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CASE LAW UPDATE
WAGE AND HOUR
ZB, N.A. v. Super Ct. of San Diego Cty., 8 Cal. 5th 175, 252 Cal. Rptr. 3d 228 (2019)
Plaintiff Lawson worked for California Bank & Trust, a subdivision of ZB, N.A. During her employment, plaintiff acknowledged receipt of an arbitration agreement that contained a class action waiver and that required arbitration of any legal controversy or claim arising out of her employment. Plaintiff filed a civil complaint against defendants containing a single cause of action under the California Private Attorneys General Act (“PAGA”). In this single cause of action, she alleged that defendants failed to provide overtime and minimum wages, meal and rest periods, timely wage payments, complete and accurate wage statements, complete and accurate payroll records, and reimbursements of business-related expenses. Plaintiff sought to recover (through PAGA) civil penalties and unpaid and premium wages under California Labor Code section 558. Section 558 provides for civil penalties of $50 and $100 for each underpaid employee for each pay period for which the employee was underpaid in addition to an amount sufficient to recover underpaid wages. Defendants moved to stay the civil action and to compel arbitration of the relief sought under section 558. The trial court granted the motion, bifurcating plaintiff’s action and moving the unpaid wages issue to arbitration. The trial court also ordered to arbitration her representative claim for unpaid wages on behalf of all aggrieved employees.
The California Court of Appeal directed the trial court to vacate its order bifurcating plaintiff’s claims and ordering a portion of those claims be arbitrated, and instead to enter a new order denying defendants’ motion to arbitrate. The appellate court found that plaintiff’s claim for unpaid wages under section 558 could not be compelled to arbitration because those alleged unpaid wages constituted civil penalties that are recoverable through a PAGA claim
The California Supreme Court rejected the appellate court’s reasoning but affirmed the order. In reviewing the legislative history of PAGA and section 558, and analyzing the statutory context of section 558, the court concluded that the amount for unpaid wages referenced in section 558 is not part of that section’s civil penalty and is therefore not recoverable through a PAGA action. Because plaintiff’s claim for unpaid wages under section 558 was not cognizable under PAGA, and because that was the only basis for defendants’ motion to compel arbitration, there was no justification for the trial court’s order compelling arbitration. Accordingly, the high court affirmed the appellate court’s writ of mandate directing the trial court to vacate its order compelling arbitration.
Practical Implications: This decision removes an incentive for employees to file PAGA-only actions to avoid class-action waivers because the penalties for PAGA violations may be substantially less than claims for unpaid wages that can be arbitrated.
Southern Cal. Pizza Co., LLC v. Certain Underwriters at Lloyd’s London, 40 Cal. App. 5th 140, 252 Cal. Rptr. 3d 635 (2019)
Southern California Pizza Co. owns and operates over 250 Pizza Hut and WingStreet restaurants. Employees brought a putative class action alleging violations of various California labor laws including failure to provide overtime wages, accurate wage statements, proper meal and rest periods; and failure to reimburse employees for business-related expenses. SoCal Pizza tendered its defense to Lloyd’s, which denied coverage. Lloyd’s argued that the entire action fell within its wage and hour exclusion, which excluded coverage for “any Loss resulting from any Claim based upon, arising out of, directly or indirectly connected or related to, or in any way alleging violation(s) of any . . . wage and hour or overtime law(s).” SoCal Pizza sued for breach of contract, bad faith, and declaratory relief. The trial court agreed with Lloyd’s and interpreted the wage and hour exclusion broadly to exclude coverage for the entire class action.
The California Court of Appeal reversed. Applying well-settled principles governing the interpretation of insurance policies in California, the court determined that the meaning of the phrase “wage and hour . . . law(s)” in Lloyd’s exclusion should be narrowly interpreted to apply only to laws concerning duration worked or remuneration received in exchange for work. The court determined that SoCal Pizza’s alleged failure to reimburse business expenses was not excluded from coverage because the reimbursement statutes (Labor Code sections 2800 and 2802) are not sufficiently related to California’s wage and hour statutes. Furthermore, the reimbursement statutes do not mention wages or hours, nor do they appear in the Labor Code’s compensation or working hours sections. Finally, since reimbursement payments are not payments made in exchange for labor or services, the reimbursement claims were not related to remuneration received in exchange for work, and therefore not within the wage and hour exclusion.
Practical Implications: This case demonstrates that wage and hour exclusions in EPLI policies might not eliminate insurance coverage for every cause of action in what has traditionally been called a wage and hour case. This is especially true when an allegation does not involve remuneration received in exchange for work. Of course, coverage depends on the specific verbiage of the exclusion itself. Employers should always tender claims to their EPLI insurers, and contact coverage counsel to review any denials which appear to be based on overly-broad applications of policy exclusions.
Salazar v. McDonald’s Corp., 939 F.3d 1051 (9th Cir. 2019)
McDonald’s Corporation (“McDonald’s”) was named as a defendant in a putative class action filed by the employees of the Haynes Family Limited Partnership, which operated eight McDonald’s franchises in the Bay Area. The putative class members alleged they were denied overtime premiums, meal and rest breaks and other violations of the California Labor Code; they further alleged that McDonald’s and its franchises were their joint employers for purposes of wage and hour liability. The district court granted summary judgment in favor of McDonald’s, and the Ninth Circuit affirmed, holding that any control McDonald’s asserted over its franchisees’ workers was geared toward quality control and not over the “day-to-day aspects” of the work at the franchises. Similarly, the Court held that McDonald’s did not “suffer or permit” the franchisees’ employees to work for it nor were those workers employed by McDonald’s under a common law theory of employment.
