing the requirements of the faltering business exception under the WARNAct. As most employers know, in certain circumstances employers are required to give employees 60 days notice of a mass layoff or shutdown. There is a notable exception to the 60-day notice requirement, known as the faltering company exception. In California, the faltering company exception is codified at Labor Code section 1402.5. Companies may apply to the DLSE for a determination that the company meets the faltering company exception and thereby are excused from the requirement of giving their employees 60 days advance notice of a layoff. The DLSE's new opinion letter is fairly detailed and provides useful guidance on factors the DLSE will look at to determine whether the exception actually applies. Employers who believe they may qualify should review the new opinion letter for guidance. The letter (which concludes that the exception does not apply on the facts presented) is available here. Interestingly, the DLSE has also re-posted an older opinion letter wherein the DLSE found the faltering business exception applicable. That letter is available here.

Congress Enacts Legislation Extending COBRA Subsidies and Eligibility Period

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President Obama recently signed legislation enacted by Congress to extend the eligibility period for the COBRA subsidy by two months, to February 28, 2010. The legislation also extends the maximum period for receiving the subsidy to 15 months (the maximum was previously 9months). The Department of Labor has issued a new fact sheetregarding COBRA subsidies, which is available here. Additional reference material is available on the Department of Labor website at www.dol.gov/cobra. Employers should review theiremployeenotices and practices for compliance with the new legislationand extended eligibility and coverage periods.

Supreme Court To Address Electronic Privacy in the Workplace

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The United States Supreme Court has granted review in Quon v. Arch Wireless, which deals with the increasingly emerging issue of the scope of an employee's privacy in electronic messages sent using employer-provided equipment. Our previous post regarding the Quon case is here. Although the case deals with a public employer and is, therefore,specifically focused on the scope of Fourth Amendment privacy protection involving the use of text messaging in a fairly case-specific factual setting, the case may well provide somebroader insight on theSupreme Court's view toward privacy issues in the electronic era that will be of use to private sector employers as well. In the meantime,employers grappling with monitoring of employee electronic usage are best advised to have clear policies signed off on by employees, making clear that employees do not have an expectation of privacy in their usage of employer provided equipment and that the employer can and will monitor such usage. Because there generally is not a "one-size-fits all" policy for all employment situations, employers are best advised to consult with counsel in drafting a comprehensive policy. We will continue to provide updates regarding significant developments in the Quon case, and similar workplace privacy cases affecting California employers.

California Supreme Court Sends Strong Message Protecting Attorney-Client Privilege

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Today the California Supreme Court issued its decision in Costco v. Superior Court (Randall), holding that a trial court erred by having an attorney-client privileged memorandum reviewed and redacted by a discovery referee, and then ordering portions of the memorandum produced to the other side. Specifically, Costco had retained legal counsel to provide advice regarding the proper exempt/non-exempt classification of its managerial employees for wage and hour purposes. Costco's outside legal counsel interviewed some managerial employees and prepared a memorandum to Costco, including information about those interviews and providing legal advice based thereon. Later, Costco was sued by some managers for alleged misclassification and wage and hour violations. The plaintiff in the case tried to obtain the memorandum in discovery from Costco. Costco objected based on attorney-client privilege and refused to produce the memorandum. The trial court ordered that Costco produce the memorandum for review by a discovery referee and the discovery referee ultimately determined that portions of the memorandum relating to a recitation of facts provided to the attorney by the manager employees were not privileged and should be produced.

On review by the California Supreme Court, the Court held that the trial court (1) should not have ordered the memorandum disclosed to a discovery referee in order to rule on the claim of privilege, and (2) the entire memorandum was privileged. More specifically, the Court indicated that Evidence Code section 915 prohibits a court from ordering in camera review of a privileged document for the purpose on determining whether the document is actually privileged. Furthermore, the court ruled that regardless of whether or not conversations between an attorney and a corporation's employees were themselves privileged, a legal memorandum between an attorney and client is privileged regardless of whether it includes potentially unprivileged information. The fact that certain information may ultimately be discoverable through other means does not translate to a finding that the same information is discoverable in the form of a legal memorandum from an attorney to the client.

The Supreme Court's decision in Costco is here.

