2017 Employment Law Update│Part 2

2017 Employment Law Update│Part 2

To learn more about the new and amended labor laws that could impact California businesses in 2017 and what changes to start preparing for, read Part One of our 2017 Employment Law Update here >>>

Part Two of our 2017 Employment Law Update highlights the cases that set new precedents in the field of employment law and shaped labor law legislation in 2016 and beyond.

It is important to note that every employment law situation is unique and this legislative update is not a replacement for legal counsel. If you have questions on if one or more of these cases are relevant to your business, contact the Employment Law Department at Young Wooldridge, LLP.

EMPLOYER LIABILITY

Jorge v. Culinary Inst. of Am., 3 Cal. App. 5th 382 (2016)

Leopoldo Jorge, Jr., sued Almir Da Fonseca and his employer, the Culinary Institute of America, for injuries Jorge sustained when he was struck by a car driven by Da Fonseca. Da Fonseca, who is employed as a chef instructor for the Institute, had finished his shift and was driving home in his own car at the time of the accident. A jury found that Da Fonseca was negligent and that he was acting within the scope of his employment when he injured Jorge and awarded Jorge $885,000. The Institute filed a motion for judgment notwithstanding the verdict, which the trial court denied. The Court of Appeal reversed the judgment and the order denying the Institute’s motion, holding that pursuant to the “going and coming rule” the Institute was not liable for the accident because Da Fonseca was not acting within the scope of his employment when he was driving home; the Court rejected Jorge’s claim that the Institute required Da Fonseca to use his personal vehicle for work purposes especially during his ordinary commute home.

Aluma Sys. Concrete Constr. of Cal. v. Nibbi Bros., Inc., 2 Cal. App. 5th 620 (2016)

Aluma (the “Contractor”) was sued by employees of Nibbi Bros. (the “Employer”) for injuries sustained on the job. Contractor sued Employer for indemnification based on the parties’ contract. The trial court sustained the Employer’s demurrer to the complaint on the ground that the employees’ lawsuit set forth claims only against the Contractor and not against the Employer. The Court of Appeal reversed, holding that under Proposition 51 the Employer could be liable for its proportionate share of comparative fault, regardless of what was alleged in the complaint. The Court further held that the duty to defend is different from the duty to indemnify – while the former may depend on the framing of the third party’s complaint because the duty is triggered by a claim, the latter does not arise until liability is actually proven.

Local TV, LLC v. Superior Court, 3 Cal. App. 5th 1 (2016)

Kurt Knutsson, a technology reporter who created “Kurt the CyberGuy” video segments for use on television news programs and station websites, sued Local TV for the use by its stations of CyberGuy material. Although Knutsson had entered into a written agreement pursuant to which the CyberGuy material was distributed to the websites of various television stations, Knutsson alleged misappropriation of his name and likeness; Local TV claimed that Knutsson had consented to the use. The trial court denied Local TV’s motion for summary judgment, but the Court of Appeal granted Local TV’s petition for a writ of mandate, holding that Knutsson had consented to allow Local TV to use the CyberGuy material in the manner in which it had used it.

WRONGFUL TERMINATION

Dang v. Maruichi Am. Corp., 207 Cal. Rptr. 3d 658 (Cal. Ct. App. 2016)

Khanh Dang sued his former employer for wrongful termination in violation of public policy, claiming that Maruichi had discharged him for engaging in concerted activity relating to unionizing efforts. The trial court granted Maruichi’s motion for summary judgment on the ground that it lacked jurisdiction because Dang’s claim was preempted by the National Labor Relations Act (“NLRA”). The Court of Appeal reversed, holding that the discharge of a supervisor based on his participation in union or concerted activity is not unlawful under federal law because supervisors (unlike employees) are not protected by section 7 of the NLRA; further, section 8 of the Act could not have been violated because Dang’s termination did not interfere with the employees’ section 7 rights. Therefore, a finding of “Garmon preemption” was not warranted, and the employer’s motion should have been denied.

Sanders v. Energy Northwest, (2016) 812 F.3d 1193

The Ninth Circuit held that a single difference of opinion concerning one existing internal condition report lacks a sufficient nexus to a concrete ongoing safety. In order to qualify as a whistleblower action, the behavior reported must be more than a single difference of opinion that does not arise to a concrete ongoing safety concern. In Sanders, the Plaintiff, a maintenance manager for Defendant, Energy Northwest (a nuclear power plant), claimed that his employment was terminated in retaliation for objecting to the severity level designation of an internal “condition report” that was generated by other employees at the plant. Sanders filed a whistleblower complaint with the Department of Labor (“DOL”), and when the DOL failed to issue a final decision within one year, Sanders filed a complaint in federal court, alleging that he was retaliated against for objecting about a “nuclear safety issue.” The district court granted summary judgment in favor of Energy Northwest on the ground that Sanders failed to establish that a case of retaliation because his activity did not rise to the level of protected” under the Energy Reorganization Act. The Ninth Circuit affirmed dismissal on the ground that “Sanders’ single expression of a difference of opinion [concerning] one existing internal condition report lacks a sufficient nexus to a concrete, ongoing safety concern.”

Davis v. Farmers Ins. Exch., 245 Cal. App. 4th 1302 (2016)

William A. Davis brought suit against Farmers, claiming he had been wrongfully classified as an independent contractor rather than an employee and asserting that he had been wrongfully terminated on the basis of his age. The trial court directed a verdict in Farmers’ favor on the wage claim, and the jury found for Farmers on the wrongful termination claim, having concluded that Farmers would have made the same termination decision for legitimate non-discriminatory reasons – even though the jury agreed with Davis that his age was a “substantial motivating factor” in his termination. The Court of Appeal affirmed the judgment in favor of Farmers on the wrongful termination claim, holding that the trial court had properly instructed the jury based upon Harris v. City of Santa Monica, 56 Cal. 4th 203 (2013). However, the appellate court reversed the directed verdict, holding that Davis had presented sufficient evidence to allow his wage claim to go to the jury. The Court also affirmed denial of Davis’s claims for recovery of attorney’s fees, costs and injunctive and declaratory relief. See also Goodrich v. Sierra Vista Reg’l Med. Ctr., 2016 WL 1702035 (Cal. Ct. App. 2016) (former employee who filed three motions attempting to re-litigate trial court’s denial of her challenge to hospital’s termination decision was properly declared a vexatious litigant).

