Federal Court Deals Setback to Employers Seeking to Strip Employees’ Class Claims Through Arbitration

Today, the United States District Court for the Central District of California, Hon. Josephine Staton, ruled in favor of Plaintiffs Kenneth Lee and Mark Thompson, denying Defendant JP Morgan Chase & Co.’s motion to compel arbitration on an individual basis. The Court’s decision is a victory for employees generally who seek to challenge improper pay practices on a class or collective basis. The case is Lee, et al. v. JPMorgan Chase & Co., et al. (No. 13-CV-511-JLS).

JPMorgan Chase’s motion arose after both parties had agreed that the merits of the case – whether Appraisers in the commercial lending division of JPMorgan Chase were improperly denied overtime pay – should be decided by an arbitrator. The arbitration agreements signed by some of the Plaintiffs stated that “[a]ny and all disputes that involve or relate in any way to [the employee’s] employment” would be submitted to arbitration, but the agreements did not discuss class-wide or collective claims. The issue presented to the Court was who should decide whether the Plaintiffs’ arbitration claims could proceed on a class-wide basis: the Court itself, or the arbitrator. JPMorgan Chase argued that the Court should decide the issue and should hold that the language of the Arbitration Agreements required each of the Plaintiffs to pursue his claims in an individual arbitration, rather than as part of a class-wide arbitration. The Court rejected JPMorgan Chase’s argument.

In ruling for Plaintiffs, the Court held that whether the Plaintiffs could proceed on a class-wide basis was a “procedural” question within the scope of the arbitrator’s authority to decide, not a question of “arbitrability” (i.e., whether the dispute was subject to arbitration in the first place), which would have been a question for the Court to decide. The Court noted that the U.S. Supreme Court had recently described this particular issue as an open question, see Oxford Health Plans LLC v. Sutter, 133 S. Ct. 2064, 1068 n.2 (2013), but the Court found guidance in an earlier Supreme Court decision, Green Tree Financial Corp. v. Bazzle, 539 U.S. 444 (2003) (plurality), and a decision from the Third Circuit Court of Appeals, Vilches v. Travelers Companies, Inc., 413 F. App’x 487 (3d Cir. 2011).

Today’s decision reinforces this blog’s prior view (expressed here and here) that employers that seek to compel class cases into arbitration should be careful what they wish for: they may escape Court litigation only to find themselves bearing the considerable cost of class-wide and/or multiple individual arbitrations.

Bryan Schwartz Law represents the Plaintiffs in Lee, along with the firm of Goldstein, Borgen, Dardarian & Ho.

The Court’s order is available here. For more information about this case on behalf of commercial appraisers and review appraisers, or generally about class actions seeking wages, please contact Bryan Schwartz at Bryan@BryanSchwartzLaw.com.

Disability Issues in the Workplace: Bryan Schwartz Law Principal Appears on NPR Talk Show Discussing New Disability Laws and Regulations

The Americans with Disabilities Act (ADA) Amendments Act of 2008 (link to the EEOC's guidance), followed by the promulgation of new disability regulations adopted by California's Fair Employment and Housing Council this year (link to the regulations), have broadened protections for workers with disabilities, especially in California.

Today, Bryan Schwartz Law's Principal discussed the impact of these new laws and regulations on NPR, along with John Hyland of Rukin Hyland Doria & Tindall, and host Chuck Finney, on the "Your Legal Rights" radio show, on KALW 91.7 FM in the Bay Area, with a syndicated version broadcast around California and available online.

Listen to the show here.

Click on "Listen" to hear the illuminating discussion of this complex area of law that affects so many workers and employers.

Sonic-Calabasas v. Moreno: California Supreme Court Holds the Unconscionability Doctrine Survived the U.S. Supreme Court's Concepcion Assault

Workers, consumers, and regular folks of all stripes have some hope, if they live in California. Though the U.S. Supreme Court has marched relentlessly toward completely eviscerating our rights to challenge big corporations when they discriminate or retaliate against us unlawfully or steal from us in various ways, "states' rights" still carry some sway in applying basic contract law. And, California's basic contract law recognizes that some contract terms are just unconscionable, and thus unenforceable.

Today, Justice Goodwin Liu, writing for the Supreme Court, in Sonic-Calabasas v. Moreno, S174475 (Sonic II), in a seventy-page majority opinion, joined by Chief Justice Cantil-Sakauye, and Justices Kennard, Werdegar, and Corrigan, gave new life to our right to challenge contracts that are unconscionable - that is, so unfair, they cannot be enforced. Read the decision here.

Though this Supreme Court (unlike the U.S. Supreme Court) has had a high number of unanimous decisions and harmony, not so, in this case. Justice Corrigan added a three-page concurrence with her two cents, and Justice Chin (joined by Justice Baxter) wrote a 29-page dissent that would not have found the agreement in this case unconscionable.

The Supreme Court in Sonic-Calabasas was reconsidering its prior decision, in Sonic-Calabasas, Inc. v. Moreno (2011) 51 Cal.4th 659 (Sonic I), in light of AT&T Mobility LLC v. Concepcion (2011) 563 U.S. __ [131 S.Ct. 1740] (Concepcion). In Concepcion, as I have written and spoken about previously on this blog here and here, the U.S. Supreme Court rejected California's presumption of unconscionability concerning class action waivers in arbitration agreements (the Discover Bank rule), holding the presumption was discriminatory against arbitration, in violation of the Federal Arbitration Act (FAA). Concepcion drastically undermined our rights as workers and consumers to challenge big companies' indiscretions on a level playing field.

In Sonic I, California's Supreme Court had held that the Federal Arbitration Act did not preempt a state law rule allowing employees to have a hearing with California's Labor Commissioner at the Division of Labor Standards Enforcement (DLSE) (a Berman hearing, as it is called). In light of Concepcion, that holding of Sonic I is dead, according to today's decision. If you signed an arbitration agreement with your employer, you do not have a right to a Berman hearing anymore.

But, that is not the end of the story, fortunately. Today's decision holds:

"Although we conclude that the FAA preempts a state-law rule categorically requiring arbitration to be preceded by a Berman hearing, our holding does not fully resolve the unconscionability claim in this case." Slip Op. at p. 27. "After Concepcion, courts may continue to apply unconscionability doctrine to arbitration agreements." Slip Op. at p. 32.

In Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, California's Supreme Court laid out the unconscionability doctrine in the context of arbitration agreements - describing what sorts of arbitration terms go too far in tilting the playing field toward the more powerful party. Armendariz survives, the Supreme Court held today.

The decision by Justice Liu gives several examples of unconscionable terms which are still unacceptable:

• one that effectively gives the more powerful party (which is imposing its own arbitration agreement - called an "adhesion contract") the right to choose a biased arbitrator (Slip Op. at p. 29, citing Graham v. Scissor-Tail, Inc. (1981) 28 Cal.3d 807, 826–827);
• where "an equal division of costs between employer and employee has the potential in practice of being unreasonably one-sided or burdening an employee's exercise of statutory rights" (citing Armendariz);
• where there is a high threshold for an arbitration appeal that decidedly favors defendants in employment contract disputes (citing Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1076);
• "an arbitration agreement with a damages limitation clause under which the customer does not
  even have the theoretical possibility he or she can be made whole" (citing Harper v. Ultimo (2003) 113 Cal.App.4th 1402, 1407);
• "an arbitration agreement that, among other things, impos[ed] upon [the employee] the obligation to pay [the employer's] attorney fees if [the employer] prevails in the proceeding, without granting her the right to recoup her own attorney fees if she prevails" (citing Ajamian v. CantorCO2e, L.P. (2012) 203 Cal.App.4th 771, 799–800);
• and "where a consumer enters into an adhesive contract that mandates arbitration, it is unconscionable to condition that process on the consumer posting fees he or she cannot pay" (citing Gutierrez v. Autowest, Inc. (2003) 114 Cal.App.4th 77).

As the Court explained:

Unconscionability doctrine ensures that contracts, particularly contracts of adhesion, do not impose terms that have been variously described as "overly harsh" (Stirlen v. Supercuts, Inc. (1997) 51 Cal.App.4th 1519, 1532), "unduly oppressive" (Perdue v. Crocker National Bank (1985) 38 Cal.3d 913, 925), "so one-sided as to shock the conscience" (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (2012) 55 Cal.4th 223, 246), or unfairly one-sided (Little, supra, 29 Cal.4th at p. 1071). All of these formulations point to the central idea that unconscionability doctrine is concerned not with "a simple old-fashioned bad bargain" (Schnuerle v. Insight Communications Co. (Ky. 2012) 376 S.W.3d 561, 575), but with terms that are "unreasonably favorable to the more powerful party" (8 Williston on Contracts (4th ed. 2010) § 18.10, p. 91).

Slip Op. at p. 31.

Significantly, the Court maintained the stance rejecting arbitration agreements that "impair the integrity of the bargaining process or otherwise contravene the public interest or public policy" (Slip Op. at pp. 31-32), though such public policy-driven arguments seemed threatened by American Express, Inc. v. Italian Colors, from June 20, 2013.