California Supreme Court Holds That Personnel Management Conduct Can Constitute Harassment

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The California Supreme Court issued its decision today in Roby v. McKesson Corp., addressing two important issues--(1) whether personnel management conduct can constitute "harassment" within the meaning of FEHA, and (2) the constitutional limits on awards of punitive damages. With respect to the first issue, the Court held that personnel management conduct, including reprimanding an employee in front of coworkers, belittling an employee's job, and shunning an employee during staff meetings, is conduct that can support a finding of hostile work environment harassment. The Court further held that evidence supporting discrimination claims and harassment claims often overlaps and is not necessarily exclusive. Such evidence does not need to be separately allocated between the two claims. This ruling blurs the distinction between conduct traditionally thought to support a "discrimination" claim on the one hand (e.g. written warnings, termination, etc.), and conduct traditionally thought to support a harassment claim on the other (e.g. discriminatory slurs, inappropriate physical contact, etc.). This decision will likely make it more difficult for employers (and individual supervisors) defending claims of harassment under FEHA to obtain summary judgment.

With respect to the second issue on the size of the punitive damages award, the Court reiterated the standards articulated by the United States Supreme Court in State Farm v. Campbell, 538 U.S. 408 (2003), for reviewing the appropriateness of a punitive damages award: (1) the degree of reprehensibility of the defendant's misconduct; (2) the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and (3) the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases. The decision contains a detailed explanation of how each of these factors is properly analyzed and applied. In this particular case, the Court held that the jury's $15 million punitive damage award was constitutionally excessive and that on the facts of the case, punitive damages could not properly exceed the amount of compensatory damages awarded to the plaintiff. The punitive damages were, therefore, reduced from $15 million to $1.9 million.

The Roby decision is here.

Non-Compete Agreements Take Another Hit in California

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Another California court has refused to enforce non-compete and non-solicitation clauses in employment contracts signed by California employees. In Dowell v. Pacesetter, Inc., the employees at issue worked in various capacities for a biotech company. Upon accepting employment, they signed an agreement providing that for 18 months after termination of employment they would not render services for a competitor if such service could aid the competitor in competing by application of "confidential information" the employee had access to during employment. "Confidential information" was broadly defined in the agreement to include "information disclosed to me or known by me as a result of my employment by the company, not generally known to the trade or industry in which the company is engaged, about products, processes, technologies, machines, customers, clients, employees, services and strategies...;.."

The agreement also contained a non-solicitation clause providing that for 18 months following termination of employment the employee would not solicit business from, sell to, or render service to any customers with whom the employee had contact during the last 12 months of employment.
The court determined that both the non-compete and non-solicitation clauses were void and unenforceable under California Business and Professions Code section 16600, which provides that contracts in restraint of trade are prohibited. The court further determined that the use of the agreements constituted unfair competition in violation of Business and Professions Code section 17200. The court rejected the employer's arguments that the clauses were enforceable because they were tied to protection of trade secrets and confidential information. The court stated that it doubted the continuing validity of any "trade secret exception" to 16600's prohibition on non-compete agreements, but reasoned that regardless of whether any trade secret exception still exists, it would not apply in this case because the agreement's definition of "confidential information" was much broader than "trade secret" information as defined under California law. By defining "confidential information" so broadly and precluding former employees from using such "confidential information," the employees were effectively precluded from competing altogether.

This decision is not welcome news for employers utilizing confidentiality and non-solicitation agreements for California employees, but employers should be mindful of the continuing trend of California courts in refusing to enforce these agreements.

132a Claimant Must Show Differential Treatment Based on Industrial Nature of Injury

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If you are a California employer who has ever had to take negative employment action against an industrially injured employee, then you are likely familiar with California Labor Code section 132a. Section 132a prohibits discrimination against an employee for filing a worker's compensation claim or for related activity. These claims are quite commonly filed by employees in conjunction with an underlying worker's compensation claim. Essentially, any time an employer takes adverse action against an industrially injured employee, the employer can expect a 132a claim to be filed. The employee cannot prevail on the claim, however, unless the employee proves that the adverse action was taken against him because of his industrial injury. Today, a California Court of Appeal further clarified that in order to prevail, the employee must establish that the employer treated the industrially injured employee differently than the employer would treat a non-industrially injured employee in the same circumstances.