Naranjo v. Spectrum Sec. Servs., Inc., 40 Cal. App. 5th 444 (2019)
Spectrum contracts with federal agencies to take temporary custody of federal prisoners and ICE detainees who must travel offsite for medical treatment and other appointments; Spectrum’s officers provide continuous supervision until the individuals are returned to their custodial locations. Spectrum had a policy that required on-duty meal periods for which officers were paid at their regular rate, but it did not have a written agreement with its employees that included an advisement that employees could revoke, in writing, the on-duty meal break policy agreement at any time. The Court of Appeal held that the employees were entitled to premium wages since the employer did not have a written agreement that included an on-duty meal period revocation clause; unpaid premium wages for meal break violations accrue prejudgment interest at the rate of seven percent; unpaid premium wages for meal break violations do not entitle employees to additional remedies for inaccurate wage statements if the statements include the wages earned for on-duty meal breaks but not the unpaid premium wages; absent a violation of Cal. Lab. Code § 226 (wage statements), attorney’s fees under Section 226(e) may not be awarded; and the trial court erred in denying class certification of a rest break class.
Stoetzl v. Dep’t of Human Resources, 7 Cal.5th 718, 248 Cal.Rptr.3d 924 (2019)
Current and former correctional officers brought coordinated class actions against the State, the Department of Corrections and Rehabilitation (CDCR), the Department of Mental Health, and the Department of Personnel Administration (DPA), alleging wage and hour violations and seeking unpaid overtime wages, unpaid minimum wages, liquidated damages, and injunctive relief. In this case, the California Supreme Court was asked to consider whether a certified class of state correctional employees was entitled to additional compensation for time spent on pre and post work activities, including traveling from the outermost gate of the prison facility to their work posts within the facility, traveling back from their work posts to the outermost gate, being briefed before the start of the shift, briefing relief staff at the end of the shift, checking out and checking back in mandated safety equipment, putting on and removing such equipment, and submitting to searches at various security checkpoints within the facility.
The Court ultimately held that:
- memorandum of understanding reached between union-represented correctional employees and State, providing for four hours’ pay for “pre and post-work activities,” referred to time that an employee spent after beginning the first activity that the employee was employed to perform but before the employee arrived at his or her assigned work post, plus analogous time at the end of the employee’s work shift;
- union’s use of word “generally” in its concession that “generally [four hours] is sufficient time for all pre and post-work activities” and that therefore compensation allotted to employees for those activities under provision of memorandum of understanding, which provided for four hours’ pay for such activities, was full compensation, did not suggest that in some work periods, the activities consumed more than four hours and thus that employees worked without compensation;
- memoranda of understanding between union and State as to rates of pay and hours of work became legislative enactments that, because of their specificity, superseded more general state laws;
- payscale manual of Department of Human Resources (CalHR), setting forth regular and overtime compensation that State was to pay to certain classes of employees, did not incorporate the definition of compensable work time set out in Industrial Welfare Commission (IWC) wage order regulating the minimum wage that State was to pay to rank-and-file employees, and therefore manual was required to be treated as statutorily-authorized exception to wage order;
- union-represented employees could not recover for allegedly unpaid overtime compensation on breach of contract theory; and
- employees who were not represented by union were capable of having contractual interest in receiving overtime compensation allegedly due for pre and post-work activities, as could allow employees to recover from the State on breach of contract theory.
Ward v. Tilly’s Inc., 31 Cal.App.5th 1167, 243 Cal.Rptr.3d 461 (2019)
In Ward, the Plaintiff alleged that California-based retail store chain, Tilly’s, required its employees to call their stores two hours before the start of an on-call shift to determine whether they were needed to work the potential shift. Tilly’s allegedly informed its employees to “consider an on-call shift a definite thing until they are actually told they do not need to come in,” but did not include on-call shifts as part of the employee’s “scheduled day’s work” when it calculated wages unless the employee was actually required to work the on-call shift. Tilly’s did not consider an employee to have “reported to work” merely because the employee called into work as instructed under the alleged on-call policy.
A Tilly’s employee, Skylar Ward, challenged this alleged policy and filed a putative class action complaint which alleged the Industrial Welfare Commission’s (“IWC”) Wage Order 7—which regulates wages, hours, and working conditions in the mercantile industry—mandates that non-exempt retail employees be paid “reporting time pay” if either “an employee is required to report for work and does report, but is not put to work or is furnished less than half said employee’s usual or scheduled day’s work” or “an employee is required to report for work a second time in any one workday and is furnished less than two (2) hours of work on the second reporting.” Cal. Code Regs., tit. 8, § 11070, subd. (5). As Wage Order 7 applied to Tilly’s alleged on-call system—Plaintiff alleged Tilly’s employees were due reporting time pay for on-call shifts, and that Tilly’s alleged failure to properly compensate employees for those shifts resulted in violations of Wage Order 7, Labor Code sections 200-203, 226, and 226.3, and Business and Professions Code section 17200.
The court ultimately held that employees must be given “reporting time pay” under Wage Order No. 7-2001 when an employer requires its employees to call in two hours before a potential shift to learn whether the employee is needed for work and the employee is told not to come into work that day. This decision strays from most employers’ general understanding that “reporting time pay” covers only the situation where the employee physically comes into work but is sent home early (usually for lack of work). Nevertheless, as the only published California appellate decision addressing this specific issue, California employers are bound by Ward and should revise their reporting policies accordingly to avoid liability.