Ultimately, Sonic II is a major victory for employees, consumers, and their advocates. The California Supreme Court's analysis, while allowing arbitration agreements to eliminate the Berman hearing right, maintained everything the Berman hearing was designed to accomplish, saying:

The Berman statutes include various features designed to lower the costs and risks for employees in pursuing wage claims, including procedural informality, assistance of a translator, use of an expert adjudicator who is authorized to help the parties by questioning witnesses and explaining issues and terms, and provisions on fee shifting, mandatory undertaking, and assistance of the Labor Commissioner as counsel to help employees defend and enforce any award on appeal. Waiver of these protections does not necessarily render an arbitration agreement unenforceable, nor does it render an arbitration agreement unconscionable per se. But waiver of these protections in the context of an agreement that does not provide an employee with an accessible and affordable arbitral forum for resolving wage disputes may support a finding of unconscionability. As with any contract, the unconscionability inquiry requires a court to examine the totality of the agreement‘s substantive terms as well as the circumstances of its formation to determine whether the overall bargain was unreasonably one-sided. In the present case, we remand to the trial court to conduct this fact-specific inquiry.

Slip Op. at p. 33(emph. added).

These days, with a U.S. Supreme Court overtly hostile to workers' and consumers' rights, this is about the best we can hope for.

If you have questions relating to your rights as an employee, or about an arbitration agreement you signed, contact Bryan Schwartz Law today.

Ninth Circuit Holds that Your Disability Leave Application May Not Deprive You of the Right to Reasonable Accommodations

Disabled employees are sometimes caught between the desire to work and the practical need to apply for disability leave through the Social Security or State Disability Insurance (SSDI or SDI) systems, the Family Medical Leave Act (FMLA) or California Family Rights Act (CFRA), or a disability retirement plan through a public employer. For example, an employee who becomes disabled on the job may find her employer denying her reasonable accommodation, thereby leaving her with no better choice than to seek some form of disability leave. FMLA leave is available for temporary conditions that make an employee unable to perform the essential functions of her job. In the past, an employee had reason to fear that statements made about her inability to perform essential job functions in an application for FMLA leave would be used against her if she later sued her employer for failure to provide reasonable accommodation in the workplace.

Fear no more. Last month, the Ninth Circuit provided a green light for disabled employees to apply for FMLA leave while asserting their right to reasonable accommodation under the Americans with Disabilities Act (ADA). In Smith v. Clark County School District, D.C. No. 2:09-civ-02142-RLH-LRL (9th Cir. Aug. 21, 2013), the Ninth Circuit made it clear that bringing a claim under the ADA does not inherently conflict with making a claim for FMLA disability leave. The Court of Appeals explained that this is because FMLA applications do not account for an employee’s ability to work with reasonable accommodation.

In Smith, the Court also provided guidance for employees seeking to apply for FMLA leave while preserving their reasonable accommodation claims. Smith involved an elementary school employee who aggravated her back while on the job, and applied for medical leave under the FMLA, as well as state retirement and private insurance disability benefits. The Court reasoned that the FMLA and the other claims were not inconsistent with the plaintiff’s ADA cause of action because the statements made on her applications did not account for her ability to perform her job with reasonable accommodation, or her ability to work in the future. The Court held that the teacher had given sufficient explanation for the inconsistencies between her ADA claims and her benefits applications to survive summary judgment, and genuine issues of material fact remained regarding whether the teacher or school district proposed a reasonable accommodation that would allow the teacher to retain her employment. Thus, an employee who becomes disabled on the job may apply for FMLA leave, and maintain a reasonable accommodation claim, if statements made in her FMLA application do not directly conflict with the conclusion that the employee could either perform her job with “reasonable accommodation,” or her ability to work in the future.

In arriving at its conclusion, the Ninth Circuit applied a two part test set forth in Cleveland v. Policy Management Systems Corporation, 526 U.S. 795 (1999). In Cleveland, an employee’s application for SSDI was at issue. Subsequently, other appeals courts have determined that Federal Employee Retirement System (FERS) benefits and state-police pension benefits do not conflict with ADA claims. In Smith, the court denied summary judgment as to not only the FMLA issue, but also Nevada Public Employees’ Retirement Systems disability retirement and private insurance benefits. A general pattern seems to be emerging, and employees should note and take heart.

If you have questions about disability discrimination under the ADA or California’s Fair Employment and Housing Act (FEHA), contact Bryan Schwartz Law today.

NOTE: Nothing in this posting is intended to provide legal advice about your particular case and it does not form an attorney-client relationship with any reader. It is intended to be information about a subject of general interest for the general public. In order for Bryan Schwartz Law  to represent you, you must have a signed representation agreement with the firm.

California Courts Split on Exhausting Whistleblower Claims Under Labor Code

Better to exhaust than be sorry.

This week, California’s Third Appellate District issued a decision dealing with whistleblower-retaliation claims under Labor Code that begs for a judicial or legislative response. In MacDonald v. State of California, Case No.C069646, the court held that an employee must exhaust the administrative remedy set forth in section 98.7 before filing suit in superior court for retaliatory discharge in violation of Labor Code sections 1102.5 and 6310. The court recognized that its decision directly and deliberately conflicts with the Second Appellate District’s decision in Lloyd v. County of Los Angeles (2009) 172 Cal. App. 4th 320, which holds that no such requirement exists.

Labor Code section 98.7 provides a statutory scheme that allows any person to file a complaint with the Labor Commissioner if that person “believes that he or she has been discharged or otherwise discriminated against in violation of any law under the jurisdiction of the Labor Commissioner.” The plain language of the code is discretionary, allowing that an aggrieved employee “may file a complaint” within six months of the alleged adverse action.

Over the years, federal district courts have taken conflicting positions on whether an employee who has been a victim of whistleblower retaliation under section 1102.5 must first file a complaint with the Labor Commissioner under section 98.7. See MacDonald, Slip op. 6, n.4. But federal courts can only speak persuasively regarding the requirements of California Law.

Some employees and their counsel have treated the complaint process as permissive, and for good reason. In 2007, the DLSE issued an opinion letter advising that: “The DLSE’s position is that the wiser course is not to require exhaustion of Labor Code section 98.7 procedures prior to raising a statutory claim in a civil action.” Later, in Lloyd v. County of Los Angeles (2009) 172 Cal. App. 4th 320, the Second Appellate District held that “[t]here is no requirement that a plaintiff pursue the Labor Code administrative procedure prior to pursuing a statutory cause of action” for retaliation; rather, section 98.7 “merely provides the employee with an additional remedy, which the employee may choose to pursue.”

According to the court in MacDonald, the Second Appellate District got it wrong in Lloyd (and by extension, so did the DLSE in its 2007 opinion letter), by failing to consider Campbell v. Regents of University of California (2005) 25 Cal.4th 311. The Third Appellate District held:

The rule of exhaustion of administrative remedies is well established in California jurisprudence. “In brief, the rule is that where an administrative remedy is provided by statute, relief must be sought from the administrative body and this remedy exhausted before the courts will act.” (Campbell, supra, 35 Cal.4th at p. 321, quoting Abelleira [v. District Court of Appeal (1941)] 17 Cal.2d [280], 292). This is so even where the administrative remedy is couched in permissive, as opposed to mandatory, language. (See Williams v. Housing Authority of Los Angeles (2004) 121 Cal.App.4th 708, 734.) Here, an administrative remedy is provided in section 98.7. Thus, in accordance with Campbell, we conclude that plaintiff was required to exhaust that remedy prior to pursuing the underlying action.

Slip op. at 6.

With conflicting decisions in the Third and Second Appellate Divisions, cautious employees and counsel will take care to file a complaint with the Labor Commissioner before they consider filing section 1102.5 or 6310 claims in court. The DLSE can expect to process an increased volume of retaliation complaints going forward.

The Supreme Court or the State Legislature would be wise to speak decisively on the issue of exhaustion raised by MacDonald and Lloyd, as well as related issues arising from the conflict, so as to provide clarity for employees, lower courts, and the DLSE.

NOTE: Nothing in this posting is intended to provide legal advice about your particular case and it does not form an attorney-client relationship with any reader. It is intended to be information about a subject of general interest for the general public. In order for Bryan Schwartz Law to represent you, you must have a signed representation agreement with the firm.

The Need for Clarity on Joint Employer Liability for Wage Claims Against Owners of Closely-Held Companies

Workers must answer a threshold question in any employment lawsuit: who is their legal employer? Frequently, several people or companies control various aspects of a worker’s employment. For example, Company A might send a worker her paycheck and create the policies that affect the worker’s compensation, while Company B might set the hours of her employment while the owner of Company B controls the worker’s workplace conditions, such as how the worker performs her work.

Currently, the case law is unclear on how a court should determine joint employer status, and thus who can be held accountable.  However, employees and their advocates faced with such a situation should argue that the worker is employed by joint employers, which means that both Companies A and B may be held liable if the worker’s rights are violated. In addition, the owner of Company B who controls the worker’s workplace conditions may also be liable as a joint employer.
The tests for joint employer status appear to vary depending on the causes of action.
Labor Code Claims

In Martinez v. Combs, the California Supreme Court provided some clarity on who should count as a joint employer when workers assert a wage claim by adopting the definition of the “employment relationship” promulgated by California’s Industrial Wage Commission (IWC). Martinez, 49 Cal.4th at 52. The IWC defines “to employ” as satisfying one of the following:

(a) to exercise control over the wages, hours or working conditions, or
(b) to suffer or permit to work, or
(c) to engage, thereby creating a common law employment relationship. 