Green v. Brennan, Postmaster General 578 US _ (2016)

On May 23, 2016, The Supreme Court settled the issue of when the statute of limitations begins for an employee to file a constructive discharge claim. An employee who resigns in the face of intolerable discriminatory or harassing working conditions can bring a claim for wrongful termination, known as “constructive discharge.” Constructive discharge covers situations where the working conditions are so intolerable that a reasonable person in the employee’s situation would feel that he or she had no choice but to resign. A resignation in the face of such intolerable conditions is treated as being the same as an actual discharge. The specific question before the Court was when does the filing period for a constructive discharge claim begin to run for federal employment discrimination claims: Is it when an employee resigns, as five federal circuit courts, including the Ninth Circuit, have held? Or is it at the time of an employer’s last allegedly discriminatory act giving rise to the resignation, as three other federal circuit courts have held? The case involved a former U.S. Postal Service Employee, Marvin Green, who claimed that he was the victim of racial discrimination. In 2008, he was passed over for a promotion and complained it was due to race. In December 2009, while his complaint was pending, the Postal Service notified Green that it was investigating him for criminal misconduct for intentionally delaying the mail — an investigation Green claims was retaliatory. On December 16, Green and the Postal Service signed an agreement where the Postal Service agreed not to pursue criminal charges in exchange for Green’s promise to resign or take a new job. Green chose to retire and submitted his resignation on February 9, effective March 31. The Tenth Circuit held that Green’s claim was time-barred because the date Green signed the settlement agreement was the Postal Service’s last discriminatory act triggering the filing deadline that Green failed to meet. In a 7-1 decision, the U.S. Supreme Court held that when an employee resigns in the face of intolerable discrimination, the resignation itself is part of the alleged discrimination. The time period for filing a constructive discharge claim “begins running only after the employee resigns.”  The Court also noted that this means the clock starts when the employee gives definite “notice” of his or her resignation, not the date the resignation is effective. For example, if the employee gives two weeks of notice, the clock starts to run on the day he tells his employer, not two weeks later on the employee’s last day of work.

Rosenfield v. GlobalTranz Enters., Inc., 2015 WL 8599403 (9th Cir. 2015)

Alla Rosenfield, who worked as the Director of Human Resources and Corporate Training for GlobalTranz, was fired after she lodged multiple oral and written internal complaints that the company was not in compliance with the requirements of the Fair Labor Standards Act (FLSA). In this lawsuit, she alleges that she was terminated in violation of the anti-retaliation provision of the FLSA (29 U.S.C. § 215(a)(3)) as well as Arizona state law. The district court granted the employer’s motion for summary judgment on the ground that Rosenfield was not entitled to the protections of the statute because she had not “filed any complaint” as required by the law. The United States Court of Appeals for the Ninth Circuit reversed, holding that the company understood Rosenfield’s “interactions” with the company to be “complaints” on the subject of FLSA compliance and because “FLSA compliance was not part of [her] portfolio, her advocacy for the rights of employees to be paid in accordance with the FLSA could not reasonably have been understood (if it was) merely to be part of [her] regular duties” as a manager.

Prue v. Brady Co. /San Diego, Inc., 196 Cal. Rptr. 3d 68 (Cal. Ct. App. 2015)

Adam Prue alleged wrongful termination of his employment based upon a work related injury, which violated the public policy set forth in Labor Code § 132a. The trial court granted the employer’s motion for summary judgment on the grounds that Section 132a “cannot be the basis for a tort action for wrongful termination” and that the claim was barred by the one-year statute of limitations set forth in Section 132a. The trial court also denied Prue’s motion for leave to file an amended complaint to add a cause of action for violation of the public policy represented by the Fair Employment and Housing Act (FEHA). The Court of Appeal reversed and held that the complaint alleged sufficient facts showing that the termination of Prue’s employment violated FEHA’s public policy against discrimination based upon a disability as well as the public policy supporting Section 132a. Similarly, the Court held that the two-year statute of limitations applicable to common law tort actions applied, not the one-year statute found in Section 132a. The trial court also erroneously denied Prue leave to amend his complaint.

Gracia v. Sigmatron, International, Inc., Case No. 15-3311

A recent 7th Circuit Court of Appeals decision, Gracia v. Sigmatron, International, Inc., Case No. 15-3311, is a good reminder to employers to be careful in taking adverse action against an employee who recently engaged in statutorily protected activity.

In Gracia, a longtime employee, who had complained of sexual harassment by her supervisor and filed a charge of sex discrimination with the Equal Employment Opportunity Commission (EEOC), was fired two weeks later for allegedly allowing a subordinate to make a production error on a customer order.  The employee sued her former employer for sex discrimination and retaliation. While Gracia was unsuccessful on her sexual harassment claim, a jury found in her favor on the retaliation claim, awarding $57,000 in compensatory damages and $250,000 in punitive damages.  Gracia was highly regarded and had received a number of promotions. In her current role as assembly supervisor, she was responsible for production output, quality, and overseeing the work of her team members on the assembly line. Gracia’s male supervisor began sending her sexually graphic photographs through the company’s email system. Gracia did not complain because of her supervisor’s position and his friendship with the company’s president. The supervisor then began writing Gracia up for attendance issues, even though Gracia had not been previously written up for similar problems in the past and, in fact, had been told her attendance was “excellent.” Gracia alleged the supervisor began calling her at home and asking her out. She declined and was suspended a few days later for attendance problems. Gracia then complained to HR about her supervisor. HR informed the company’s president, who ultimately told Gracia and her supervisor to ‘shake hands’ and get along. Gracia, unhappy with the company’s response, filed a charge with the EEOC. Two weeks later, she was fired after one of her subordinates made a mistake, even though others made similar mistakes and were not terminated. Perhaps of significance to the jury on the punitive damages award was evidence that the company never admonished the supervisor for sending the graphic photographs but rather simply told him to stop using the company’s email for non-business reasons. The company also refused to admit the photographs violated the company’s sexual harassment policy.