Ferra v. Loews Hollywood Hotel, LLC, 40 Cal. App. 5th 1239, 253 Cal. Rptr. 3d 798 (2019)
Plaintiff Ferra filed a complaint against defendant Loews Hollywood Hotel, LLC on behalf of herself and three alleged classes of hourly Loews employees. She alleged that Loews improperly calculated her premium payment when it failed to provide her with statutorily required meal and rest breaks in violation of California Labor Code section 226.7. Loews paid meal and rest period premiums to hourly employees at their base rate of compensation (i.e., their hourly wage) rather than the employees’ regular rates of pay (i.e., with adjustments to the hourly wage reflecting nonhourly compensation employees earned during pay periods). On a motion for summary adjudication, the trial court found that meal and rest period premiums under section 226.7 only have to be paid at the employee’s base hourly rate and not the regular rate of pay, as those terms are not synonymous.
The California Court of Appeal affirmed, finding that “regular rate of compensation” and “regular rate of pay” are not synonymous terms. The court looked to a basic principle of statutory construction which holds that where different words or phrases are used in the same connection in different parts of a statute, it is presumed the Legislature intended a different meaning. Turning to the legislative histories of Labor Code sections 510 and 226.7, the court noted the punitive nature of overtime laws (i.e., to punish employers for working employees more than a normal workday ), as compared to the compensatory nature of meal and rest period laws (i.e., to compensate employees who are injured by not being provided a break). Thus, the two terms must have a different meaning and “regular rate of compensation” just refers to the employee’s base hourly wage.
DISCRIMINATION AND HARASSMENT
Williams v. Sacramento River Cats Baseball Club, LLC, 40 Cal. App. 5th 280, 253 Cal. Rptr. 3d 129 (2019)
Plaintiff Williams, an African-American, catered meals to players at Raley Field, home of defendant Sacramento River Cats Baseball Club, LLC. While plaintiff was assisting the visitor clubhouse manager, the job of assistant clubhouse manager became available. With the recommendation of the visitor clubhouse manager and relevant previous experience, plaintiff applied for the job. However, the club never interviewed him for the job and instead hired a Caucasian teenager who was still in high school, lacked relevant job experience, and did not meet other prerequisites for the job. Plaintiff sued, arguing that the club’s failure to hire him because of race violated public policy and Tameny v. Atlantic Richfield Co., 27 Cal. 3d 167, 164 Cal. Rptr. 839 (1980), which held that when an employer’s discharge of an employee violates fundamental principles of public policy, the discharged employee may maintain a tort action and recover damages traditionally available in such actions. The trial court sustained the club’s demurrer, finding that California does not recognize a common law claim for failure to hire in violation of public policy, and that the Tameny holding did not apply to him.
The California Court of Appeal affirmed, reasoning that an employer’s decision to reject an applicant because of the applicant’s race does not create tort liability because, absent an employee-employer relationship, the defendant owed no duty of care to the applicant. However, the court encouraged plaintiff to determine whether the Fair Employment and Housing Act applied to his allegations.
Symmonds v. Mahoney, 31 Cal. App. 5th 1096 (2019)
After 41 years, singer/songwriter Edward Joseph Mahoney (aka “Eddie Money”) terminated the employment of Glenn Symmonds (the band’s drummer) in response to which Symmonds filed a lawsuit alleging discrimination based on age, disability and medical condition in violation of the California Fair Employment and Housing Act (“FEHA”). Mahoney filed an anti-SLAPP motion to dismiss the FEHA claim on the ground that Symmonds’ claim arose in connection with an issue of public interest given the media’s and the public’s interest in Mahoney and his music. The trial court denied Mahoney’s motion to dismiss, but the Court of Appeal reversed, holding that “a singer’s selection of the musicians that play with him both advances and assists the performance of the music, and therefore is an act in furtherance of his exercise of the right to free speech.”
EEOC v. Global Horizons, Inc., 915 F.3d 631 (9th Cir. 2019)
The Washington state fruit growers, in this case, experienced labor shortages and as a result, entered into agreements with Global Horizons (a labor contractor) to obtain temporary workers from Thailand to work in their orchards under the H-2A guest worker program. After two of the Thai workers filed discrimination charges with the EEOC, the agency initiated this litigation, claiming the growers and Global Horizons subjected the Thai workers to poor working conditions, substandard living conditions and unsafe transportation based on their race and national origin. After Global Horizons became financially insolvent, the following legal question remained: To what extent were the growers’ joint employers of the Thai workers for purposes of Title VII liability? The district court dismissed all Title VII charges against the growers that did not involve “orchard-related matters.” In this appeal proceeding, however, the Ninth Circuit reversed the dismissal of claims regarding “non-orchard-related matters” and held the district court should have applied the “common-law agency test” for determining joint-employer status under Title VII. Further, the Court held that at least one of the growers allegedly knew or should have known about the discrimination and had “ultimate control over [even non-orchard-related matters] and thus could have taken corrective action to stop the discrimination.”
Carroll v. City & Cnty. of S.F., 41 Cal. App. 5th 805, 254 Cal. Rptr. 3d 519 (2019)
Plaintiff Carroll started working for defendant City and County of San Francisco when she was age 43. After working for defendant for 15 years, she retired at age 58 due to rheumatoid arthritis. Plaintiff applied for disability retirement in June 2000, defendant granted her request, and she started to receive monthly disability retirement benefit payments thereafter. In 2017, plaintiff discovered that because her disability retirement benefits were partially calculated based on her age at the start of her employment, her payments were less than they would have been if she had been under the age of 40 when hired. Plaintiff filed a complaint with the California Department of Fair Employment and Housing (“DFEH”) in November 2017, alleging that defendant’s policy violated the Fair Employment and Housing Act (“FEHA”) by discriminating against employees on the basis of age. She then sued defendant for age discrimination in violation of FEHA. Defendant demurred, arguing that FEHA’s one-year statute of limitations period began running in 2000, the year defendant granted plaintiff’s disability request. The trial court sustained the demurrer, agreeing with defendant that the complaint filed more than 17 years later was untimely.