Id. at 64.

While Martinez provided some clarity on how to determine if an individual is an employer, it also created ambiguity because the court excluded corporate agents merely acting within the scope of their agency from liability for violations of Labor Code § 1194 (minimum wage and overtime violations). Id. at 66. This means that if plaintiffs attempt to sue both the company that employed them and also a manager strictly acting as an agent of the employer company, the individual agent likely would not be personally liable for minimum wage or overtime violations.

The Martinez court did not address whether a sole owner of a closely held entity is insulated against liability. Reynolds v. Bement, 36 Cal. 4th 1075, 1082 (2005), overruled by Martinez to the extent it relied solely upon agency theory, instead of the three-prong IWC test, involved corporate agents rather than a sole owner.

The control and suffer/permit tests embraced by Martinez raise the possibility that individual owners can now be liable for Labor Code, minimum wage and overtime violations, where they are involved hands-on in running their business, hiring/firing, setting wages, making policies, etc.

No California appellate court has yet addressed the issue, but Bryan Schwartz Law has recently filed a writ on the issue of joint employer liability for Labor Code violations to the Court of Appeal, available at here.

Federal courts deciding the issue have split. Compare Garcia v. Bana, C 11-02047 LB, 2013 WL 621793 (N.D. Cal. Feb. 19, 2013) with Guifu Li v. A Perfect Day Franchise, Inc, 281 F.R.D. 373, 396 (N.D. Cal. 2012). Stay tuned! For more information about the 2010 Martinez decision, please read our blog article when it was first decided here.

Private Attorneys General Act of 2004 (PAGA)
The Private Attorneys General Act of 2004 (PAGA) allows workers to collect civil penalties for violations of the California Labor Code. Again, workers with multiple supervisors, perhaps from different companies, must determine whom they can hold accountable under PAGA. The text of the statute provides that “[a]ny employer or other person acting on behalf of an employer who violates, or causes to be violated, a section of this chapter or any provision regulating hours and days of work in any order of the Industrial Welfare Commission…” will be subject to civil penalties. Cal. Lab. Code § 558(a) (West). In Reynolds, Justice Moreno, in his concurrence, raised the possibility that the then-new PAGA statute would permit individual liability for corporate officials, saying, “the Private Attorneys General Act…which authorizes civil penalties for violations of the wage laws that include unpaid wages from “any employer or other person acting on behalf of an employer,” a phrase conceivably broad enough to include corporate officers and agents in some cases.” Reynolds v. Bement, 36 Cal. 4th 1075, 1094 (2005) abrogated by Martinez v. Combs, 49 Cal. 4th 35 (2010).

A federal court in McDonald v. Ricardo’s on the Beach, Inc., concluded that there was a genuine issue of material fact as to whether a defendant “violate[d], or cause[d] to be violated,” Labor Code 510 (overtime wages) on the basis that he owned and operated the company which issued checks to the plaintiffs, signed the checks that plaintiffs received, and occasionally brought the checks to the workplace to be distributed. McDonald v. Ricardo's on the Beach, Inc., CV 11-9366 PSG MRWX, 2013 WL 153860 at *4 (C.D. Cal. Jan. 15, 2013). McDonald relied upon prior federal precedent in Ontiveros v. Zamora, which reached the same conclusion. CIV S-08-567LKK/DAD, 2009 WL 425962 at *6 (E.D. Cal. Feb. 20, 2009).

Though California appellate authorities have not yet reached the issue, workers should argue that PAGA extends liability for Labor Code violations beyond mere corporate entities to individual agents and owners, depending on the circumstances, because PAGA explicitly creates liability for a “person acting on behalf of an employer who violates, or causes to be violated” a section of the Labor Code.

Business and Professions Code § 17200 et seq.
California’s Business and Professions Code § 17200 et seq. allows workers to recover unpaid wages and other property unlawfully taken from them by their employer. Section 17200 provides that a “person” shall be required to “restore to any person in interest any money or property, real or personal, which may have been acquired by means of such unfair competition.” Bus. and Prof. Code § 17203. “Person” includes “natural person.” Cal. Bus. & Prof. Code § 17201 (West). This broad definition can also extend to personal liability for individual owners for wage violations. See, e.g., Troyk v. Farmers Grp., Inc., 171 Cal. App. 4th 1305, 1340 (2009) (“The UCL ‘requires only that the plaintiff must once have had an ownership interest in the money or property acquired by the defendant through unlawful means.’”); Aleksick v. 7-Eleven, Inc., 205 Cal. App. 4th 1176, 1185 (2012) (UCL claims under § 17200 are derivative of wage claims).

California’s appellate courts should confirm soon that owners of closely held corporations may be held personally liable for a variety of wage claims under appropriate circumstances. At stake in many cases is whether or not workers cheated of their wages will be able to recover at all. Often the individual owners are the only ones with resources to make good on their company’s debts. They should not be able to hide behind corporate formalities in dodging wage laws.

If you question why you are not receiving compensation to which you believe you are entitled, and do not know who to hold accountable, and you want advice from an attorney, please contact Bryan Schwartz Law today.

Justice Kennedy Finds Compassion for LGBT Americans, Striking down DOMA in U.S. v. Windsor

After many dark days, today the Supreme Court shone a light across the world with a decision that will make this day stand among the landmark days in the history of our diverse America. Like with Brown v. Board of Education, Loving v. Virginia, and its other great decisions, today, in U.S. v. Windsor, the Supreme Court did what that Court should always do - stood as the last defense for the Constitution, for the rights of ordinary Americans, against those who would use power to desecrate American freedom and denigrate American citizens.

DOMA is unconstitutional as a deprivation of the equal liberty of persons that is protected by the Fifth Amendment, the Court held. The Defense of Marriage Act (DOMA), which "defended" only the rights of those who wish to discriminate against America's lesbian, gay, bisexual, and transgender minority, is no more. Hard-working, tax-paying, law-abiding LGBT Americans like Edith Windsor and Thea Spyer are entitled to the same rights as the rest of us - including the rights to love one another, have their love sanctioned by the state, and obtain the same benefits as other married couples - even the right to care for one another after death, by providing for each other in their estates.

Justices Ginsburg, Sotomayor, Breyer, and Kagan have fought in recent days to defend civil rights, the rights of the disenfranchised, of small businesses - of all ordinary Americans. Justice Kennedy has voted against these protections. Only yesterday, Justice Kennedy wrote for the majority, making it harder for those who stand against civil rights violations and suffer retaliation to obtain redress, in University of Texas Southwestern Med. Center v. Nassar. But today, Justice Kennedy did the right thing.

As his opinion today said of the now-dead DOMA:

DOMA singles out a class of persons deemed by a State entitled to recognition and protection to enhance their own liberty. It imposes a disability on the class by refusing to acknowledge a status the State finds to be dignified and proper. DOMA instructs all federal officials, and indeed all persons with whom same-sex couples interact, including their own children, that their marriage is less worthy than the marriages of others. The federal statute is invalid, for no legitimate purpose overcomes the purpose and effect to disparage and to injure those whom the State, by its marriage laws, sought to protect in personhood and dignity. By seeking to displace this protection and treating those persons as living in marriages less respected than others,the federal statute is in violation of the Fifth Amendment.

Slip Op., at pp. 25-26.

When dignity triumphs in the Supreme Court, it is a great day for America. I will remember today. We all will.

The Supreme Court Continues to Hinder Efforts to End Retaliation and Workplace Harassment: Univ. of Texas Southwestern Med. Center v. Nassar and Vance v. Ball State University

Very quietly, over the past several years, the Supreme Court has been making it more difficult for Americans to sue businesses for class actions, retaliation and/or discrimination.  The Court seems far more concerned with protecting employers from lawsuits than vindicating employees’ statutory rights.  Two decisions by the Supreme Court on Monday continue this unfortunate trend.

On June 23, 2013, a sharply divided Supreme Court issued two decisions that reveal the Court is out touch with the realities of the workplace and out of touch with the realities of workplace harassment and retaliation.  The Court issued University of Texas Southwestern Medical Center v. Nassar, No. 12-484 (opinion, here) and Vance v. Ball State University, No. 11-556 (opinion here), two 5-4 pro-employer decisions authored by Justice Samuel Alito and Justice Anthony Kennedy, respectively.  Justice Ginsburg authored two dissents that she read from the bench.

In the first case, Nassar, who is of Middle Eastern descent, alleged that the University of Texas Southwestern Medical Center blocked him from getting a new job.  According to Dr. Nassar, the Medical Center denied him the new job after he complained that his supervisor discriminated against him based on his race and ethnicity.  The U.S. Equal Employment Opportunity Commission found “credible, testimonial evidence” that the Medical Center retaliated against Dr. Nassar, and a jury found that the University violated the anti-retaliation provision of Title VII.  Nassar, Slip Op., Dissent at p. 4. The U.S. Court of Appeals for the Fifth Circuit upheld the jury verdict.