In Gelson's Markets, Inc. v. WCAB, the employee sustained an industrial neck injury which resulted in the employee having surgery and being off work for over a year. Following surgery, the employee provided a doctor's note purporting to release the employee to return to work. However, the release was ambiguous, prompting the employer to follow up with the doctor for clarification. In the process of seeking clarification from the doctor, the doctor admitted that he did not believe the employee should return to work but should instead remain temporarily totally disabled. However, the employee wanted to return to work and wanted a release, so the doctor provided a release based on the employee's personal opinion that he could do his job. As a result of the doctor's admissions, the employer did not allow the employee to return to work. Litigation over the underlying worker's compensation claim proceeded, eventually resulting in an agreed medical evaluator opining that the employee could return to work. At that point, the employer allowed the employee to return to work (one and one-half years after the employee's original "release" from his treating doctor).

The employee filed a petition for discrimination under 132a, seeking lost wages for the time period his employer did not allow him to return to work. The WCAB granted the petition and awarded the employee lost wages, as well as a $10,000 statutory penalty. Specifically, the WCAB found that the employer's failure to return the employee to work following an unambiguous full-duty release, constituted discrimination against an industrially injured worker in violation of 132a.

The employer appealed and the appellate court agreed with the employer. Overturning the WCAB's award, the court held that the WCAB applied the wrong legal standard and erroneously concluded that the employee had been the victim of discrimination under 132a. The court explained that the proper standard to be used in evaluating a 132a claim is the standard articulated by the California Supreme Court in Dep't of Rehabilitation v. WCAB (Lauher),30 Cal.4th 1281(2003). Under Lauher,to prevail on a claim for discrimination under 132a, it is not enough for the employee to show he suffered some negativeconsequenceasa result of an industrial injury. Rather, the employee must show "discrimination"--i.e.differential treatment based on the industrial nature of the injury.

Applying the Lauher standard to the case before it, the court held that the employee had made no such showing. There were no facts suggesting that the employer would have treated an employee with a nonindustrial injury any differently in the circumstances. "[The employee] made no showing that [the employer] treated him disadvantageously because of the industrial nature of his injury, as compared to how [the employer] treated a nonindustrially injured employee." The court, therefore, concluded that the employee could not prevail on his claim for discrimination under 132a and annulled the WCAB award in the employee's favor.

The Gelson's Market case is a positive case for employers, making it harder for employees to prove discrimination under 132a and thereby lessening the risk associated with taking necessary adverse action against an industrially injured employee.

Party Claiming Misappropriation Must Identify Trade Secrets

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California employers who have litigated claims for misappropriation of trade secrets are likely familiar with the requirement that the party claiming its trade secrets were misappropriated must identify, with "reasonable particularity," the trade secrets that were misappropriated. Until this identification is made, that party cannot take discovery from the other side regarding the trade secret claims. A California court reiterated this principle this week in Perlan Therapeutics, Inc. v. Superior Court (NexBio). The Perlan case involves alleged trade secrets related to development of treatments for viral infections. The court, holding that Perlan did not sufficiently identify its trade secrets, applied the principle that "in a highly specialized technical field, a more exacting level of particularity may be required to distinguish the alleged trade secrets from matters already known to persons skilled in that field." The court found that Perlan's vague description of its alleged trade secrets failed to meet this standard.

Interestingly, the court also frowned on Perlan's attempt to include broad, catch-all language in its identification statement, to preserve the ability to add additional trade secrets to the list of those misappropriated later in the case. "Perlan is not entitled to include broad, catch-all language as a tactic to preserve an unrestricted, unilateral right to subsequently amend its trade secret statement. If Perlan does not know what its own trade secrets are, it has no basis for suggesting defendants misappropriated them. Nor is Perlan entitled to hide its trade secrets in plain sight by including surplusage and voluminous attachments in its trade secret statement."

The case contains a good discussion of what identification with "reasonable particularity" means under Code of Civil Procedure section 2019.210, and canvasses some of the recent California cases addressing this issue. The decision is here.

California Supreme Court Upholds Forfeiture Provision In Incentive Compensation Plan

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The California Supreme Court issued its decision in Schachter v. Citigroup, Inc. today, upholding the legality of an incentive compensation plan provision providing for forfeiture upon an employee's resignation or termination for cause. The plan at issue allowed employees to elect to receive shares of restricted stock at a reduced price in lieu of a portion of their annual compensation. Title to the shares vested two years after the purchase date. However, the plan provided that if the employee voluntarily resigned or was terminated for cause prior to the two-year vesting date, the employee forfeited his or her stock as well as the portion of annual income designated by the employee to be paid as shares of stock. (If an employee was involuntarily terminated without cause prior to vesting, the employee still forfeited the stock but was paid for the percentage of annual income the employee had directed be used to purchase stock.)