The California Court of Appeal reversed, siding with plaintiff’s position that each time defendant issued her a disability retirement payment it was allegedly violating FEHA by committing an unlawful employment practice. As a result, each monthly issuance of a disability retirement payment was a continuing violation that restarted the statute of limitations. Thus, plaintiff had a cause of action for the one-year period immediately preceding the date on which she filed her DFEH complaint.
Practical Implications: The continuing violations doctrine discussed by this case can also apply to improper denials of vacation and to ongoing incidents of harassment. Employers can minimize application of the doctrine by promptly resolving employee concerns when brought to their attention.
Glynn v. Super. Ct., 42 Cal. App. 5th 47, 254 Cal. Rptr. 3d 772 (2019)
Plaintiff Glynn worked as a pharmaceutical sales representative for defendant Allergan. During his employment, plaintiff developed an eye condition that prevented him from being able to drive to sales calls. He took a medical leave of absence and requested reassignment to a position that did not require driving. Six months later, after many emails to human resources and applications for other internal positions, a temporary benefits department employee, Anne Marie Perosino, mistakenly concluded that plaintiff had transitioned from short-term disability to long-term disability and was unable to return to work with or without reasonable accommodation. Based on this mistake, she erroneously believed that defendant was required to terminate plaintiff under its internal policy, and she notified plaintiff of his termination. Plaintiff, who had neither requested nor been approved for long-term disability benefits, promptly emailed and relentlessly attempted to correct the misunderstanding. When defendant failed to reinstate him, he filed suit. Defendant moved for summary adjudication of six of plaintiff’s eight causes of action. The trial court granted defendant’s motion, and plaintiff filed a petition for writ of mandate challenging the trial court’s ruling.
The California Court of Appeal granted the petition in part, reversing the trial court’s order granting summary adjudication of plaintiff’s disability discrimination cause of action. First, it was undisputed that Perosino miscategorized plaintiff as totally disabled and unable to perform any work with or without reasonable accommodation. As a result of this mistake, plaintiff’s employment was terminated. Even if defendant’s mistakes were reasonable and in good faith, an employee should not bear the financial brunt of such a mistake. As a result, a lack of animus does not preclude liability for a disability discrimination claim where, as here, plaintiff provided direct evidence of disability discrimination. Specifically, defendant terminated plaintiff’s employment because of Perosino’s mistaken belief that he was disabled and unable to perform any work. The court also held that the trial court erred in granting summary adjudication of plaintiff’s causes of action for retaliation, failure to prevent discrimination, and wrongful termination in violation of public policy.
Practical Implications: This case emphasizes the importance of making accurate decisions that affect an employee’s employment, perhaps with multiple internal reviews, as an employer can be liable for intentional discrimination without having a discriminatory animosity toward the employee.
Gonzales v. San Gabriel Transit, Inc., 40 Cal. App. 5th 1131, 253 Cal. Rptr. 3d 681 (2019)
Plaintiff Gonzales formerly worked as a driver for defendant San Gabriel Transit, Inc., a transportation company which facilitates traditional taxicab passenger service. In February 2014, plaintiff filed a putative class action alleging that defendant, among other things, misclassified drivers as independent contractors in violation of the California Labor Code and Industrial Welfare Commission Wage Order No. 9-2001. Plaintiff sought to certify a class defined as all non-employee drivers, or lessees of defendant from February 14, 2010 to the present (the class period) who drove a taxicab or van and paid defendant a weekly vehicle lease. Alternatively, plaintiff proposed certification of three subclasses. The trial court found that plaintiff had shown the existence of an ascertainable and sufficiently numerous class and that he and counsel were adequate representatives. However, the court found that plaintiff failed to show that the issue of misclassification as an independent contractor was susceptible to common proof. The trial court based its ruling largely on distinctions between terms of several written agreements between plaintiff and other drivers in effect during the class period.
The California Court of Appeal reversed and remanded based on the intervening California Supreme Court decision in Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903, 232 Cal. Rptr. 3d 1 (2018). In Dynamex, the California Supreme Court adopted the ABC test under which the hiring entity must show all of the following to establish an independent contractor relationship: (A) that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact; and (B) that the worker performs work that is outside the usual course of the hiring entity’s business; and (C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed. The court of appeal held that Dynamex applies retroactively and that the ABC test is not only applicable to claims under the wage orders, but also to Labor Code claims rooted in one or more wage orders, or predicated on conduct alleged to have violated a wage order. It then determined that most of plaintiff’s claims were rooted in wage order protections and requirements, and as such the ABC test must be applied. The court remanded the case to the trial court for application of the ABC test.
Key Takeaway: Dynamex’s ABC test applies retroactively to pending litigation and not only to claims brought under wage orders but also to Labor Code claims rooted in one or more wage orders or predicated on conduct alleged to have violated a wage order.
Practical Implications: California Assembly Bill 5, effective on January 1, 2020, essentially adopts this holding, as it expands the ABC test to the California Labor Code, Unemployment Insurance Code, and wage orders. The case could have an impact on pending litigation based on the holding that Dynamex has retroactive effect.