Supreme Court overturned the decisions of the district and appellate courts, and the Equal Employment Opportunity Commission.  Instead of applying the same standard of proof that is used for race and gender discrimination claims, the Court adopted a more stringent standard for retaliation, which Justice Ginsburg, in her dissenting opinion, recognized “lacks sensitivity to the realities of life at work.”  Nassar, Slip Op., Dissent at p. 25. The lack of sensitivity to the realities of life at work is further reflected in Justice Kennedy’s words that convey empathy for the employer and disdain for employees: “The fair and responsible allocation of resources in the judicial and litigation system” requires raising the standard for retaliation claims because “[i]t would be inconsistent with the structure and operation of Title VII to so raise the costs, both financial and reputational, on an employer whose actions were not in fact the result of any discriminatory or retaliatory intent.”  Nassar, Slip Op., at p. 19.  Moreover, the majority’s lack of concern for the financial, reputational and emotional cost of retaliatory harassment to the employee in comparison to the Courts’ desire to reduce the number of retaliation claims filed, regardless of merit, is reflected in the acceptance of the following hypothetical considered by the Court: “Consider…the case of an employee who knows that he or she is about to be fired for poor performance, given a lower pay grade, or even just transferred to a different assignment or location.  To forestall that lawful action, he or she might be tempted to make an unfounded charge of racial, sexual, or religious discrimination: then when the unrelated employment action comes, the employee could allege that this is retaliation.” Nassar, Slip Op., at p. 18.

For race and gender discrimination, the Court ruled that Title VII requires an employee to show only that race or gender was one of multiple “motivating” reasons for the employer’s decision-making.  Nassar, Slip Op., at p. 23.  However, for a claim of retaliation, the Court ruled that the employee must show that the employer would not have made the decision “but for” its improper retaliatory motive.  Id.  The Court remanded the case to the trial court to apply this higher standard to Dr. Nassar’s retaliation claim.

Unfortunately, the Court’s decision to raise the burden of proof for retaliation claims is in contrast to the strong safeguards necessary to shield employees who protest discriminatory actions.  These protections particularly are important since the number of Equal Employment Opportunity Commission complaints has nearly doubled in the past 15 years from over 16,000 in 1997 to 31,000 in 2012. Nassar, Slip Op., at p. 18.

In Vance v. Ball State the Court ruled that in Title VII cases a person must be able to take “tangible employment actions against the victim, such as hiring and firing someone to be considered a supervisor in discrimination lawsuits, thereby making it harder to blame a business for a co-worker's unlawful and discriminatory behavior.  Vance, Slip Op., at p. 30.  Maetta Vance, the only African-American employee in the Ball State University kitchen, was exposed to racial slurs from Saundra Davis, the kitchen staff worker who gave Ms. Vance her daily work assignments.

The Court previously held that an employer is accountable under Title VII when one of its supervisors harasses an employee.  In Vance, the Court ruled that Ball State was not responsible for Davis’s discriminatory conduct because Davis did not fit the Court’s narrow definition of “supervisor.”  Vance, Slip Op., at p. 30.  The Court’s ruling also rejected EEOC’s guidance regarding who is a supervisor.  Vance, Slip Op. at pp. 20-21. The Court determined that because Davis did not have the power to make certain formal employment decisions, such as hiring, firing, or promoting, she was not a “supervisor” under Title VII, despite the fact that she controlled and supervised Ms. Vance’s day-to-day activities. Vance, Slip Op. at pp. 29-30.

Unfortunately, the Vance decision will leave employees without judicial recourse when faced with harassment by supervisors who may not have the ability to fire workers, but do have the ability to harass them in the workplace.

Both decisions show that the Court is out of touch with the realities of today’s workplace.  In the real world, a coworker who assigns work, even without hiring and firing responsibility, can use that authority to make the conditions of another employees’ life miserable or unsafe because of a protected category. When there is unlawful behavior in the work place, the law should protect employees who try to make the workplace safe for everyone by reporting the situation.  When there is unlawful behavior in the work place, the employer should be required either to fix the situation or be held accountable for not doing so. This is not just the reality of the workplace but this is common sense because everyone-regardless of race, gender or other-wants to work in a workplace free from harassment. Instead of ensuring justice and equality to all, the Court continues to listen to one singular voice-business. As Justice Ginsburg noted in her dissent, “[t]he ball is once again in Congress’ court to correct the error into which this Court has fallen, and to restore the robust protections against workplace harassment the Court weakens today.”

Regressive Supreme Court Majority Dismantles Key Victory of Civil Rights Era in Shelby County, Alabama v. Holder

Today the Supreme Court's majority continued its relentless march to restrict civil rights protections and place obstacles before those seeking to promote diversity, and combat discrimination, retaliation and wage theft. Read the Shelby County, Alabama v. Holder decision here, which slashes the Voting Rights Act of 1965.

It appears that a basic question in America is whether the advances of the Civil Rights era 50 years ago are anachronistic today - essentially, whether we have fully realized the goals of the civil rights struggle, the dreams of our nation's founders and heroes.

We have not. In America, people of color remain disproportionately among the poor and disenfranchised, among the socioeconomically depressed. Blacks, Latinos, and Native Americans are not represented in proportionate numbers in the highest echelons of business and government, and too many minority-concentrated neighborhoods continue to struggle with violence, lack of educational opportunity, and the grinding cycle of poverty. We still have a lot of work to do to correct America's greatest tragedies, slavery and the Native American genocide. America is the most diverse nation in the world, and our diversity and shared values give us more potential than any other - but only if we move forward together, continuing to pursue the struggle for life, liberty, and the pursuit of happiness for all Americans.

I am part of a campaign called Civil Rights at 50, led by the Equal Justice Society, which seeks to reflect on the great victories of the civil rights struggle 50 years ago, and create momentum toward continuing the important work of that struggle. I hope you will join us.

Diversity Programs Reconsidered after Supreme Court Ruling in Fisher v. University of Texas

The Supreme Court continues to erode affirmative action policies in a way that could eventually collapse race-conscious admissions policies, crucial to ensuring diversity in higher education. The Supreme Court, in a 7-1 vote with Justice Elena Kagan not taking part, ruled that the Fifth Circuit Court of Appeals did not apply the correct standard of strict scrutiny in deciding whether the University of Texas’ decision to use race as an admissions factor violated the U.S. Constitution’s guarantee of equal protection. In Fisher v. University of Texas, No. 11–345 (opinion available here), the Court vacated and remanded back to the Fifth Circuit, which previously upheld the University of Texas’ affirmative action plan. In so doing, the Supreme Court further complicated the efforts of all who work proactively to create a diverse student body, workforce, etc., by considering race a “plus factor” in an admissions program that considers the overall individual contribution of each candidate.

Fisher, a Caucasian applicant to the University of Texas who was denied admission, sued under the Equal Protection Clause of the Fourteenth Amendment, blaming her denied application on affirmative action. She argued that eliminating race-based factors and using race-blind alternatives would be able to produce a diverse student body to a satisfactory degree, and therefore race-conscious admissions ought to be eliminated.

The District Court granted summary judgment to the University. Affirming, the Fifth Circuit held that Grutter v. Bollinger, 539 U. S. 306 (2003), required courts to give substantial deference to the University, both in the definition of the compelling interest in diversity’s benefits and in deciding whether its specific plan was narrowly tailored to achieve its stated goal.

In his majority opinion, Justice Anthony Kennedy wrote that strict scrutiny requires a searching examination, and the University bears the burden to prove “‘that the reasons for any [racial] classification [are] clearly identified and unquestionably legitimate.’” Fisher, Slip Op. at p. 8. The majority perceived that, rather than perform this searching examination, the Fifth Circuit held petitioner could challenge only whether the University’s decision to use race as an admissions factor “was made in good faith.” Fisher, Slip Op. at pp. 8-12. The majority found that Fifth Circuit incorrectly presumed that the school had acted in good faith and gave Fisher the burden of rebutting that presumption. The majority held that the Fifth Circuit thus undertook the narrow tailoring requirement with an improper “degree of deference” to the school. Id.

The outcome of the Fisher decision is to send the case back to the lower courts to sort out, though each Supreme Court decision rejecting an affirmative action plan makes it more difficult for well-intentioned institutions to create diversity in their respective populations. Justice Ruth Bader Ginsburg used her dissent to attempt to provide an outline for the University of Texas to follow in defending its admissions program when the case returns to the Fifth Circuit. She also her used her dissent to remind the Court of the “lingering effects of ‘an overtly discriminatory past,’” and “the legacy of ‘centuries of law-sanctioned inequality’” which led to the need for affirmative action in the first place. Fisher, Slip Op., Dissent at p. 3.

The University of Texas’s Top Ten Percent plan, which was the predecessor to the challenged affirmative action plan, and which was advocated as a preferred alternative by Fisher, “grant[ed] automatic admission to any public state college, including the University, to all students in the top 10% of their class at high schools in Texas that comply with certain standards.” Fisher, Slip Op. at p. 3.

There are several problems with the “race-blind” Top Ten Percent plan, and others like it. Most notably, it seemingly does not make much of an impact on diversity, based upon the information in the Court’s decision, noting that the Top Ten Percent plan only increased African-American admissions 0.4% and Hispanic admissions 2.4%. Id.

