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

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.

EEOC Says Federal Anti-Discrimination Law Protects Transgender Employees

This week, the Equal Employment Opportunity Commission (EEOC) issued a ruling giving transgender individuals protections against discrimination in the workplace, concluding that "intentional discrimination against a transgender individual because that person is transgender is, by definition, discrimination 'based on...sex' and such discrimination...violates Title VII."  For California employers, discrimination against transgender employees and job applicants has been prohibited since 2004, when the Legislature passed the Gender Nondiscrimination Bill of 2003 and in so doing amended the Fair Employment and Housing Act to specifically include transgender people.  But California is in the minority of states, as only fifteen other states prohibit employment discrimination based on gender identity.  No federal court has held that Title VII's anti-discrimination provisions apply to transgender people, but the practical effect of the EEOC's ruling is transgender people are now protected by federal law and have legal recourse if they are denied a job or fired because they are transgender.

The ruling came as a result of a discrimination complaint filed by a transgender woman who was denied a job as a ballistics technician at the Walnut Creek, California laboratory of the federal Bureau of Alcohol, Tobacco, Firearms, and Explosives.  The applicant was a veteran and former police detective, and initially applied for the position as a male and was told that she was virtually guaranteed the job.  After she disclosed her gender transition in the middle of the hiring process, the applicant was told that funding for the position had been cut, and subsequently learned that someone else had been hired for the job.

Even though the complaint was brought against a federal agency, the EEOC's ruling applies to both public and private employers alike.  California employers should have already taken measures to ensure against discrimination, including discrimination against those who are transgender.  But given yesterday's decision, companies in all fifty states - including California employers with operations in other states - should take steps to prevent such discrimination.  For example, employers should make sure that "gender identity" is part of the existing company nondiscrimination and anti-harassment workplace policies, and strive to create a non-discriminatory environment in the workplace so as to avoid costly litigation.

NLRB Indefinitely Postpones Posting Requirement

As we reported earlier this week, the DC Circuit temporarily enjoined the NLRB's rule requiring employers to post its Employee Rights Poster.  In response to the DC Circuit's order, the NLRB has announced that is postponing its mandate until the courts finally rule on the legality of the posting requirement.  The NLRB's Chairperson announced:  "In view of the DC Circuit's order, and in light of the strong interest in the uniform implementation and administration of agency rules, regional offices will not implement the rule pending the resolution of the issues before the court."  For a copy of the NLRB announcement, click here.

Based on this development, employers are not required to post the NLRB poster on or before April 30.  We will continue to keep you updated.

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

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

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

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

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

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

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.

Webinar: The Brinker Decision and How It Impacts Your Meal Break Policies

The California Supreme Court is expected to issue its long-awaited decision in Brinker v. Superior Court (Hohnbaum) by April 12, 2012.  This decision is expected to finally answer the much litigated question of what it means to "provide" a meal break under California law.

Must employers ensure that non-exempt employees take full 30 minute meal breaks, or must they merely provide employees the opportunity to take such breaks?  The Court's decision will also address whether a meal break is required to be provided every five hours on a rolling basis.  These important issues have been the subject of numerous class action lawsuits against California employers and have left employers with uncertainty on how best to administer and enforce meal break requirements to avoid such litigation.

Please join us for a one time complimentary webinar on April 18, 2012 from 10:30-11:45 a.m. PDT during which we will discuss the Brinker decision, how it impacts meal break policies and practices for California employers going forward, and what employers should do in its wake.  To register, click here.