Jimenez v. U.S. Continental Marketing, Inc., 41 Cal. App. 5th 189 (2019)
Plaintiff Jimenez worked for defendant U.S. Continental Marketing, Inc. for five years yet primarily classified her as a temporary employee. Like plaintiff, other temporary employees were placed with defendant by a temporary staffing agency, Ameritemps. Temporary employees received their benefits and paychecks from Ameritemps, and tracked and reported their time to Ameritemps. However, while at the worksite, there was little distinction regarding the control defendant exerted over the entire workforce. Plaintiff claimed that she had been harassed and retaliated against by a coworker. Defendant could not corroborate her claims and declined to issue any formal discipline. Defendant later terminated plaintiff’s services, and Ameritemps terminated her employment shortly thereafter. Plaintiff sued defendant and her coworker for violations of the California Fair Employment and Housing Act (“FEHA”), and for common law wrongful termination in violation of public policy. Defendant’s primary defense was that it did not employ plaintiff. After a trial on the merits, the jury decided that defendant was not plaintiff’s employer and returned a defense verdict.
The California Court of Appeal reversed the jury’s finding that defendant was not plaintiff’s employer. While FEHA requires an employment relationship, it need not be direct. Rather, an employment relationship for purposes of FEHA exists when the employer exerts direction and control over the individual’s work performance. That direction and control is not mitigated in the temporary-staffing context simply because hiring, payment, benefits, and time-tracking aspects of employment are handled by the temporary-staffing agency. Here, plaintiff had put forth substantial evidence that defendant directed and controlled her employment (e.g., plaintiff worked in a supervisory role, reported to defendant’s employee, was subject to defendant’s employee handbook, underwent mandatory in-house training, and was subject to defendant’s disciplinary policies). The jury had insufficient evidence to hold otherwise. The court remanded the case for a retrial, with instructions that the trial court instruct the jury that defendant was plaintiff’s employer with respect to her FEHA claims.
Key Takeaway: Amount of control exercised over temporary employee by worksite-employer is key factor under FEHA for analyzing whether temporary employee is employed by worksite-employer.
Practical Implications: The right to control test to determine employee vs. independent contractor status applies in situations involving potential joint employment, not the ABC test of Dynamex. Under the right to control test, a worker placed by a temporary agency with another company will often be jointly employed by both.
Siri v. Sutter Home Winery, Inc., 31 Cal. App. 5th 598 (2019)
Plaintiff, Ms. Siri, was an accountant for Defendant, Sutter Home Winery, Inc. doing business as Trinchero Family Estates (“TFE”). Ms. Siri believed her employer was failing to comply with certain California sales and use tax laws. She consulted with the California State Board of Equalization, who confirmed some of Ms. Siri’s suspicions. Ms. Siri informed her direct supervisor, top management, and the company’s general counsel that TFE was not paying and had not paid use taxes it owed. TFE authorized some payments but declined to let Ms. Siri pay for others.
After lodging her complaints, Ms. Siri alleged that TFE retaliated against her by singling her out and scrutinizing her work; stripping her of some of her duties; giving an office promised to Ms. Siri to someone else; treating her as a pariah; and ultimately, terminating her employment. Ms. Siri sued TFE for wrongfully terminating her in violation of California Labor Code section 1102.5 and public policy.
In the course of discovery, Ms. Siri attempted to obtain TFE’s tax documents that she hoped would support her claims. However, the trial court found that these documents were privileged and did not order TFE to produce them.
TFE then moved for summary judgment on the grounds that Ms. Siri’s causes of action failed for two reasons. First, Ms. Siri claimed that she had to rely on TFE’s tax returns to establish her claims. However, the court did not order TFE to produce them, so Ms. Siri did not have these documents. Second, TFE argued that Ms. Siri relied on information she gleaned while preparing TFE’s tax returns. Disclosing this privileged and confidential information would be a violation of the California Revenue and Taxation Code.
Ms. Siri responded by stating that her claim did not rely on privileged tax information, but rather on her communications with TFE’s management and the Board of Equalization. The trial court disagreed with Ms. Siri. It granted TFE’s motion for summary judgment on the grounds that Ms. Siri could not have asserted her claims without violating the taxpayer privilege.
On appeal, the First Appellate District reversed the trial court’s judgment. The appellate court found that the taxpayer privilege does not preclude an employee from speaking up if the employer files incorrect or fraudulent returns. Ms. Siri could bring a claim for wrongful termination as long as she reasonably believed that TFE was violating the law. Further, the appellate court found that Ms. Siri could prove the elements of her causes of action without violating the taxpayer privilege. The First Appellate District further noted that the Revenue and Taxation Code could not be interpreted to prohibit an employee from telling an employer that it is violating tax law. Nor could that code be read to bar a plaintiff from bringing a wrongful termination claim. The appellate court found that Ms. Siri was entitled to prove her claim without disclosing any privileged information.
Ross v. County of Riverside, 2019 WL 2537342 (Cal. Ct. App. 2019)
Christopher Ross worked as a deputy district attorney for the County of Riverside before he was constructively discharged (according to Ross) or had abandoned his job (according to the county). Ross sued the county for violation of Cal. Lab. Code § 1102.5 (the “whistleblower statute”) and for disability discrimination. The trial court granted the county’s motion for summary judgment, but the Court of Appeal reversed, holding that Ross had engaged in protected activity because he disclosed information to a governmental or law enforcement agency that he reasonably believed disclosed a violation of law applicable to criminal prosecution and prosecutors (i.e., wrongful prosecution of a criminal case against a criminal defendant). The Court of Appeal further held there was sufficient evidence that Ross had a temporary or short-term physical impairment that was actually or perceived by the county to be potentially disabling.