Plaintiff Schachter enrolled in the plan and elected to receive about 5% of his annual compensation in the form of restricted stock. Schachter voluntarily resigned prior to his shares vesting and, as a result, forfeited his shares as well as the amount of annual compensation that had been used to purchase the shares. Schachter filed a class action lawsuit against Citigroup alleging that the forfeiture provisions in the incentive compensation plan violated certain provisions of the California Labor Code prohibiting the forfeiture of earned but unpaid wages. The trial court granted summary judgment in favor of Citigroup and rejected Plaintiff's claims. A California Court of Appeal agreed.

Schachter petitioned for review by the California Supreme Court, which also agreed with the lower court rulings. The Court rejected Schachter's argument that Citigroup should have paid him, upon his resignation, cash for the amount of his annual income he had directed be used to purchase shares of stock. The Court reasoned that an employer and an at-will employee are free to renegotiate the terms of the employee's straight-time compensation at any time during employment. Schachter's election to participate in the incentive compensation plan, understanding its terms and its forfeiture provision, constituted Schachter's agreement to a restructured compensation package. Under the specific terms of the plan, Schachter's interest in the shares he purchased did not vest (and hence was not "earned") unless he remained employed for two years. Because Schachter voluntarily resigned prior to the two-year mark, he had not "earned" and had no right to receive either the shares or the money used to purchase the shares.

The Court also rejected Schachter's argument that at least a portion of his incentive compensation should have vested on a pro rata basis, much like vacation wages. The Court explained that unlike vacation, which is compensation for past services, an incentive compensation plan is inducement for continuing future service. As a result, the Court held that rules prohibiting forfeiture of accrued vacation do not apply to incentive compensation plans.

Although the Schachter case is an employer-friendly decision that allows employers more control and flexibility in structuring incentive compensation plans, employers should note that the California Supreme Court placed some emphasis on the fact that Schachter had voluntarily resigned and, therefore, it was Schachter's own actions that caused him to lose his contingent incentive compensation. Although the Court did not say that a forfeiture provision tied to involuntary terminations would per se violate California law, employers should be mindful that forfeitures in the case of involuntary terminations frequently give rise to a claim that the employer terminated the employee as a pretext to avoid payment of the incentive compensation. Therefore, particular care should be taken in drafting forfeiture provisions tied to involuntary terminations.

Reducing Hourly Rate In Exchange For 12-Hour Shift Does Not Violate FLSA

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The Ninth Circuit recently issued an employer-friendly ruling holding that an employer could lawfully reduce employees' base hourly rate in connection with allowing employees to work an alternative schedule of 12-hour shifts instead of 8-hour shifts. The employer was covered by an FLSA provision requiring payment of overtime for hours worked in excess of eight per day. In order to neutralize the additional costs associated with payment of an overtime rate for employees desiring to work 12-hour shifts, the employer and the affected employees agreed to a lower base hourly rate, with the effect being that the employees would earn about the same amount per pay period regardless of whether they worked a normal 8-hour shift schedule or the alternative 12-hour shift schedule.

Some of the employees later filed a class action alleging that the employer's reduction of their hourly rate was a subterfuge to avoid payment of mandated overtime premiums and thereby violated the federal Fair Labor Standards Act (FLSA). A federal district court disagreed and found that the employer's practice did not violate the FLSA. The employees appealed to the Ninth Circuit, but the Ninth Circuit agreed with the district court, concluding that an employer "may alter the 'regular rate' of pay in order to provide employees a schedule they desire" without violating the FLSA.

Although the Ninth Circuit's decision provides employers with much needed flexibility in considering whether to implement alternative workweek schedules, California employers are cautioned that the decision is based solely on federal law. The decision does not address California law, and it is not clear whether California's Department of Labor Standards Enforcement or a California court would find such a practice legal under California law. Notably, California's DLSE has previously issued at least one opinion letter disagreeing with some caselaw (the Belo case) on which the Ninth Circuit's decision is based. In addition, California Labor Code section 511(c) prohibits an employer from reducing an employee's regular rate of hourly pay as a result of the adoption, repeal or nullification of an alternative workweek schedule. As a result, California employers considering this type of pay reduction should consult counsel.

The Ninth Circuit decision is Parth v. Pomona Valley Hospital Medical Center and may be accessed here.

