NLRB Indefinitely Postpones Posting Requirement

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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.

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. 

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 Employers May Be Barred from Requiring Disclosure of Social Media Passwords

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Last week, we posted about the recent uproar over employers and colleges seeking to require applicants to surrender their Facebook passwords as a condition of hiring/admission and how that practice may be analyzed by the courts under an invasion of privacy challenge. 

California employers should also note that the California legislature has proposed a bill that would specifically outlaw the practice.   AB 1844, proposed by Assemblywoman Nora Campos (D), if enacted as currently drafted:

(a)  would prohibit an employer from requiring an employee or prospective employee to disclose a user name or account password to access social media used by the employee or prospective employee; and

(b) would also provide that an employer does not fail to exercise reasonable care to discover whether a potential employee is unfit or incompetent by the employer’s failure to search or monitor social media, as defined, before hiring the employee.

The bill would add sections 980-982 to the California Labor Code to read as follows:

980.  As used in this chapter, "social media" means an electronic medium where users may create and view user-generated content, including uploading or downloading videos or still photographs, blogs, video blogs, podcasts, or instant messages.

981.  For purposes of a claim of negligent hiring, an employer does not fail to exercise reasonable care to discover whether a potential employee is unfit or incompetent by the employer's failure to search or monitor social media before hiring the employee.

982.  An employer shall not require an employee or prospective employee to disclose a user name or account password to access social media used by the employee or prospective employee.

This bill is a mixed bag, as currently drafted.  Proposed section 982 of the Labor Code would make it impossible for those California employers who wish to require applicants to surrender their Facebook and other social media passwords to engage in this conduct.  Certain employers would see this as an unfair restriction.  However, proposed section 981 of the Labor Code would protect California employers from negligent hiring lawsuits that are based on an employer's failure to search or monitor an applicant's social media profile and this would likely be seen as a positive piece of legislation by many California employers. 

AB 1844 was referred to the Assembly Committee on Labor and Employment on March 5.  We would not be surprised if this bill gained some traction as it may end up getting support from both employers and employees.  We will continue to keep you updated on this and other important California legislative developments.

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.