On the retaliation claim, the 7th Circuit reiterated the general rule that timing alone is rarely enough to support a retaliation claim; however, if there is other circumstantial evidence, it may raise an inference of retaliatory motive. Here, the suspicious timing of Gracia’s termination, coupled with evidence that others had not been terminated for similar mistakes, supported the retaliation claim.

WAGE AND HOUR

Ochoa, et al. v. McDonald’s Corp., et al. 133 F. Supp.3d 1228 (2015)

Despite finding that as a matter of law McDonald’s was not directly liable as a joint employer, a California federal judge granted class certification to McDonald’s workers, saying the claims against McDonald’s Corp. can proceed on a class wide basis under a theory of ostensible agency. Under this theory, McDonald’s could be liable because employees reasonably believed they were employed by McDonald’s.  The workers filed the class action in 2014, alleging a variety of wage and hour violations by defendant the Edward J. Smith and Valerie S. Smith Family Limited Partnership (“Smith”), which owns and operates five restaurants in California under a franchise agreement with McDonald’s. Plaintiffs also sued McDonald’s on direct and vicarious liability grounds.  McDonald’s moved for summary judgment on the grounds that it was not a joint employer. The Court granted summary judgment on plaintiffs’ direct liability theories, finding that McDonald’s is not directly liable as a joint employer with the Smiths, but denied it on the issue of whether McDonald’s may be liable on an ostensible agency basis. Ostensible agency exists where (1) the person dealing with the agent does so with reasonable belief in the agent’s authority; (2) that belief is “generated by some act or neglect of the principal sought to be charged,” and (3) the relying party is not negligent. (Kaplan v. Coldwell Banker Residential Affiliates, Inc., 59 Cal. App. 4th 741, 747 (1997)). Plaintiffs then settled with the Smiths, leaving the McDonald’s entities as the last standing defendants. Plaintiffs moved for certification of a class to pursue claims for: (1) miscalculated wages; (2) overtime; (3) meals and rest breaks; (4) maintenance of uniforms; (5) wage statements; and (6) related derivative claims. McDonald’s argued that allegations of ostensible agency are incapable of being resolved on a class wide basis because they involve individualized questions of personal belief and reasonable reliance on an agency relationship. The court disagreed, holding that ostensible agency does not demand unique or alternative treatment, and “certainly does not stand entirely outside Rule 23 as impossible to adjudicate on a class wide basis. “The court then reviewed the evidence to determine whether to allow class wide adjudication against McDonald’s. Plaintiffs tendered “substantial and largely undisputed evidence that the putative class was exposed to conduct in common that would make proof of ostensible agency practical and fair on a class basis.” For example, plaintiffs submitted declarations showing that they were required to wear McDonald’s uniforms, packaged food in McDonald’s boxes, received paystubs, orientation materials, shift schedules and time punch reports all marked with McDonald’s name and logo, and in most cases applied for a job through a McDonald’s website. The fact that each employee spent every work day in a restaurant heavily branded with McDonald’s trademarks and name was also informative. These facts were shared in common across the proposed class and made class wide adjudication of ostensible agency against McDonald’s a suitable and appropriate procedure. On this record, the court found that plaintiffs did enough to show that the ostensible agency issue can be litigated on a class wide basis, although the court noted that whether plaintiffs will ultimately prevail or fail in their proof of agency is for the trier of fact to decide and not for the court to resolve in determining certification.

Despite vowing to the challenge the plaintiffs’ ability to sue on class basis, the parties ultimately agreed to settle the dispute for $3.75 million dollars, in October 2016.

Troester v. Starbucks 2014 WL 1004098 

The California Supreme Court agreed to review Troester v. Starbucks, a case involving the issue of whether de minimis work time must be compensated under California law.  In Troester, the plaintiff was a former employee of Starbucks who sued the coffee giant because he was not paid for certain closing-related activities such as time spent walking out of the store after activating the alarm and time spent locking the door — activities that took a minute or two and effectively had to be performed after the plaintiff clocked out on Starbucks’ timekeeping software.  Plaintiff sued for unpaid wages under California law.  A federal district court in California granted summary judgment in favor of Starbucks, ruling that this “work” time was de minimis and that Plaintiff was not owed compensation for it.  Plaintiff appealed to the Ninth Circuit.  Rather than decide the issue on the merits, the Ninth Circuit certified the issue to the California Supreme Court (because the issue is one of California law).  Specifically, the Ninth Circuit asked the state high court for its opinion on whether California law recognizes a de minimis standard similar to the de minimis standard that has been recognized and applied under the Fair Labor Standards Act for decades.  Last week, the California Supreme Court agreed to decide this issue for the Ninth Circuit.

Although a decision likely is a year or more away, it will provide useful guidance for California employers and for California employment law practitioners. Indeed, the state’s Department of Labor Standards Enforcement itself has endorsed the de minimis standard.  However, many plaintiffs’ lawyers nonetheless argue that California wage and hour law is more protective of employees than the FLSA and that California does not recognize a de minimis standard whereby de minimis time worked need not be compensated.