Ninth Circuit Liberally Interprets Standing Provisions of Federal Anti-Discrimination Laws

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The Ninth Circuit recently held that a non-disabled employee claiming retaliatory discharge had standing to sue her employer under Section 504 of the Rehabilitation Act of 1973 and Title II of the Americans With Disabilities Act--two laws which prohibit discrimination against disabled individuals by certain public entities, including the Plaintiff's employer, the Riverside County Office of Education.

The plaintiff in the case, Susan Barker, was a special education teacher for Riverside County.During the course of her employment, she complained that the County's special education services were noncompliant with federal and state law. Barker alleges that following her complaint, her supervisors began to retaliate against her by excluding her from meetings, reducing her caseload, failing to respond to her emails and phone calls, and similar conduct. Barker alleged that she was ultimately forced to resign as a result of her employer's alleged retaliatory conduct.

Barker subsequently filed a lawsuit against the Riverside County Office of Education, alleging retaliation under the Rehabilitation Act and the ADA. A federal District Court dismissed Barker's complaint, finding that because Barker was not "disabled" within the meaning of either law, she did not have standing to sue under such laws. Barker appealed and the Ninth Circuit agreed with Barker.Liberally construing the anti-retaliation provisions of these two laws, the Ninth Circuit held that the provisions prohibit retaliation not only against disabled individuals, but also against non-disabled individuals who advocate for the rights of disabled individuals. As a result, the Court held that Barker could proceed with her retaliation claims against Riverside County.

The case is Barker v. Riverside County Office of Education and the opinion is here.

EEOC Issues New Poster Incorporating New GINA Law

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The Genetic Information Nondiscrimination Act of 2008 (GINA) takes effect November 21, 2009.GINA, which applies toall entities covered by Title VII, prohibits discrimination in employment based on an employee's(orthe employee'sfamily members') genetic information. The Act furtherprohibits employers,with few exceptions, from requesting or obtaining geneticinformation about an employee. The EEOC hasnow issued a revised "EEO Is The Law"poster, incorporatingthe requirements of GINA. Covered employersshoulddownload andpost the new poster this November. The new poster is available on the EEOCwebsite and can be accessedhere.

Employer Liability for Injury Suffered En Route to Doctor?

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Do you think it is obvious that an employer should not be held liable for injuries suffered by an employee as a result of running a stop sign outside of work hours? A California Workers' Compensation judge apparently did not think so. In Esquivel v. WCAB, an employee who worked in San Diego and was receiving regular medical treatments in the San Diego area for an industrial injury decided to travel to Los Angeles some 130 miles away to visit her family. Shortly after leaving Los Angeles to drive back to San Diego to attend a medical appointment the employee ran a stop sign, caused a collision and sustained serious injuries as a result. She sought worker's compensation benefits for the injuries caused by the car accident, contending that because she was on her way to a medical appointment for an industrial injury, her employer bore responsibility for the further injuries (albeit unrelated) she sustained en route to her appointment. The workers' compensation judge agreed with the employee and found that the motor vehicle accident injuries were a compensable consequence of the employee's existing industrial injuries.

The employer rightfully sought reconsideration from the Workers' Compensation Appeals Board and the Board agreed with the employer, reversing the award of additional benefits. The WCAB held that the accident occurred too remotely from the employee's home and doctor's office to hold the employer responsible for the risk of that injury. The employee appealed from the WCAB order.

On appeal, the California Court of Appeal agreed with the WCAB and held that the employee's injuries occurred outside the reasonable geographic area of her employer's compensability risk. To be clear, the court did not hold that an employer is never liable for injuries sustained by an employee en route to a medical appointment for an industrial injury. To the contrary, the court held that an employer bears the risk and responsibility for new injuries an employee suffers while en route to or from a medical appointment within a "reasonable geographic area." The court explained that there is no "bright line" test for what constitutes a "reasonable geographic area" and that it must be determined on a case by case basis. However, on the facts before the court, the employee was, for purely personal reasons, some 130 miles away from her work, her residence, and the location of her medical appointments at the time of her car accident. The court held that in these circumstances, the injury was clearly outside the reasonable geographic area the employer could have assumed risk for.

Interestingly, the court did not address the employer's additional argument that the employer should not have been liable for the employee's injuries (regardless of where they occurred geographically) because the injuries were caused by the employee's own fault in running a stop sign (according to the CHP report of the accident). What are we missing here?