Justice Ginsberg wrote that seemingly race-neutral alternatives fail because of persistent and enduring residential segregation that determines where students go to school, and that as such, “race consciousness, not blindness to race, …drives such plans.” Fisher, Slip Op., Dissent at p. 2. As she explained, “[O]nly an ostrich could regard the supposedly neutral alternatives as race unconscious.” Fisher, Slip Op., Dissent at p. 2.

Far from simply making a modest, “good faith” effort to meet constitutional scrutiny, the University of Texas, which considers race as but one of many plus factors in its admissions process, puts its admissions program up for regular review to determine whether its consideration of race remains necessary and proper to achieve the University’s education objectives. Fisher, Dissent, at p. 3. Ginsburg concluded that “Justice Powell’s opinion in [Regents of Univ. of Cal. v. Bakke, 438 U. S. 265] and the Court’s decision in Grutter require no further determinations.” Id.

Ultimately, the Court’s decision will raise difficult challenges for universities and institutions that want to have diversity programs which meet constitutional muster. Fortunately, though, Fisher does not shut the door on diversity recruiting. The Court maintained the framework created by Justice Powell’s opinion in Bakke, and enshrined in Grutter, allowing affirmative action to be a plus factor – notwithstanding Justice Thomas’s lengthy concurrence which would end consideration of diversity factors altogether. In Bakke’s principal opinion, Justice Powell recognized that state university “decisions based on race or ethnic origin…are reviewable under the Fourteenth Amendment,” 438 U. S., at 287, using a strict scrutiny standard, id., at 299. He identified the educational benefits that flow from a diverse student body as a compelling interest that could justify the consideration of race but noted that this interest is complex, encompassing a broad array “of qualifications and characteristics of which racial or ethnic origin is but a single though important element.” Id. at 315. See Fisher, Slip Op. at pp. 8-9.

Hopefully, on remand, the lower courts will subject the University of Texas plan to strict scrutiny, and find that their affirmative action program passes the test.

Why Regular People Need to Pay Attention to the Supreme Court’s Arbitration Obsession: American Express Co. v. Italian Colors Restaurant Cries for Amending the Federal Arbitration Act

Today the Supreme Court, in American Express Co. v. Italian Colors Restaurant (Italian Colors), gave companies a tool to use to keep you from enforcing the legal protections for your wages, against discrimination, and for average consumers and small businesses. Please, pay attention. It is not right, and it affects you, no matter who you are.

I am for big corporations. They give lots of people jobs. They give us stuff we want. They pay taxes that help build roads and schools and hospitals. They sometimes donate money to worthy causes. I get it. They don’t need a thank you note from me. I pay them every day, and so does everyone else. And, I don’t have a problem with good businesspeople getting rich. America is, in part, about capitalist incentives that we each have to work hard, get ahead, and provide for our families, friends, and causes we believe in.

But, that’s not all America is about. America is also about fairness, protecting the little guy’s/gal’s rights against the big guy/gal. Anyone being honest knows that big corporations will trample individual workers’, consumers’, and small businesses’ rights, if left unchecked. I do not need to view this as a conspiracy by Big Business in every instance. I can simply observe that companies do sometimes violate workers’ rights, based on years of seeing employment law violations and holding companies (and the government) accountable in my law practice. I know the same is true regarding consumers and small businesses, based on my own experiences as a consumer and small business owner. Teddy Roosevelt (a Republican) figured this out over 100 years ago when he helped put an end to (or at least put checks upon) the Gilded Age. FDR (a Democrat) figured this out when he helped end the Great Depression with the Fair Labor Standards Act, 75 years ago. I don’t know why we need to keep figuring this out. But, here we go again. Big companies need to be regulated.

When companies overstep – sometimes deliberately, based upon a cost-benefit analysis or harboring discriminatory or retaliatory animus – or even when they inadvertently fail to comply with legal protections for workers, consumers, and small businesses – we all need to have effective recourse to bring companies back into line. That recourse is litigation, or the threat of litigation, to enforce important statutory principles. Sometimes companies respond to employees, consumers, or small businesses providing helpful feedback, and come into compliance voluntarily. But, without the risk that litigation can pose to the companies’ bottom line, companies become immune to the important protections that exist for ordinary citizens.

What if a big corporation, like AT&T Mobility, is cheating their cell phone customers out of $30 or $40 on their bills, millions of times, for years? You have to take the kids to school and get to work. You have to get home and fix dinner after work. You have to clean the dishes. Then, you’re tired and want to sit in front of the TV. Maybe this is not your average day but, whatever your day looks like for you, I suspect it does not leave a lot of hours to fight over $30 or $40 dollars you were once cheated. If someone walked up to you and stole your wallet, with $30 or $40 in it, you might call the police, and they would take a report, and might even try to find the culprit, if they got there in time. But, if AT&T Mobility decides to steal this money, millions of times, there is nothing you can do about it, unless the company fixes the overcharge out of the goodness of their corporate heart. They will often not be motivated by the threat that customers or workers or small businesses will go elsewhere – because the other big companies are doing the same thing. They will respond to you if you are prepared to litigate.

You won’t litigate this $30-$40 case by yourself. In fact, even if your case is worth $30,000-$40,000, which is real money to most of us, you can’t do it by yourself. The company will hire lawyers to fight the case, and you need to fight them on a level playing field to have a shot at getting back what was taken from you. Trouble is, fully litigating a case – either in Court or arbitration – usually costs tens or hundreds of thousands of dollars in attorneys’ fees and costs, if not more, takes many months or years of your time and energy, and, there is always a risk you won’t win. Those of us who have arbitrated cases know that it is not true that arbitration is always cheaper, simpler, or quicker, than proceeding in court, as the Supreme Court seems to suggest. (Slip Op. at 9.) Unless you have been so wronged that it changed your life – you lost your job, you suffered egregious harassment or retaliation, you had so much stolen from you that you were on the verge of going broke, hundreds of thousands – you just won’t undertake this long and expensive litigation alone in arbitration, any more than you would in court. Big companies know this.

So, what will happen? If you have been violated –had your wages stolen, been subjected to discrimination, retaliated against for exposing wrongdoing – and you and/or your attorneys are not prepared to spend the resources and effort necessary to fight, then companies will most often simply deny wrongdoing, and spend whatever resources are necessary to bury your claims.

This is why class and collective action litigation is so important. It is a cornerstone of American democracy and capitalism in the modern era. It is what allows the little guy/gal to stand up to the big guy/gal and get ahead. You can’t afford to keep the company in check by yourself. But if there are dozens, or hundreds, or thousands, or millions of people who are standing with you, you have a fighting chance.

For several years, Justice Scalia and his allies on the United States Supreme Court have seemingly taken any opportunity to edify big corporations’ defenses against workers, consumers, and small businesses. Though always railing against “judicial activism,” Justice Scalia has become the chief judicial activist, reshaping the 1925 Federal Arbitration Act (FAA) to become a major weapon against class and collective action litigation – something the FAA’s architects never could have envisioned, since class and collective actions did not evolve to their modern form until well after the FAA came about. Though average Joe or Jane on the street has never heard of the FAA, it now affects every one of us.

Back to today’s decision in Italian Colors. In AT&T Mobility v. Concepcion, 131 S.Ct. 1740 (2011), the Court overturned California’s Supreme Court which had held that a class action waiver in a consumer arbitration agreement was presumptively unconscionable. I previously spoke about this decision on NPR, posted on the blog here. Though California had held (correctly) that it was unfair for a big company to strip away our rights to come together to fight against wrongdoing with words hidden somewhere in the fine print of an arbitration agreement, the Supreme Court said that the FAA allowed companies to do exactly that.

Since AT&T Mobility, consumer, antitrust, and employment lawyers have argued that arbitration agreements that preclude class actions can still be combated where we were effectively barred from vindicating statutory rights – in other words, where we would have no fighting chance proceeding as an individual. Today, the Supreme Court (as Justice Elena Kagan’s dissent explains) held as follows, with respect to the fact that arbitration agreements with class action waivers effectively deprive victims of all legal recourse: “Too darn bad.” Slip Op., Dissent at p. 1.

According to Justice Scalia, it doesn’t matter that the wage laws, consumer protection laws, anti-discrimination laws, and antitrust laws won’t be effectively enforceable in many instances, without class or collective action recourse, because we all “contracted to” litigate our claims individually. Slip Op., at p.4. But Justice Scalia’s reasoning is just disingenuous.

We never knowingly agreed to that. We took a job because we needed to work. We bought a cell phone because we needed a cell phone. We started a business and got credit card service for our customers’ use. We did not negotiate with AT&T Mobility, or American Express, the terms of these arrangements. They handed us some fine print documents – maybe put them in the box when we bought a product – maybe (in the employment context) told us that we needed to sign all the paperwork to get added to payroll. Of course, at the time, we had no idea that we would have a dispute with these big companies, that they would cheat us of money, or discriminate against us, or break some other laws. We only learned later – when the big companies did these things – that we were without any meaningful recourse, because none of us are going to spend $100,000 to try to get $10,000, or $100, or $10. Remember – we are Americans, and we care about capitalist incentives, too, just like the big companies. We’re not asking for handouts, but we don’t think the big guy/gal is above the law, either. When they break the law, we need to be able to hold them accountable. We can’t put a company in jail, like the pickpocket who steals your wallet, but we can hit them where it counts – the bottom line.