Flores v. City of San Gabriel (June 2, 2016, 14-56421) _ F.3d _ [2016 WL 3090782]

The City of San Gabriel (“City”) offers a Flexible Benefit Plan that provides employees with a set monetary amount to purchase various benefits. Employees may decline to use these funds for medical benefits, receiving them instead as cash payments added to their paychecks. The City did not include these cash-in-lieu of benefits payments in its determination of recipients’ regular rates of pay, and consequently did not incorporate them into its calculation of non-exempt employees’ overtime rates. Fifteen current and former police officers sued the City, arguing that the payments should have been included in calculating the officers’ regular rates of pay and overtime rates. After the trial court ruled on the issues, the case went to the Ninth Circuit Court of Appeals. Ruling on an issue that had never been decided by any court in the country, the Ninth Circuit Court of Appeals held that an employer must include monetary payments made in lieu of benefits when calculating an employee’s regular rate of pay for purposes of determining overtime payments under the Fair Labor Standards Act (“FLSA”). The Ninth Circuit further held that under FLSA’s liquidated damages provision, the employer was liable for double the amount of unpaid overtime compensation covering the three years before the complaint was filed. The June 2nd ruling will significantly affect most employers operating in the Ninth Circuit, increasing the amount of overtime payments due their employees and opening the door to lawsuits seeking to recover ordinary and liquidated damages over a three-year period.

McLean v. State of Cal., 2016 WL 4395672 (Cal. S. Ct. 2016)

Janis McLean, a retired deputy attorney general, filed suit against the State of California on behalf of herself and a class of former state employees who, having resigned or retired, did not receive their final wages within the time period set forth in Cal. Labor Code § 202 (72 hours). McLean alleged that defendants violated Section 202 by failing to pay her final wages on her last day of employment or within 72 hours after her last day; failing to deposit wages for her unused leave and vacation time to her supplemental retirement plans within 45 days of the last day of her employment (despite her request that they do so); and failing to transfer to her before February 1 of the following year the wages that she had elected to defer to that tax year. The trial court sustained the employer’s demurrer on the ground that McLean had “retired” and, therefore, she had not stated a claim under Section 203, which applies only when employees quit or are discharged. The Court of Appeal reversed the dismissal, holding that Sections 202 and 203 apply when an employee “quits to retire.” The California Supreme Court affirmed the judgment of the Court of Appeal, holding that the “ordinary meaning of the word ‘quit’ is broad enough to encompass a voluntary departure from a particular employment, whatever its motivation:  an employee who retires, no less than an employee who ends one job to start another, has ‘stopped,’ ‘ceased,’ or ‘left’ her employment.” The Court similarly rejected the state’s assertion that McLean had sued the wrong entity because she was employed by the Department of Justice and not the State of California as a whole.

Augustus v. ABM Sec. Servs., Inc. (Cal. S. Ct. 2016)

The California Supreme Court ruled that California law strictly prohibits on-duty rest periods.  “What the law requires instead is that employers relinquish any control over how employees spend their break time, and relieve their employees of all duties – including the obligation that an employee remain on call.”  This class action was filed on behalf of all ABM security guards, alleging that ABM consistently failed to provide uninterrupted rest periods as required by state law.  During the litigation, ABM acknowledged that it required guards to keep their radios and pagers on, remain vigilant and respond when needs arose, such as escorting tenants to parking lots, notifying building managers of mechanical problems and responding to emergency situations during their breaks.  The trial court granted plaintiffs’ motion for summary adjudication on their rest period claim on the ground that ABM’s policy to provide guards with rest periods subject to employer control and the obligation to perform certain work-related duties was illegal as a matter of law.  The trial court subsequently awarded the class approximately $90 million in statutory damages, interest and penalties.

ARBITRATION AGREEMENTS

Morris v. Ernst & Young, LLP, 2016 WL 4433080 (9th Cir. 2016)

As a condition of employment, Stephen Morris and Kelly McDaniel were required to sign agreements not to join with other employees in bringing legal claims via arbitration against their employer. Morris and McDaniel filed a class and collective action against the company, alleging they had been misclassified as employees exempt from overtime under the Fair Labor Standards Act and California state law. In response, the employer filed a motion to compel arbitration pursuant to the agreements the employees had signed; the district court ordered individual arbitration and dismissed the case. In this opinion, the United States Court of Appeals for the Ninth Circuit reversed the judgment, holding that the agreement interferes with the employees’ rights under Sections 7 and 8 of the National Labor Relations Act (protecting “concerted activity”). In so holding, the Ninth Circuit joined the Seventh Circuit in adopting the position of the National Labor Relations Board as set forth in D.R. Horton, 357 NLRB No. 184 (2012), enf. denied, 737 F.3d 344 (5th Cir. 2013) and Murphy Oil USA, Inc., 361 NLRB No. 72 (2014), enf. denied, 808 F.3d 1013 (5th Cir. 2015). See also Young v. REMX, Inc., 2016 WL 4386166 (Cal. Ct. App. 2016).

Since then, the defendants in Ernst & Young, as well as in a similar appellate decision in another circuit, Lewis v. Epic Systems Corp., filed petitions for certiorari asking the U.S. Supreme Court to resolve the issue. In addition, the National Labor Relations Board has asked the U.S. Supreme Court to resolve the same issue in a similar case. Employers should continue to monitor these federal appellate decisions and consult legal counsel in managing issues arising under their arbitration agreements.