California Will Recognize Rights of Same-Sex Couples Married Outside California

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Yesterday Governor Schwarzenegger signed SB 54 into law, granting same-sex coupleslegally married outside ofCalifornia the same basic rights, benefitsand obligations as married couples living in California. This new law ameliorates some of the effects of the voter-approved ban on same-sex marriage that was passed in November 2008 and later upheld by the California Supreme Court. SB 54 amends Section 308 of the California Family Code toprovide that California will recognize same-sex marriages validly contracted outside ofCalifornia, by ensuring thatthese same-sex couples will have the same rights, protections and benefits, and shall be subject to the same responsibilities, duties and obligations under law asmarried couples--with the sole exception of having the designation of "marriage" in California.

For California employers, this means that same-sex coupleslegally married outside of California willneed to be afforded the same rights and benefits asregistered domestic partners (in 2003, Californiaenacted a law affording registereddomesticpartners manyofthe same rights and benefitsas married couples). This includes, of course, access tofamily healthinsurance plans and the ability to use certain types of leaveto attend to the illness of a partner.

To view the textof SB 54, click here.

EEOC Issues Proposed ADAAA Regulations

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The EEOC has issued its long awaited proposed regulations interpreting the Americans With Disabilities Amendments Act of 2008. The proposed regulations explain the new broad standard for determining whether an individual is disabled. Under the proposed regulations, mitigating measures, such as medication or assistive devices, must be disregarded when determining whether an individual is disabled. (The only specific exception is that eyeglasses/contact lenses can be considered.) Thus, it generally is the individual's non-medicated condition that must be considered in analyzing whether the condition substantially limits a major life activity. Furthermore, the meaning of the term "substantially limits" has been relaxed such that it is no longer necessary to show that the condition prevents or even "significantly" or "severely" restricts the individual's ability to perform a major life activity. Instead, it appears to be enough if the individual is limited in ability to perform a major life activity when compared to most people in the general population.

Where work is the major life activity at issue, the proposed regulations explain that the individual need not show that she is limited in her ability to perform a wide range of jobs, but rather that the individual is limited in her ability to perform her job and jobs with similar physical requirements.

Significantly, under the proposed regulations, a condition that is episodic or in remission (such as cancer or epilepsy) is still a disability if it would substantially limit a major life activity when active.

The proposed regulations list several conditions that "will consistently meet the definition of disability:"deafness, blindness, intellectual disability (formerly referred to as mental retardation), partially or completely missing limbs, mobility impairments requiring the use of a wheelchair, autism, cancer, cerebral palsy, diabetes, epilepsy, HIV or AIDS, multiple sclerosis and muscular dystrophy, major depression, bipolar disorder, post-traumatic stress disorder, obsessive compulsive disorder, and schizophrenia.

Conditions that ordinarily will not be considered disabilities are temporary, non-chronic impairments of short duration with little or no residual effects, such as the common cold or flu, or a sprain or broken bone that is expected to heal completely.

The proposed regulations also expand the meaning of the term "regarded as disabled." To succeed on a claim that the employer discriminated against an employee because the employer "regarded" the employee as disabled, the employee need only show that the employer took adverse action against the employee because the employer regarded the employee as having an impairment. The employee does not have to prove that the employer believed the impairment "substantially limited" the employee's ability to perform major life activities. However, the impairment must be more than minor or transitory (such as a cold or the flu). The proposed regulations provide, by way of example, that if an employer refuses to hire an applicant with a facial tic (even though the employer does not know the facial tic is caused by Tourette's Syndrome), the EEOC would consider the employer to have regarded the applicant as disabled.

The ADAAA and its accompanying proposed regulations greatly expand the meaning of the term disabled under federal law. This change does not greatly impact California employers who are already covered by California's historically broad definition of disability under California's Fair Employment and Housing Act. However, multi-state employers will be impacted. The change is also likely to change the focus of disability discrimination litigation such that there will be much less focus on litigating the issue of whether or not an employee is disabled (most will be) and more focus on the issue of whether the motivation for the employer's adverse action was discrimination or a legitimate, non-discriminatory reason.

The proposed regulations can be accessed here. The proposed regulations are open for a public comment period through November 23, 2009. In addition, the EEOC will be holding four town hall meetings this November in Chicago, San Francisco, New Orleans, and Philadelphia, to share information and gather comments about the proposed regulations. Formore information, visit the EEOC website at www.eeoc.gov.

Although the proposed regulations are not final yet, the ADAAA is final and is current law. As a result, covered employers should ensure that management and/or human resource personnel are trained in understanding and applying the new law when addressing disability issues in the workplace.