Since it is clear the FAA is going to be used to take away all of our meaningful recourse to fight big companies, we need to change the FAA. The Arbitration Fairness Act of 2013 is currently pending (HR 1844; S878). Most of us never cared about arbitration before, but it is time to start paying attention. Contact your congressperson or senator, before big companies hurt you too, and leave you with no way to fight for your rights. To find who you need to contact, click here.

Oxford Health Plans, LLC, v. Sutter: Supreme Court Tells Company that Chose Arbitration: You Made Your Bed. Now Lie in It...With a Whole Class of Plaintiffs.

Today, the United States Supreme Court surprised a lot of us. The Court acted unanimously, and with reasoning so unimpeachable and self-evident it can practically be described with a series of  truisms and proverbial expressions: Be careful what you wish for. What's good for the goose is good for the gander. You cannot have your cake and eat it, too. Do not go for a second bite of the apple. And, perhaps most of all: you have made your bed, and now you must lie in it.

In Oxford HealthPlans, LLC, v. Sutter, Slip Op. (June 10, 2013), Justice Elena Kagan, writing for all nine justices, permitted an arbitrator to authorize class arbitration where the arbitration agreement did not contain express language referencing class action, clarifying Stolt-Nielsen v. AnimalFeeds Int'l Corp., 559 U.S. 662, 684 (2010).

The immediate significance of the decision cannot be overstated in cases where a broad general arbitration agreement exists without an explicit class action waiver. In such cases, arbitration may become a viable alternative for seasoned workers' and consumer advocates bringing class claims. And, for companies faced with a potential class action, the outcome sends a clear message, reiterating what this blog has said repeatedly on the question:[1] be careful what you wish for!

In Oxford Health, the arbitration clause - like many companies' - left much unsaid, simply stating:

No civil action concerning any dispute arising under this Agreement shall be instituted before any court, and all such disputes shall be submitted to final and binding  arbitration in New Jersey, pursuant to the rules of the American Arbitration Association with one arbitrator.

Slip Op. at 2.

The arbitrator applied the contract's terms and reasoned essentially that mutuality prevailed, i.e., that the sweeping clause "sent to arbitration 'the same universal class of disputes' that it barred the parties from bringing 'as civil actions' in court: The 'intent of the clause' was 'to vest in the arbitration process everything that is prohibited from the court process.'"  Id. What's good for the goose is good for the gander, in other words.

But, the company wanted to have its cake and eat it, too. It wanted to compel arbitration as a short-cut to sweep away class allegations, but then - when the arbitrator charged with enforcing its agreement found class allegations permissible - wanted a court to step in and say the arbitrator had exceeded his powers. The District Court and Third Circuit refused the invitation to do away with the principle of finality of arbitration awards.

Then came Stolt-Nielsen. The Supreme Court held there that "a party may not be compelled under the FAA [Federal Arbitration Act] to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so." 559 U.S. at 684. Oxford went for a second bite of the proverbial apple, seeking a new decision.

The problem for Oxford was that in Stolt-Nielsen, the parties had stipulated that they never reached an agreement for class arbitration. Here, the arbitrator had found that the parties' agreement to arbitrate all disputes naturally encompassed class allegations which otherwise would have been brought in court. Accordingly, the arbitrator held that Stolt-Nielsen was of no consequence. The company again sought judicial review, notwithstanding the fact that Oxford - not the plaintiffs - first sought to extricate the case from the courts.

The Third Circuit upheld the District Court, again rejecting the company's attempt to seek vacatur under §10(a)(4) of the Federal Arbitration Act of the arbitrator's decision permitting class arbitration. See 675 F.3d 215 (3rd Cir. 2012). The Third Circuit's decision was in line with a Second Circuit decision, Jock v. Sterling Jewelers, Inc., 646 F.3d 113 (2nd Cir. 2011), which split with a Fifth Circuit decision, Reed v. Florida Metropolitan Univ., Inc., 681 F.3d 630 (5th Cir. 2012).

Today's decision in Oxford Health sides with the Second and Third Circuits. The opinion is summarized as follows: "Oxford chose arbitration, and it must now live with that choice." Slip Op. at 8. Having moved to compel arbitration, and twice asking the arbitrator to decide whether class arbitration was permissible under the arbitration clause, the company could not seek to vacate the arbitrator's decision, which was based upon an arguable construction of the parties' contract. Slip Op. at 4, 8 (quoting Eastern Associated Coal Corp. v. Mine Workers, 531 U.S. 57, 62 (2000)). Courts' "sole question" when faced with a request to vacate an arbitral decision is "whether the arbitrator (even arguably) interpreted the parties' contract, not whether he got its meaning right or wrong." Slip Op. at 5.

Justice Samuel Alito's concurrence, joined by Justice Clarence Thomas, goes a step farther, saying that they would "have little trouble concluding that [the arbitrator] improperly inferred" an agreement to class-wide arbitration into the arbitration clause referenced above, and essentially arguing for creation of an opt-in class action mechanism in arbitration, contrary to Fed.R.Civ.P. 23's opt-out mechanism. Slip Op., concurrence at 2. Ultimately, though, the concurrence concedes that Oxford put the matter outside the Court's prerogatives by submitting the question for decision to the arbitrator.

Two remaining questions after Oxford Health are: 1) whether companies (i.e., in the context of Bryan Schwartz Law's work, employers) will more consistently implement arbitration agreements with explicit waivers of class claims, which they may have done after AT& T Mobility v. Concepcion, but perhaps felt they did not need to do, in light of Stolt-Nielsen; and 2) whether companies will successfully argue, as alluded to in Footnote 2 of Oxford Health (Slip Op. at 5), that the availability of class arbitration is a question of arbitrability - i.e., for courts to decide as part of their gatekeeper function?

Though the Supreme Court seemingly invites the latter as its arbitration case for the next term, it begs the question - why would employers be eager to pursue expensive private arbitration, but not be eager to have their chosen arbitrator decide the most important question in most class action litigation - namely, whether it is indeed a class action or not? It may invite forum shopping, as companies' attorneys decide which side has the greener grass - i.e., whether they like their chances better with the particular judge they draw or with an arbitration service - though both courts and arbitrators alike are increasingly deciding like the arbitrator in Oxford Health did, that sweeping arbitration provisions are intended to encompass all class and individual allegations.

Though the victory may be short-lived, depending on the Supreme Court's decision on arbitration class waivers, in American Express Co. v. Italian Colors Restaurant, workers' and consumer advocates live to fight another day. Oxford Health was not the death knell. Certainly for the many companies with some kind of broad arbitration provision which does not specify a class waiver, Oxford Health will have an impact.

At the end of the day, today's decision boils down to this: Oxford made its bed, and must lie in it. Companies will have to shop carefully for bedding, going forward.

If you are an employee with a question about an arbitration agreement or a class action claim you may have, contact Bryan Schwartz Law today.

Disclaimer: The discussion in the foregoing article is not intended to provide legal advice in any particular case but is a general expression of viewpoints on current legal issues of general interest. Bryan Schwartz Law does not represent you until you have a signed representation agreement or are a member of a certified class represented by the firm.


[1] See "Employers: Be Careful What You Wish For - YourMotion to Compel Arbitration Can Lead to Expensive, Class-Wide Arbitration," December 26, 2012 (citing to prior articles).

Two California Courts of Appeal Hold that Certification Is Appropriate for Challenges to an Employer’s Stated Policy (or Lack of a Stated Policy)

Two California appellate opinions issued last week confirm that, following Brinker, when an employee challenges an employer’s stated policy (or lack of a stated policy) as violating a wage order, that challenge constitutes a predominant common question, making class certification appropriate. The varying degrees to which individual class members were harmed by the policy (e.g., who missed meal periods and why) is a question for damages. These decisions are important in recognizing that class certification must be available to challenge an employer’s policy despite the fact that the effect of the policy on various class members will differ.

Faulkinbury v. Boyd & Assocs. (4th App. Dist.)

In Faulkinbury v. Boyd & Associates, Inc., G041702, --- Cal.Rptr.3d --- , 2013 WL 1927019 (Cal. App. 4th May 10, 2013) (opinion available here), the Court of Appeal for the Fourth District issued a published opinion reversing the trial court’s denial of certification. The Plaintiffs in Faulkinbury were security guards who claimed meal break violations, rest break violations, and improper calculation of overtime pay. The trial court denied certification as to all three issues, concluding that individual questions predominated. The Court of Appeal initially heard the case prior to Brinker, and reversed the denial of certification only with respect to the claim alleging improper calculation of overtime (Faulkinbury I). After granting review of that decision, the Supreme Court decided Brinker; it then vacated Faulkinbury I and directed the Court of Appeal to reconsider the case in light of Brinker.

Upon reconsideration, the Court of Appeal held that certification was appropriate as to all three issues. The Court explained:  “Brinker teaches that we must focus on the policy itself and address the issue whether the legality of the policy can be resolved on a classwide basis” (emphasis in original).