Ziober v. BLB Resources, Inc., 2016 U.S. App. LEXIS 18516 (9th Cir., Oct. 14, 2016)

In Ziober v. BLB Resources, Inc., 2016 U.S. App. LEXIS 18516 (9th Cir., Oct. 14, 2016), the United States Court of Appeals for the Ninth Circuit joined three other circuit courts in holding that the Uniformed Services Employment and Reemployment Rights Act (USERRA) does not prohibit the compelled arbitration of claims under the Act.  The Ninth Circuit’s ruling helps solidify the right of employers to compel arbitration of USERRA claims under a valid arbitration agreement, particularly in light of this Circuit’s perceived hostility towards arbitration of employment-related claims.  Ziober provides further support for the view that a properly drafted arbitration agreement provides employers with the ability to arbitrate USERRA claims and avoid litigation. The issue in Ziober was whether Congress intended USERRA to override the liberal federal policy favoring arbitration of claims subject to the Federal Arbitration Act (FAA).  Noting that the FAA requires courts to “rigorously” enforce arbitration agreements, the Ninth Circuit was required to decide whether USERRA’s language and legislative history “reveal that Congress intended to preclude arbitration of claims arising under its provisions.”  Joining the Fifth, Sixth, and Eleventh Circuits, the Ninth Circuit held that neither the text nor the legislative history of USERRA evinces the intent to preclude arbitration of claims under the Act. The court began its analysis by focusing on the historical context of USERRA’s adoption in 1994 in light of the federal policy favoring arbitration under the FAA.  The court noted that when Congress adopted USERRA, the FAA had been in effect for almost 70 years; it also reasoned, based on existing case law that overriding the liberal policy favoring arbitration of claims requires a “contrary congressional command.”  Examining USERRA’s language, the court found no such command. Specifically, the court examined the section of USERRA (38 U.S.C. § 4302(b)) that places limits on State laws and private contracts if they attempt to limit a person’s rights under USERRA:  This chapter supersedes any State law (including any local law or ordinance), contract, agreement, policy, plan, practice, or other matter that reduces, limits, or eliminates in any manner any right or benefit provided by this chapter, including the establishment of additional prerequisites to the exercise of any such right or the receipt of any such benefit.

Combining this language with the private right of action USERRA permits to enforce an individual’s substantive rights, the appellant argued that USERRA creates “a procedural right to sue in federal court that precludes a contractual agreement to arbitrate.” The Ninth Circuit, however, disagreed.  It first noted the well-established rule that, by agreeing to arbitrate claims, a party gives up no substantive rights.  It also held that the United States Supreme Court’s decision in CompuCredit Corp. v. Greenwood, 565 U.S. 95 (2012), “forecloses the argument that USERRA includes a non-waivable procedural right to a judicial forum.”  The statute involved in CompuCredit, the Credit Repair Organizations Act, prohibits waiver of any “right of a consumer” under that Act.  The Supreme Court, however, held that this waiver, and the mere formation of a federal cause of action under the CROA, did not establish the required “contrary congressional command” necessary to override the liberal arbitration policy under the FAA.  Like the CROA, nothing in the plain text of USERRA “mentions mandatory arbitration or the FAA.”  The Ninth Circuit also distinguished an arbitration agreement from a contract that establishes “additional prerequisites” for vindication of substantive rights.  Thus, union contracts that require additional steps prior to seeking enforcement of an employee’s substantive rights under USERRA are barred, whereas arbitration agreements that simply require arbitration (as opposed to litigation) are not. Finally, the Ninth Circuit considered USERRA’s legislative history and concluded that, even if the plain language of the statute were ambiguous, the limited legislative history surrounding USERRA fails to satisfy the burden of showing that Congress intended to preclude arbitration of USERRA claims. Although not a novel ruling, the Ninth Circuit’s decision to follow other circuits in upholding the ability to arbitrate private USERRA claims is significant in that it adds to the ledger a circuit that has, in the past, been perceived as being hostile towards the arbitration of employment-related statutory claims.  The Ninth Circuit’s decision is likely to be viewed as a positive development for employers with respect to arbitration of USERRA claims, which can involve significant sympathies towards plaintiffs who serve, or have served, in the military. Significant to the Ninth Circuit’s ruling, however, is the limit Section 4302(b) places on agreements that require additional procedural steps prior to seeking arbitration.  Thus, an arbitration agreement that includes the requirement of mediation prior to arbitration (or other steps that precede a right to arbitration) could be deemed inconsistent with Section 4302(b).  Practically speaking, therefore, employers will wish to assure that, with respect to the arbitration of claims under USERRA, their arbitration agreements permit an immediate request for arbitration in order to avoid the preclusive effect of Section 4302(b). Additionally, as with all employment-related statutory claims subject to arbitration agreements, employers may want to review their arbitration agreements to ensure they meet the relevant standards for permitting arbitration of statutory claims, as Ziober considered the ability of an employer to require arbitration of claims under USERRA—not whether the arbitration agreement itself was appropriately drafted.  Relevant standards for enforceable arbitration agreement include, but are not necessarily limited to, provisions that provide for discovery and appropriate relief and remedies, and have the employer cover the costs of arbitration that would otherwise not be borne by an individual in court.

NLRB

T-Mobile U.S.A., Inc., 363 NLRB No. 171 (2016)

In T-Mobile U.S.A., Inc., 363 NLRB No. 171 (2016), the National Labor Relations Board continued its trend in aggressively policing Employee Handbooks. It has issued a decision that finds a series of workplace rules in T-Mobile’s and MetroPCS’ Employee Handbooks unlawful, including provisions requiring positive workplace behavior and prohibiting workplace recordings. The Board concluded that those workplace rules would reasonably tend to chill employees in the exercise of their NLRA Section 7 rights, which give employees the right to engage in “concerted activities for the purpose of collective bargaining or other mutual aid or protection.” The Board’s intrusion into workplace policies is the result of its decision in Lutheran Heritage Village-Livonia, 343 NLRB 646 (2004). Under the standard set in Lutheran Heritage, a work rule is unlawful if the rule explicitly restricts activities protected by Section 7. If the work rule does not explicitly restrict protected activities, it nonetheless will violate the NLRA if: “(1) employees would reasonably construe the language to prohibit Section 7 activity; (2) the rule was promulgated in response to union activity; or (3) the rule has been applied to restrict the exercise of Section 7 rights.”