PRELIMINARY DISCLOSURES FOR EMPLOYMENT BACKGROUND CHECKS
Gilberg v. California Check Cashing Stores, LLC 913 F.3d 1169 (2019)
The widespread use of credit reports and background checks led Congress to pass the Fair Credit Reporting Act (“FCRA”) to protect consumers’ privacy rights. FCRA requires employers who obtain a consumer report on a job applicant to provide the applicant with a “clear and conspicuous disclosure” that they may obtain such a report (the “clear and conspicuous requirement”) “in a document that consists solely of the disclosure” (the “standalone document requirement”) before procuring the report.
In this case, the employer used an FCRA Disclosure and Authorization form that included disclosures and authorizations from several states. The form declared that these state-specific disclosures and authorizations applied to applicants and employees of those states only. For example, the California disclosure and authorization form in Gilberg expressly applied to “California applicants or employees only.” The Court found that the employer’s inclusion of state-disclosures and authorizations violated the FCRA’s “consists solely of the disclosure” requirement. The Court further held that, because the language regarding the scope of the background check was not clear (due to typos and poor grammar), the employer’s FCRA disclosure form further violated the “clear and conspicuous” requirement. The Gilberg Court rejected the employer’s “invitation to create an implied exception” to the FCRA’s “consists solely of the [federal] disclosure” language in cases where a disclosure form includes language required by state or local law. Rather, the Court found that the FCRA’s “standalone requirement forecloses implicit exceptions,” including apparently legal obligations imposed by state law and arising from the same activity covered by the FCRA.
Practical Implications: Employers should review their FCRA disclosure forms to ensure that they do not include any language other than the FCRA required disclosure and authorization language. They should also review their forms to ensure the language in the forms is clear and easily understood by an average layperson. Finally, they should determine whether any state or local laws impose additional disclosure, authorization, or acknowledgment obligations.
OTO, L.L.C. v. Kho, 8 Cal.5th 111, 251 Cal.Rptr.3d 714 (2019)
In this case, the California Supreme Court was asked to ascertain the enforceability of an arbitration agreement. Three years into his employment with defendant OTO, plaintiff Kho was approached at his desk and asked to sign a collection of documents, one of which included an arbitration agreement requiring any employment-related claims to be brought in arbitration. The agreement required procedures that largely mirrored those found in civil litigation, including full discovery and civil rules of pleading and evidence. After his employment ended, plaintiff filed a claim with the California Labor Commissioner to recover allegedly unpaid wages, and his claim was set for a hearing under the applicable Labor Code procedures (known as a Berman hearing). Defendant filed a petition to compel arbitration, but the hearing officer proceeded with the hearing and awarded plaintiff over $158,000. Defendant appealed the hearing officer’s decision to the superior court, and the court vacated the award but declined to compel arbitration. The California Court of Appeal reversed the trial court’s decision.
The California Supreme Court reversed, refusing to compel arbitration of plaintiff’s wage claims because the arbitration agreement was unconscionable and therefore unenforceable. The court found a high degree of procedural unconscionability as plaintiff was required to sign the agreement without having a real chance to review it, the agreement was lengthy and full of legalese, and no one was available to explain it to him. The court also found the agreement to be substantively unconscionable in this case on grounds that despite being designed to be fair to both sides, the costly, complex and time-consuming civil litigation-type process required by the agreement constituted a barrier to plaintiff’s right to the expedient, largely cost-free Berman hearing process that plaintiff would have otherwise been entitled to have to adjudicate his wage claim. The waiver of Berman procedures does not, in itself, render an arbitration agreement unconscionable, but where, as here, that waiver was imposed in an unconscionable fashion, the agreement was unenforceable.
Justice Chen wrote a dissent in which he asserted that the holding is inconsistent with California law as well as unambiguous United States Supreme Court precedent interpreting the broad preemptive effect of the Federal Arbitration Act, which “precludes the majority from invalidating this arbitration agreement based on its subjective view” about how best to vindicate employee rights. Eight years ago, the United States Supreme Court, citing its own opinion in AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011), vacated a similar California Supreme Court judgment invalidating an arbitration agreement in Sonic-Calabasas A, Inc. v. Moreno, 51 Cal. 4th 659 (2011). Justice Chin suggests the same fate may befall this latest opinion.
Diaz v. Sohnen Enters., 34 Cal. App. 5th 126, 245 Cal. Rptr. 3d 827 (2019)
Plaintiff, while employed by defendant, filed a complaint alleging workplace discrimination. A few weeks earlier, plaintiff and her co-workers met with defendant’s chief operating officer about a new dispute resolution agreement, which mandated arbitration of disputes arising between defendant and its employees. Plaintiff refused to sign the arbitration agreement despite defendant making clear that it was a condition of continued employment. Thereafter, plaintiff’s attorney sent defendant a letter in which plaintiff rejected the arbitration agreement but indicated her intent to continue her employment, while simultaneously serving defendant with a civil complaint. Defendant sent a demand for arbitration to plaintiff’s counsel and thereafter filed a motion to compel arbitration. The trial court denied the motion, finding that it was a contract of adhesion with no meeting of the minds.
The California Court of Appeal reversed. First, defendant met its burden of proving the existence of an agreement to arbitrate. The court rejected plaintiff’s argument that she did not assent to the terms of the arbitration agreement, holding that California law in this area is settled: when an employee continues his or her employment after notification that an agreement to arbitration is a condition of continued employment, that employee has impliedly consented to the arbitration agreement. Because plaintiff’s employment was at-will, defendant was free to change the terms of her employment provided it gave plaintiff notice of the change. Here, defendant had properly provided such notice. Because plaintiff failed to present a valid defense to the arbitration agreement, the order denying defendant’s motion to compel was improper.