With respect to meal breaks, plaintiffs alleged that the defendant had a blanket policy of requiring all security guards to sign meal-break waivers and remain on-duty (and paid) for all meals, regardless of whether the working conditions at a particular station necessitated on-duty meals. Because “[t]he claim made by Plaintiffs [was] that [defendant’s] policy is unlawful,” the court concluded that the question of liability was a class-wide claim. If it turned out that on-duty meals were necessary for certain individual positions but not others, that finding would go to damages, not liability, and would not preclude class certification.

With respect to rest breaks, plaintiffs alleged that the defendant did not have a policy regarding provision of rest breaks, and had an express policy requiring security guards to remain at their posts at all times. Again, whether the absence of a rest break policy violated the wage order was a class-wide liability question; if it turned out that some individual class members were taking breaks anyway, this would go to damages. The Court’s reasoning on the overtime issue was similar.

Bluford v. Safeway Stores (3d App. Dist.)
In a recent unpublished decision – publication of which would be appropriate – Bluford v. Safeway Stores, Inc., C066074, 2013 WL 1897410 (Cal. App. 3d May 8, 2013) (opinion available here), the Court of Appeal for the Third District likewise reversed the trial court’s denial of certification with respect to three claims – a rest break claim, a meal period claim, and a wage statement claim. The plaintiffs were truck drivers for Safeway who were paid partly based on the number of miles they drove and partly by the hour or task for certain non-driving work. The employer did not track or separately pay for the time that drivers were on rest breaks.

The rest break claim alleged that Safeway was required to pay an hourly rate to drivers for the time they were on breaks. The drivers argued that because they were not driving during breaks, the per-mile compensation system resulted in no pay for the time they were on breaks. Safeway argued that the driver’s compensation for their breaks had been accounted for in the rate of pay for miles driven. The Court held that the question was proper for certification because it challenged “Safeway’s compensation system,” and did “not concern the drivers’ subjective reasons for taking or not taking a rest period.” Peeking at the merits, the Court also rejected Safeway’s argument, likening it to the “averaging” of pay to comply with the minimum wage law, which the Court rejected in Armenta v. Osmose, Inc. (2005) 135 Cal. App. 4th 314, 323. The Court similarly found that the plaintiffs’ meal period claim was proper for certification because it challenged Safeway’s announced policy of providing only one meal period, even though the wage order required two meal periods for drivers who worked longer than 10 hours.

On the itemized wage claim, plaintiffs argued that their wage statements did not allow them to determine whether their wages compensated them for all hours worked without performing complicated calculations. The court held that this was a sufficient “injury” under Labor Code § 226 to make certification appropriate, reversing the trial court’s contrary conclusion.

Both Faulkinbury and Bluford demonstrate the importance of Brinker in allowing workers to challenge illegal wage and hour policies on a class-wide basis, reserving for the damages phase the individualized assessments of the harm caused by such policies.

Disclaimer:  Nothing in the foregoing commentary is intended to provide legal advice in any particular case. Bryan Schwartz Law cannot represent you unless you have a signed representation agreement with the firm.

California Federal Court Holds that Teen Adventure Tour and Travel Company Is Not Exempt from Overtime and Minimum Wage Laws

Yesterday, in a decision that may have repercussions throughout the teen tour and travel industry, Judge Edward M. Chen of the U.S. District Court for the Northern District of California held that the trip leaders of a teen tour and travel company were not exempt from the minimum wage and overtime protections of federal and California law. The case is Wright, et al. v. Adventures Rolling Cross Country, et al., 12-cv-982-EMC (N.D. Cal.), and the decision is available here. Bryan Schwartz Law represents the Plaintiffs.

The Defendants, Adventures Rolling Cross Country (“ARCC”) and its principal owner and President, Scott Von Eschen, sell trips for teenagers to destinations around the world, generating millions of dollars of revenues each year. The trips fall into categories such as “language immersion,” “multisport adventure,” and “gap semester” trips. ARCC claimed that it was exempt from the labor laws as an “organized camp,” despite the fact that ARCC does not operate any camping or other recreational facilities.

The case was brought as a class and collective action by two former ARCC trip leaders. They led groups of teenagers on several-week tours to Latin America and Europe and worked for ARCC for approximately two additional weeks in California doing mandatory preparatory, administrative, training and debriefing work before and after the trips. While ARCC charges a trip participant's parents upwards of $5,000 dollars for many of its trips, ARCC paid plaintiffs – who were responsible for chaperoning the teens – approximately $3 per hour.

After the Plaintiffs commenced the case, ARCC attempted to shoehorn itself into the “organized camp” exemption, applying for membership to the American Camp Association and referring to its trip leaders in its briefs as “camp counselors.” The exemption was enacted in order to apply to traditional summer camps that run facilities designed for outdoor group living, such as Boy Scout camps and non-profit religious camps staffed by high school students.

Plaintiffs moved for summary judgment, claiming that ARCC does not fall within the “organized camp” exemption, and Judge Chen agreed. Noting that exemptions from the labor laws are “narrowly construed,” the Court held that the language of the federal and state laws and regulations compelled a finding that because ARCC does not operate any “distinct physical location” or “facility” for the purpose of camping or recreation, “the exemption is not applicable to ARCC as a matter of law.”

Significantly, although many of ARCC’s tours are to other countries, where California and U.S. wage laws typically do not apply, Judge Chen also ruled that ARCC was required to comply with the California and federal labor laws for the entirety of any workweek during which a given employee worked at least part of the week in California or the United States, respectively.

Adventure travel and tour companies operating like ARCC may rely on a workforce of adult outdoor professionals to operate profitable tour and travel businesses that are not tied to any camping or recreational facility operated by the company. Yesterday's decision confirms that such trip leaders should generally be entitled to minimum wages and overtime.

For more information about the case or the decision, please contact Bryan Schwartz Law.

Disclaimer: Nothing in the foregoing commentary is intended to provide legal advice in any particular case. Bryan Schwartz Law cannot represent you unless you have a signed representation agreement with the firm.

Bryan Schwartz Law Case Against JPMorgan Chase for Misclassification of Appraisers Profiled in Daily Journal

Bryan Schwartz Law's principal discussed a recent lawsuit brought by the firm against JPMorgan Chase seeking to correct misclassification of a group of employees - commercial production appraisers and review appraisers - as exempt from overtime:

"Employees Try New Tack with Misclassification Class Actions," by Laura Hautala, San Francisco Daily Journal, April 16, 2013.

The full text of the article is also reproduced below.

The firm brought a similar suit against Bank of America, also this month. In both cases, major banks shortchanged workers their overtime, meal/rest periods, etc., on the premise that they are "administrative" employees - like Human Resources employees - instead of production workers in the companies' core business, working to process loan sales. In both cases, Bryan Schwartz Law is confident that the company's decisions were in error, as held by the Second Circuit years ago, in the Davis v. JPMorgan case (link here).

The firm estimates the banks owe their appraisers millions of dollars in unpaid wages and penalties.

If you would like more information about the cases brought by appraisers and/or review appraisers against JPMorgan Chase or Bank of America, contact Bryan Schwartz Law today.

Here is the full text of the article:
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Tuesday, April 16, 2013

Employees try new tack with misclassification class actions

By Laura Hautala, Daily Journal Staff Writer

Kenneth J. Lee was pulling 70-hour weeks, coming in on weekends and working through lunch, he said. He and his co-workers, property appraisers for JPMorgan Chase & Co., earned a salary, but the bulk of their pay was based on how many appraisals they completed, which required them to work overtime. But Chase classified Lee and others across the country as working in an administrative capacity, a designation that exempts Chase from paying them for overtime and meal breaks. Now Lee and another former appraiser are suing Chase with the help of Oakland plaintiffs' attorney Bryan J. Schwartz, contending that appraisers don't have the decision-making power in their jobs necessary to qualify them as administrators.

"Chase is running an appraisal sweatshop, and it's time that Chase be required to compensate its appraisers fairly," Lee said in a statement after he and another former Chase appraiser filed a putative class action against the bank earlier this month.

Lee and Mark G. Thompson are suing for a host of wage and hour violations, all stemming from his claim that the financial company misclassified employees in Lee's position. The claim hinges on the job classifications available to businesses that let them exempt managers, executives and other employees with discretion in their job activities from overtime pay and other wage and hour requirements.

Misclassification cases are appealing to plaintiffs' lawyers like Schwartz because they include opportunities for claims under wage and hour laws, California's Private Attorney General Act, as well as attorney fees. However, appellate courts have set an increasingly high bar for class certification, and changing employer behavior have made the seemingly lucrative cases more challenging to find and win.

"When there's a misclassification case, there are usually four or five derivative claims," said Cheryl D. Orr, a defense-side employment partner at Drinker Biddle & Reath LLP in San Francisco. "In some positions and in some industries, whether someone's classified correctly or incorrectly can be sometimes difficult to ascertain."

Lee's attorney Schwartz said there's no question the property appraisers he represents were misclassified. "They can't just go off and say, 'God, I love this apartment building,'" he said. "They're applying a formula set by people way above their pay grade."

Randy Renick, a plaintiffs' attorney in Pasadena with Hadsell, Stormer, Richardson & Renick LLP, said that in general, misclassification claims have to clear a higher bar than they did 10 years ago. They now must do more to prove predominance, or that their employers' policies or practices affected them in a similar way.