In T-Mobile, the Board acknowledged that the rules at issue did not explicitly restrict protected activities and were not promulgated in response to or applied to restrict Section 7 activities. Nonetheless, the Board found the following rules unlawful because employees would reasonably construe them to prohibit their Section 7 rights: A policy that stated the employer’s expectation that all employees “behave in a professional manner that promotes efficiency, productivity, and cooperation” and “maintain a positive work environment by communicating in a manner that is conducive to effective working relationships with internal and external customers, clients, co-workers, and management”;

A policy that prohibited employees from recording people or confidential information using cameras, camera phones/devices, or recording devices in order “to prevent harassment, maintain individual privacy, encourage open communication, and protect confidential information”; A provision that the handbook is a confidential and proprietary document that must not be disclosed to or used by any third party without the employer’s written consent.  A rule that requires employees to maintain the confidentiality of the names of employees involved in internal investigations as complainants, subjects, or witnesses; A rule that requires employees to contact a manager, an HR business partner, or the integrity line if they feel they have not been paid all wages or pay owed to them, believe that an improper deduction was made from their salary, or feel they have been required to miss meal or rest periods. It is now clear under this standard, Employee Handbooks that prohibit employees from criticizing their employer, discussing or disclosing wage or benefit information, or that admonish employees to protect the names and other contact information of employees, or to behave professionally or collegially in the workplace will not survive NLRB scrutiny.

Pineda, et al. v. JTCH Apartments, L.L.C., et al (2016)

On December 19, 2016, the Fifth Circuit joined the Sixth and Seventh Circuits in holding that “employees” under the FLSA may recover emotional distress damages in FLSA retaliation actions, finding that the district court erred by refusing to instruct the jury on the availability of emotional distress damages for an employee’s retaliation claim. In so holding in Pineda, et al. v. JTCH Apartments, L.L.C., et al., the Fifth Circuit did affirm the district court’s ruling that only an “employee” may bring a retaliation claim under the FLSA. Santiago Pineda lived in an apartment owned by JTCH Apartments, L.L.C. and leased by his wife, Maria Pena. Pineda did maintenance work for the apartment complex, and JTCH discounted Pena’s rent as part of his compensation. Pineda filed suit against JTCH and its owner and manager, Simona Vizireanu, seeking unpaid overtime under the FLSA. Three days after serving JTCH with the summons, Pineda and Pena received a notice to vacate the apartment for nonpayment of rent and a demand for an amount equal to the rent reductions Pena received during Pineda’s employment. Pena then joined the suit. The amended complaint included FLSA retaliation claims under 29 U.S.C. § 215(a)(3) based on the back rent JTCH demanded after Pineda filed suit.

During the jury trial, the district court granted the defendants’ motion for judgment as a matter of law on Pena’s retaliation claim, finding she was not protected because she was not an “employee” under the FLSA. The district court denied Pineda’s request for an instruction to the jury on the availability of emotional distress damages for his retaliation claim. The jury found for Pineda on his overtime wage and retaliation claims. Pineda and Pena both appealed. Pineda argued the district court should have instructed the jury on emotional distress damages, and Pena argued she was “within the zone of interests protected by the FLSA retaliation provision and thus should have also been able to seek such damages from the jury.” On appeal, the Fifth Circuit held that the FLSA’s broad damages provision allows an employee to potentially recover for emotional injuries suffered as a result of an employer’s retaliation. The Fifth Circuit’s holding is consistent with two sister courts that have analyzed this question and with a number of other circuits that, although not directly considering this issue, have upheld jury awards for emotional damages in FLSA retaliation cases. This holding resolves disagreement among district courts in the circuit, which differed in the interpretation and application of the Fifth Circuit’s prior decisions that stated the remedies provisions of the FLSA and ADEA “should be interpreted consistently.” Based on this instruction, some district courts concluded that the Fifth Circuit’s holding in Dean v. American Security Insurance Co., a 1977 case holding that emotional distress damages are not available under the ADEA, necessarily meant such damages were also unavailable under the FLSA.

DISCRIMINATION

Mitchell v. California Dep’t of Public Health, 1 Cal. App. 5th 1000 (2016)

Reginald Mitchell sued his former employer, the California Department of Public Health, for racial discrimination in violation of the Fair Employment and Housing Act (“FEHA”). The trial court sustained the employer’s demurrer based upon the statute of limitations, but the Court of Appeal reversed, holding that the complaint sufficiently established a claim of equitable tolling that prevented dismissal. The California Department of Fair Employment and Housing (“DFEH”) issued a right-to-sue letter on September 9, 2011 and stated that the federal Equal Employment Opportunity Commission (“EEOC”) would be responsible for processing the complaint. The letter further notified Mitchell that the one-year period to initiate a civil proceeding would be tolled if the investigation of the charge was deferred to the EEOC. The EEOC issued its letter of determination on September 30, 2013, stating that there was “reasonable cause” to believe Mitchell had suffered racial discrimination in violation of Title VII. After conciliation efforts failed, the Department of Justice issued a federal right-to-sue notice, which Mitchell received on March 21, 2014. Mitchell filed his FEHA civil action on July 8, 2014 (17 days beyond the 90-day federal right-to-sue period). In response to the employer’s demurrer, Mitchell argued that the one-year FEHA limitation period did not expire until September 30, 2014, one year (not 90 days) from the date of the EEOC’s letter of determination. The Court of Appeal agreed that the one-year FEHA limitation period was equitably tolled  during the period of the EEOC investigation based upon Mitchell’s alleged “reasonable and good faith conduct.”

Castro-Ramirez v. Dependable Highway Express, Inc., 246 Cal. App. 4th 180 (2016)

Luis Castro-Ramirez sued his former employer, Dependable Highway Express, Inc., for “associational disability discrimination,” failure to prevent discrimination and retaliation under the California Fair Employment and Housing Act (“FEHA”) and wrongful termination. Castro-Ramirez’s son requires daily dialysis, and Castro-Ramirez must administer the treatment to his son. Castro-Ramirez’s supervisors had for several years scheduled his work so that he could be at home to administer the dialysis, but that accommodation changed when a new supervisor took over and terminated Castro-Ramirez for refusing to work a shift that did not permit him to be home in time to administer the dialysis. The trial court granted the employer’s motion for summary judgment, but the Court of Appeal (over a strong dissent) reversed, holding that FEHA creates a duty on the part of the employer “to provide reasonable accommodations to an applicant or employee who is associated with a disabled person,” not just to applicants and employees who themselves are disabled (citing Cal. Gov’t Code § 12926(o) (“physical disability” includes a perception that a person is associated with a person who has, or is perceived to have, a disability)). See also Wallace v. County of Stanislaus, 245 Cal. App. 4th 109 (2016) (Harris v. City of Santa Monica, 56 Cal. 4th 203 (2013) does not require an alleged victim of disability discrimination to prove “animus or ill will,” only that discriminatory intent was a substantial motivating factor/reason for the Employer’s actions).