Practical Implications: With recent favorable opinions in both state and federal courts regarding employment arbitration agreements, now is a good time for employers without them to determine whether they should be implemented.
Bravo v. RADC Enters., Inc., 33 Cal. App. 5th 920, 245 Cal. Rptr. 3d 399 (2019)
Defendant RADC Enterprises, Inc. owns and operates gas stations in Southern California. It hired plaintiff to manage one of its gas stations. During plaintiff’s employment, the parties signed an arbitration agreement covering all disputes arising from the employment relationship. The arbitration agreement included a one-sentence choice-of-law provision stating that the agreement was governed by and must be interpreted in accordance with the laws of California. After defendant terminated plaintiff’s employment, he filed a lawsuit alleging discrimination under the California Fair Employment and Housing Act (“FEHA”), whistleblower retaliation, common law wrongful termination, and individual as well as representative wage claims under the California Labor Code. Defendant filed a motion to compel arbitration. The trial court granted the motion in part as to the FEHA, whistleblower, and common law claims, but denied the motion with respect to the wage claims. The trial court determined that the California choice of law provision implicated Labor Code section 229, which directs courts to disregard agreements to arbitrate wage claims.
The California Court of Appeal reversed, holding that because the entire purpose of the arbitration agreement was to arbitrate all disputes arising from their employment relationship, the parties could not have meant for the choice-of-law provision to preclude arbitration of wage claims. Applying section 229 would contradict the parties’ intent to arbitrate any and all disputes including claims related to wages. In other words, plaintiff’s interpretation of the choice-of-law provision would cause this term in the agreement to conflict with its entire purpose.
Practical Implication: Because choice-of-law provisions in arbitration agreements have the potential for creating confusion in the enforcement of arbitration, they should be reviewed by experienced employment counsel before implementation.
Cuevas-Martinez v. Sun Salt Sand, Inc., 35 Cal. App. 5th 1109 (2019)
Antonio Cuevas-Martinez worked as the head cook at a Palm Desert restaurant called Grill-A-Burger before he was fired by the owners (Farouk and Salima Nurani) allegedly for showing up late and missing shifts. After Cuevas-Martinez was fired, the Nuranis learned that over the previous few months, Cuevas-Martinez had been working to open his own restaurant, had been soliciting their employees and customers, using their “exact recipes” while using “confusingly similar names” for items on the menu, etc. The Nuranis sued Cuevas-Martinez for misappropriation of trade secrets; interference with contractual relationships with suppliers; interference with prospective economic advantage with customers, suppliers, and employees; conversion; and unfair business practices. After Cuevas-Martinez moved successfully for summary judgment in response to the lawsuit filed against him, he sued his former employers for malicious prosecution. They responded with an anti-SLAPP motion, which the trial court granted. The Court of Appeal reversed, however, holding that Cuevas-Martinez established a reasonable probability of success on his claims as well as malice on the part of his former employers who “pursued their interference with contractual relations claim against Cuevas-Martinez for over 20 months…despite knowing the claim was baseless.”
Dane-Elec Corp., USA v. Bodokh, 35 Cal. App. 5th 761 (2019)
Dane-Elec sued its former CEO, Nessim Bodokh, for breach of a promissory note. Bodokh filed a cross-complaint against Dane-Elec for failure to pay wages and unfair competition. Dane-Elec prevailed against Bodokh on both the complaint and the cross-complaint in a bench trial. Following the trial, Dane-Elec filed a motion to recover its attorney’s fees based upon a prevailing party attorney’s fees provision in the promissory note. The trial court granted the motion, with the exception of the attorney’s fees Dane-Elec incurred in defending Bodokh’s wage claim (Cal. Lab. Code § 218.5(a) prohibits the recovery of attorney’s fees by a prevailing-party employer unless the employee’s wage claim was made in bad faith). The Court of Appeal reversed in part, ordering the trial court on remand to determine the attorney’s fees Dane-Elec incurred solely in connection with its successful enforcement of the promissory note.
Townley v. BJ’s Restaurants, Inc., 2019 WL 2913303 (Cal. Ct. App. 2019)
Krista Townley filed this class action and Private Attorneys General Act (“PAGA”) claim against her employer, seeking penalties on behalf of herself and other aggrieved employees for alleged Labor Code violations. Townley claimed that BJ’s violated Cal. Lab. Code § 2802 by not reimbursing its employees for the cost of purchasing slip-resistant, close-toed shoes. (To avoid slip and fall accidents, BJ’s adopted a safety policy requiring all hourly restaurant employees to wear black, slip-resistant, close-toed shoes, but the restaurant did not reimburse employees who purchased shoes to comply with the safety policy.) The trial court granted summary judgment to BJ’s on the ground that OSHA and Cal-OSHA specifically provide that an employer is not required to reimburse employees for the cost of non-specialty shoes that offer some slip-resistant characteristics, but are otherwise ordinary clothing in nature. The Court of Appeal affirmed, holding that “the cost of the shoes does not qualify as a ‘necessary expenditure’ within the meaning of the statute.”