"Plaintiffs have to do a lot more work on the front end," Renick said. "It isn't enough anymore to show that folks were just misclassified; you need to show that there was uniform control and that class members were working the same types of jobs under the same policies."

Renick experienced the change firsthand over the past eight years, as a case his clients won in trial court went through a lengthy appeals process. In 2005, he won class certification for a group of employees allegedly misclassified at Chinese Daily News Inc., a Chinese-language newspaper based in Monterey Park. He then won both a jury trial and a bench trial.

But the case was appealed all the way to the U.S. Supreme Court, which had recently raised the bar for class certification in employment discrimination and wage-and-hour cases by siding with Wal-Mart Stores Inc. in the landmark Dukes v. Wal-Mart case in 2011. The high court ordered the 9th U.S. Circuit Court of Appeals to apply Dukes to the Chinese Daily News case.

Renick said he is confident that the record he established the first time around will withstand heightened scrutiny for class certification. However, because of Dukes and two other precedents set in appellate courts since the plaintiffs' original victory, the 9th Circuit ruled in March that plaintiffs must argue for class certification anew.

Finding cases of straightforward misclassification has also become harder, lawyers representing both workers and businesses say.

This is partly because businesses have started classifying their workers more appropriately, Renick said. "Over the last seven to eight years, most of the bigger misclassification cases have been filed and resolved, and many employers have amended their practices as a result of those lawsuits," Renick said.

Partly in response to the increasing difficulty of certifying and winning these cases, lawyers said, workers have found a back door though which to levy penalties against employers for misclassifying them.

Even if plaintiffs aren't allowed to proceed as a class, employment claims can move forward under the state Private Attorney General Act. Every claim under the statute can reap a penalty against the employer for each pay period of each affected employee. The penalties are split between the state and the plaintiffs.

What's more, defense attorneys say that while class certification is harder to attain, plaintiffs are still filing and settling these claims.

"I think there are a handful of cases recently that have very much gone our way," Orr said, "but there are still many, many cases that are getting resolved through the settlement process."

This of course includes attorney fees, which Naki M. Irvin said is the primary motivation for attorneys filing the cases. Irvin most often defends employers as a partner at Margolis & Tisman LLP in San Francisco but occasionally represents individual plaintiffs in employment cases.

"While it's commendable that we have labor laws to protect our workers, I think the laws are such that it makes things difficult for employers in California," Irvin said. "Often these lawsuits are used as leverage for negotiation, and it often comes down to attorney fees."

It's not clear how large of a settlement plaintiffs stand to receive from misclassification cases, because they're easier to defeat at class certification. "They're generally viewed as not being worth as much as other cases," said S. Brett Sutton, a partner at Sutton Hatmaker Law Corp. in Fresno who represents both workers and businesses in employment cases.

Orr said the cases are in fact still lucrative at the settlement stage. "Based on what I'm reading other folks are settling for, I'm not sure that process has caught up with a seeming shift in the law."

laura_hautala@dailyjournal.com

5-4 Supreme Court Decision in Genesis Healthcare v. Symczyk Unlikely to Snuff Out Incipient FLSA Collective Actions

Today the Supreme Court issued an odd decision in Genesis Healthcare Corp. v. Symczyk, No. 11-1059, representing another effort by the Court to limit the ability of employees to bring collective actions enforcing the Fair Labor Standards Act (“FLSA”). Justice Thomas authored the 5-4 majority opinion. The dissent, by Justice Kagan, argued that the majority’s decision will have no practical effect.

The action was brought in federal district court by a registered nurse, Laura Symczyk, against her employer, Genesis Healthcare Corp., challenging the employer’s practice of automatically deducting 30 minutes of wages per employee shift for “meal breaks,” despite the fact that employees allegedly did not actually receive such breaks. Symczyk brought the case as a collective action under the FLSA on behalf of herself and similarly situated co-workers.

Attempting to snuff out the case before other employees could opt in, Genesis made an “offer of judgment” under Federal Rule of Civil Procedure 68, offering to pay Symczyk $7,500, which Genesis contended was all that Symczyk personally could hope to recover, plus such attorneys’ fees and costs as the court deemed reasonable. Rule 68 is intended to encourage early resolution of cases by imposing relatively minor litigation costs, such as photocopying charges, on a plaintiff who refuses an early offer of judgment and then ultimately recovers no more in the suit than the defendant initially offered. By its terms, Genesis’s offer expired within 10 days if not accepted. Symczyk did not respond to the offer.

Genesis thereafter moved to dismiss the case for lack of subject-matter jurisdiction, claiming that the case was “moot” because Symczyk, the only plaintiff, had been offered an amount that, the employer claimed, would make her whole for the wages of which she had been deprived. The district court granted the motion and dismissed the case. On appeal, the Third Circuit reversed, holding that the collective action was not moot, although the court agreed that Symczyk’s individual claim was moot. The Third Circuit observed that allowing the employer strategically to use Rule 68 to terminate the suit before the plaintiff could seek certification frustrated the purpose of making collective actions available to enforce the FLSA.

The Supreme Court reversed. The Court “assumed, without deciding,” that Symczyk’s case was, in fact, mooted by her decision not to accept the defendant’s Rule 68 offer of judgment, finding that Symczyk had waived her argument to the contrary. Therein lies the oddness of the decision. If this “assumption” was incorrect, then everything the majority went on to say is irrelevant. In her dissent, Justice Kagan argued that the assumption is false, and that the employer’s unaccepted Rule 68 offer did not moot the case:  “When a plaintiff rejects such an offer—however good the terms—her interest in the lawsuit remains just what it was before. And so too does the court’s ability to grant her relief. An unaccepted settlement offer—like any unaccepted contract offer—is a legal nullity, with no operative effect. As every first-year law student learns, the recipient’s rejection of an offer leaves the matter as if no offer had ever been made” (citation omitted). Because the majority’s holding was applicable only if, in fact, the case was moot, Justice Kagan observed that “the question the majority answers should never arise—which means the analysis the majority propounds should never apply.”
So what did the majority hold? It held that, assuming (without deciding) a plaintiff’s case is mooted by an unaccepted offer of judgment under Rule 68, then so long as no other putative FLSA collective action member has opted into the case, an employer can strategically moot the case by making a Rule 68 offer of judgment to the sole plaintiff that would provide that plaintiff with full and complete relief. The majority opinion seemed to contemplate at least two circumstances in which an offer to pay damages would not render such a case moot:  when the plaintiff is seeking injunctive relief challenging ongoing conduct, and when the plaintiff is “assert[ing] any continuing economic interest in shifting attorney’s fees and costs to others.”

Rather than acknowledge the real effect of dismissing Symczyk’s suit – i.e., that an employer who allegedly deprived a class of employees of wages due under the FLSA was allowed to escape liability by quickly offering to pay off a single employee who complained – Justice Thomas observed that the registered nurses who had been deprived of their pay “remain free to vindicate their rights in their own suits.” This will be cold comfort for Symczyk’s co-workers.

But Justice Thomas’s observation does raise an interesting question: what effect will an offer of judgment, if accepted by the plaintiff, have in a subsequent case brought by others in the putative class? Will employers really be willing to accept the consequences of conceding liability? If a suit seeks injunctive relief, will the employer be willing to offer a judgment in which it agrees to reclassify its employees?  Will counsel who represents an employee offered such judgment (e.g., including reclassification) still be entitled to full fees for the class-wide relief based on the catalyst theory? Any entry of judgment is likely to invite a subsequent collective and class action by those who “remain free to vindicate their rights,” and in such an action, the employer’s liability may be a foregone conclusion as a result of the prior entry of judgment. Given that the majority did not overrule Barrentine v. Arkansas-Best Freight System, 450 U.S. 728 (1981), which held that FLSA rights cannot be waived, employers will not be able to manufacture a finding of mootness by making a mere settlement offer, but rather will be required to offer bona fide complete and final judgment, to be entered by the court.

To the extent that the majority’s decision has any life notwithstanding Justice Kagan’s argument and the practical risks an employer would face by conceding liability, plaintiffs should easily be able to avoid the impact of Genesis Healthcare. The case was sui generis: the plaintiff “conceded that [the employer’s] offer ‘provided complete relief on her individual claims’”; she “failed to assert any continuing economic interest in shifting attorney’s fees and costs to others”; she was a sole named plaintiff without a single opt-in; she apparently did not seek injunctive relief; and she apparently did not assert class claims under Rule 23. The absence of any of these attributes would take a case outside of Genesis Healthcare’s holding, and a garden variety FLSA collective action suit often lacks them all. In addition, the decision should have no impact on cases that include Rule 23 class claims or similar actions under state law (such as California Code of Civil Procedure § 382), because ample precedent establishes that class claims (unlike FLSA collective claims) cannot be nullified simply by offers of judgment to the named plaintiff.

If you have questions about your class action rights, contact Bryan Schwartz Law today.

Disclaimer:  Nothing in the foregoing commentary is intended to provide legal advice in any particular case. The author and Bryan Schwartz Law cannot represent you unless you have a signed representation agreement with the firm.