Jumaane v. City of Los Angeles, 241 Cal. App. 4th 1390 (2015)

Jabari Jumaane, an African-American firefighter with the Los Angeles Fire Department, sued the City of Los Angeles for racial discrimination, harassment and retaliation. Following a 34-day jury trial, the jury found for Jumaane on his claims and awarded him more than $1 million in damages. Following the trial, the city filed a motion for judgment notwithstanding the verdict based upon the statute of limitations, which the trial court denied. In this opinion, the Court of Appeal reversed, holding that the evidence of events that occurred before 2001 was not part of a continuing violation and that the evidence of events that occurred after that date was insufficient to prove the plaintiff’s claims. The appellate court concluded that the trial court committed “manifest error” when it refused to give a city-requested instruction to the jury about the “continuing violation” doctrine – the trial court’s previous denial of the city’s motion for summary judgment on that issue only meant that there were triable issues of material fact that the jury should have been permitted to decide. The Court further held that Jumaane could not rely upon the continuing violation doctrine to sue for events that he alleged occurred in the 1990s because he knew those actions had become permanent by 1999 and that further efforts on his part to end the alleged conduct would have been in vain – yet he did not file his lawsuit until 2003.

 

UNION ISSUES

Friedrichs v. California Teachers Association, 578 US _ (2016)

In a one sentence ruling, a deadlocked United States Supreme Court upheld a system allowing public employers to require nonunion public workers to pay what are called “fair share” union fees. With the recent passing of Justice Antonin Scalia, there was no deciding vote to break the 4-4 tie. The case began in California. A group of public school teachers sought to overturn a 1977 United States Supreme Court decision in Abood v. Detroit Board of Education. Abood allowed public employers to require nonunion workers in union-represented bargaining units to pay union fees as long as they didn’t have to fund the union’s political or ideological activities — so-called “fair share” payments. Some union opponents in California challenged these fair share fees as unconstitutional, but the Ninth Circuit relied on Abood to rule in favor of the teachers’ unions. In the Friedrichs case, the Supreme Court was set to consider its earlier decision in Abood and the constitutionality of fair share fees, including whether it violates the First Amendment to require public employees to affirmatively “opt out” of funding unions’ political and ideological activities rather than requiring that employees affirmatively “opt-in” to subsidizing such speech. In today’s ruling, the U.S. Supreme Court simply announced the deadlock and affirmed the Ninth Circuit’s decision. For now, Abood and fair share fees remain valid. This is the second tie decision since Justice Scalia died and left a vacancy on the Court.

DISABILITY/ REASONABLE ACCOMODATION

Kilby v. CVS Pharmacy, Inc., (2016) 63 Cal. 4th 1

In this opinion, the California Supreme Court answered three questions posed to it by the United States Court of Appeals for the Ninth Circuit involving suitable seating requirements under California law. Section 14(A) of California Wage Order No. 7-2001 states that, “All working employees shall be provided with suitable seats when the nature of the work reasonably permits the use of seats.” Section 14(B) states that “When employees are not engaged in the active duties of their employment and the nature of the work requires standing, an adequate number of suitable seats shall be placed in reasonable proximity to the work area and employees shall be permitted to use such seats when it does not interfere with the performance of their duties.” The federal trial court concluded that Sections 14(A) and (B) were mutually exclusive and that the former applied when an employee was actually engaged in work, while the latter applied when an employee was not actively working. The California Supreme Court answered the Ninth Circuit’s questions as follows:  (1) If the tasks performed at a given location reasonably permit sitting, and provision of a seat would not interfere with performance of any other tasks that may require standing, a seat is called for; (2) Whether the nature of the work reasonably permits sitting is a question to be determined objectively based on the totality of the circumstances. An employer’s business judgment and the physical layout of the workplace are relevant but not dispositive factors. The inquiry focuses on the nature of the work, not an individual employee’s characteristics; and (3) the nature of the work aside, if an employer argues there is no suitable seat available, the burden is on the employer to prove unavailability.

Mendoza v. The Roman Catholic Archbishop of Los Angeles, 2016 WL 1459214 (9th Cir. 2016)

Alice Mendoza worked as a full-time bookkeeper for a small parish church. She took sick leave for 10 months, during which time the pastor of the church took over the bookkeeping duties himself and determined that Mendoza’s job could be done by a part-time bookkeeper. When Mendoza returned from her leave of absence, there was no longer a full-time bookkeeping position available, so the pastor offered her a part-time job, which Mendoza declined before suing for violation of the Americans with Disabilities Act (“ADA”). The district court granted summary judgment in favor of the Archbishop, and the United States Court of Appeals for the Ninth Circuit affirmed, holding that Mendoza failed to establish that a full-time position was available and, therefore, that a discriminatory reason more likely than not motivated the employer.