Parker Drilling Mgmt. Servs., Ltd. v. Newton, 587 U.S. ___, 139 S. Ct. 1881 (2019)
Brian Newton worked for Parker Drilling on drilling platforms located off the coast of California. Newton’s 14-day shifts involved 12 hours per day on duty and 12 hours per day on standby during which time he could not leave the platform. Newton, who was not paid for his standby time, filed this class action in California state court alleging violations of California wage-and-hour laws. After the case was removed to federal court, the parties agreed that the platforms are subject to the Outer Continental Shelf Lands Act, which denies states any interest in or jurisdiction over the Outer Continental Shelf (“OCS”). The Supreme Court unanimously held that where federal law addresses the relevant issue (as it does in this case through the Fair Labor Standards Act), state law is not adopted as federal law on the OCS.
Goonewardene v. ADP, LLC, 6 Cal. 5th 817 (2019)
Sharmalene Goonewardene alleged claims against ADP (the payroll company used by her employer, Altour International Inc.) for wrongful termination, violation of the Labor Code, breach of contract, negligent misrepresentation and negligence. The trial court sustained ADP’s demurrer to the complaint without further leave to amend, and the Court of Appeal affirmed in part and reversed in part, holding that only the wrongful termination and Labor Code claims were properly dismissed. The Court of Appeal held that there were not sufficient facts alleged establishing an employment relationship between Goonewardene and on that basis affirmed dismissal of the Labor Code and FLSA violation claims. Similarly, ADP was not liable as a matter of law for either discrimination or wrongful termination in violation of public policy because of the absence of an employment relationship. As for the breach of contract claim, the Court of Appeal held that Goonewardene and other Altour employees were third-party beneficiaries of an agreement between Altour and ADP. The Court of Appeal also held that the negligent misrepresentation and professional negligence claims survived demurrer based on ADP’s alleged failure to properly calculate wages owed to Goonewardene.
In this opinion, the California Supreme Court reversed the Court of Appeal insofar as the lower Court held that the trial court erred in dismissing the causes of action for breach of contract, negligence and negligent misrepresentation. The Supreme Court unanimously determined that ADP was not a creditor beneficiary of the employment relationship between Altour and its employees or that ADP agreed to pay the wages that Altour owes to its employees out of ADP’s own funds. The Supreme Court further held that ADP owed no common law duty of care to Altour’s employees and thus could not be liable for alleged negligence.
Dickinson v. Cosby, 37 Cal. App. 5th 1138 (2019)
After Janice Dickinson went public with her accusations of rape against Bill Cosby, Cosby’s attorney (Martin Singer) reacted with: (1) a letter demanding that media outlets not repeat Dickinson’s allegedly false accusation, under threat of litigation; and (2) a press release characterizing Dickinson’s rape accusation as a lie. Dickinson then brought suit against Cosby for defamation and related causes of action. When Cosby’s submissions indicated that Singer might have issued the statements without first asking Cosby if the rape accusations were true, Dickinson amended her complaint to add Singer as a defendant. Cosby and Singer successfully moved to strike the amended complaint because of the pending anti-SLAPP motion. The trial court then granted in part Cosby’s anti-SLAPP motion, striking Dickinson’s claims arising from the demand letter, and denied it as to her claims arising from the press release.
In an earlier opinion (Dickinson I), the Court of Appeal held that the trial court erred in striking the amended complaint because it pertained only to Singer (who had not filed an anti-SLAPP motion). The trial court also erred in granting Cosby’s anti-SLAPP motion with respect to the demand letter (it was sent without a good faith contemplation of litigation seriously considered and contained actionable statements of fact), but the trial court correctly denied Cosby’s anti-SLAPP motion with respect to the press release (it also contained actionable statements of fact). On remand, Cosby filed a second anti-SLAPP motion seeking to strike claims newly asserted in Dickinson’s amended complaint. The trial court granted the motion in substantial part, but refused to strike Dickinson’s claims premised on two allegedly defamatory statements that appeared in Singer’s press releases.
In this appeal, Cosby argued that Dickinson cannot show that he is directly or vicariously liable for his attorney’s statements and also that the allegedly defamatory statements were his attorney’s nonactionable opinions. The Court of Appeal disagreed and affirmed the trial court’s order, holding that “there is evidence that Cosby personally approved or authorized the statements before Singer issued them. Cosby had no ethical obligation to issue press releases containing known falsehoods, nor does it benefit our free and open society for him to do so.”
Severson & Werson v. Sepehry-Fard, 37 Cal. App. 5th 938 (2019)
Severson & Werson, a law firm, filed a petition for a workplace violence restraining order seeking protection for all of its employees, contending that Sepehry-Fard (a member of the “sovereign citizen movement”) had made “veiled threats of physical violence,” performed a “citizen’s arrest” of two employees, drafted papers that purported to be “arrest warrants” listing 23 “felony counts,” including “treason,” against employees, etc. The Judicial Council form used by the law firm required that documents be served upon Sepehry-Fard at least five days before the hearing unless the petitioner specifically requested fewer than five days’ notice, which it had not. The trial court entered the restraining order, but the Court of Appeal reversed, holding that Sepehry-Fard did not receive adequate notice or an opportunity to be heard to contest the issuance of the restraining order.
It is important to note that every employment law situation is unique and this update is not a replacement for legal counsel. If you have further questions or would like additional information, contact Jerry Pearson at email@example.com.
About the Authors: Jerry Pearson is a Managing Partner at Young Wooldridge, LLP and leads the firm’s Business Department. Jerry represents management in labor and employment issues and ensures his clients stay in compliance with the State and Federal labor laws.
Lauren Naworski-Smith is an associate attorney in the Business Department at Young Wooldridge, LLP. Lauren focuses her practice on business law with an emphasis on labor and employment matters.