HARASSMENT

Arizona ex rel. Horne v. The Geo Group, 2016 WL 945634 (9th Cir. 2016)

Alice Hancock was employed by Geo as a correctional officer at the Arizona State Prison. Geo contracts with the Arizona Department of Corrections to maintain and operate two facilities in the state. Hancock filed a charge of discrimination and harassment based on sex and also alleging retaliation. After concluding its investigation, the Arizona Civil Rights Division and the EEOC issued a reasonable cause determination, substantiating Hancock’s allegations, and subsequently filed a class action lawsuit. The district court granted summary judgment to the employer, but the United States Court of Appeals for the Ninth Circuit reversed, relying upon Mach Mining, LLC v. EEOC, 135 S. Ct. 1645 (2015) and holding that the EEOC’s pre-suit conciliation efforts are subject to limited judicial review and were sufficient. The Court held that the EEOC is not required to conciliate on an individual basis prior to bringing a class action and that the proper starting date of the class action was 300 days prior to the filing of Hancock’s charge (not the date of the filing of the reasonable cause determination). The Court also held that the district court had improperly dismissed another employee’s (Sofia Hines) claims of a hostile environment, which allegedly included unwanted comments about her breasts, the grabbing of her breast on one occasion, an unwanted “spanking on her butt,” and several unwanted sexually explicit comments directed at her. See also Baughn v. Department of Forestry, 2016 WL 1386040 (Cal. Ct. App. 2016) (former employer’s anti-SLAPP motion to dismiss union’s challenge to employer’s termination of alleged sexual harasser was properly denied on the ground that the action did not arise from protected speech).

WHISTLEBLOWER PROTECTIONS 

United States ex rel. Mateski v. Raytheon, 816 F.3d 565 (9th Cir. 2016)

Steven Mateski worked as an engineer at Raytheon. Mateski filed a complaint in federal court alleging that Raytheon had violated the False Claims Act (“FCA”) by failing to comply with numerous contractual requirements in developing a project for the government, fraudulently covering up areas of noncompliance and improperly billing the government for erroneous and incomplete work. Six years after he filed the initial complaint, the United States declined to exercise its right under the FCA to intervene in the lawsuit, and Raytheon successfully moved to dismiss for lack of subject matter jurisdiction, arguing that the suit was barred by the public disclosure bar (i.e., that the subject matter about which Mateski was complaining was already publicly known when he filed his lawsuit). The United States Court of Appeals for the Ninth Circuit reversed, holding that Mateski’s allegations differ in both degree and kind from the very general previously disclosed information about problems with the project in question. As such, “if his allegations prove to be true, Mateski will undoubtedly have been one of those ‘whistle-blowing insiders with genuinely valuable information,’ rather than an ‘opportunistic plaintiff who ha[s] no significant information to contribute.’”

DeSaulles v. Community Hosp. of the Monterey Peninsula, (2016) 62 Cal. 4th 1140 

Maureen DeSaulles agreed to dismiss her causes of action for breach of contract and breach of the implied covenant of good faith and fair dealing in exchange for a settlement payment from her former employer in the amount of $23,000. The trial court subsequently exercised its discretion and awarded $12,731.92 in costs to the employer. DeSaulles appealed, claiming that the settlement payment to her was a net monetary recovery, which entitled her – rather than the employer – to recover costs. The Court of Appeal agreed and reversed, holding that the trial court should have recognized DeSaulles was entitled to costs under the statutory definition of “prevailing party” (Cal. Code Civ. Proc. § 1032(a)(4)). The Court further concluded that because the employer was not the prevailing party, the trial court should not have exercised its discretion to determine which party prevailed based on the merits of the case. Finally, the Court cautioned that “[o]f course, parties can avoid this mechanical approach by taking care to provide for costs in their settlements.” The California Supreme Court affirmed.

Graziadio v. Culinary Institute of America (2016) 817 F.3d 415

The Culinary Institute of America questioned the validity of an employee’s medical support for FMLA time off. In the ensuing communication between company and employee, the company’s director of human resources maintained that the employee’s documentation was not sufficient. The company eventually established a deadline for submitting proper documentation and when the employee did not respond, terminated her for job abandonment.  The employee sued the company and the Director of Human Resources for alleged FMLA and Americans with Disabilities Act (ADA) violations. In the lower court, the federal district judge dismissed all of the claims. The judge concluded the director of human resources was not liable as an “employer” under FMLA because she lacked the “power to hire and fire” and she did not supervise the employee. On appeal, the 2nd Circuit dismissed the ADA claims but allowed the FMLA claims to go forward, including the claim against the director of human resources. The 2nd Circuit court applied a more broad definition of “employer” than that used by the lower court. Under the FMLA, an “employer” is one who “acts, directly or indirectly, in the interest of an employer to any of the employees of such employer.” Because the FMLA was originally adopted as an amendment to the Fair Labor Standards Act (FLSA), the 2nd Circuit looked to decisions applying the definition of employer under the FLSA. The Court ruled that the definition of employer is not controlled simply by the right to hire, fire or supervise. The Court applied an “economic realities” test, concluding employer status can also be shown by the authority to control the employee in question, including authority to control his or her rights under the FMLA. Turning to the facts of the case, the Court ruled that there was sufficient evidence that the director of human resources played at least a role in the decision to terminate, even if she did not control that decision, and that she played a significant role in determining the employee’s rights under the FMLA. The case will now go to trial on the FMLA violations and the question of whether the director of human resources should be held personally liable under the FMLA.

ATTORNEY’S FEES

Laffitte v. Robert Half Int’l Inc., 1 Cal. 5th 480 (2016)

An objecting class member in a wage and hour lawsuit challenged the trial court’s award of an attorney’s fee calculated as a percentage (one-third) of the overall settlement amount of $19 million. The objector asserted that pursuant to Serrano v. Priest, 20 Cal. 3d 25 (1977) (“Serrano III”), every attorney’s fee award must be calculated on the basis of time actually spent by the attorneys in the case and cannot be a percentage of the common fund. The California Supreme Court affirmed the judgment of the Court of Appeal, holding that Serrano III permits a trial court to calculate an attorney’s fee award from a class action common fund as a percentage of the fund, while using the lodestar-multiplier method as a cross-check on the selected percentage. In this case, the trial court did not abuse its discretion by cross-checking the reasonableness of the percentage award by calculating a lodestar fee and approving a multiplier over the lodestar of 2.03 to 2.13.

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