U.S. Supreme Court Enforces Class Action Arbitration Waiver In DIRECTV's Adhesion Contract

The U.S. Supreme Court, on December 14, 2015, ruled, 6 to 3, that DIRECTV customers in California who were allegedly illegally charged hefty “early termination fees” of up to around $500 can neither file their individual claim with a court nor join together to sue the company in court. The Supreme Court ordered that each consumer must have their respective complaint adjudicated through a private arbitration system established by DIRECTV (now owned by AT&T). See DirecTV, Inc. v. Imburgia, et al, available at: http://www.supremecourt.gov/opinions/15pdf/14-462_2co3.pdf . 

         The majority refused to give the customer the benefit of the doubt when DIRECTV itself drafted and provided the ambiguous contractual languages in its 2007 version of the form service contract in dispute. Section 9 of this 2007 form agreement provides that (1) any claims raised by DIRECTV or consumers will be resolved only by binding arbitration; (2) no class-based arbitration is permitted; (3) the entire arbitration provision (i.e., arbitration only and no class-based claims) is unenforceable if “the law of your state” makes the class arbitration waiver unenforceable. Section 10 states that Section 9 shall be governed by the Federal Arbitration Act (FAA). The majority deferred to California Court of Appeal’s interpretation and concluded “the law of your state” refers to “the law of California.” The only issue in this case, thus, was whether California state law made the class arbitration waiver unenforceable so as to make the entire arbitration provision unenforceable.

The majority held that current California state law could not make DIRECTV’s clause of class arbitration waiver unenforceable even though in 2007—when DIRECTV drafted the form agreement—California’s Supreme Court, in Discover Bank v. Superior Court, 36 Cal. 4th 148, 162-163 (2005), had held class arbitration waiver clauses under such circumstances unconscionable and unenforceable. In other words, when DIRECTV imposed this 2009 service agreement, both parties (DIRECTV and California customers who read and understood the agreement) would have had to assume if they knew California law that the class arbitration waiver would be unenforceable in California, which would have made the entire arbitration provision unenforceable under the terms of the agreement. The majority acknowledged that such assumption was likely to exist.

 The majority, however, held “the law of your state” should be presumed to be the current “valid state law.” Given the Supreme Court, in 2011, held that Discover Bank was pre-empted by the FAA (in AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 352 (2011)), Discover Bank is not “valid state law.” The majority held that California courts discriminated against arbitration—violating the FAA’s policy that favors arbitration. Therefore, the majority concluded California Court of Appeal’s decision interpreting DIRECTV’s 2009 form service agreement was pre-empted by the FAA and individual arbitration is required.

Justices Ginsburg and Sotomayor dissented, as did Justice Thomas. Justice Thomas (surprisingly) opined that the FAA does not require state courts to order arbitration, stating that it does not apply to proceedings in state courts.

Justice Ginsburg articulated at least four errors in the majority’s opinion. 

First, the majority misread the FAA (enacted in 1925 to resolve disputes between merchants with equal bargaining powers), depriving consumers of effective relief against powerful economic entities, which have created their contracts with consumers and employees containing no-class arbitration clauses. Consumers and most employees, unlike merchants with equal bargaining powers, lack the ability to change the terms of consumer adhesion contracts or employment agreements so that their effective access to justice would be safeguarded.

Second, the majority unreasonably expanded the FAA’s pre-emption scope. The FAA preempts state laws only to the extent that state laws conflict with “the contracting parties’ intent.” For example, the contracting parties in 2009 expected Discover Bank to be valid – their 2009 intent should not be gauged in light of the 2011 Concepcion decision.

Third, Section 1751 of California’s Consumer Legal Remedies Act (CLRA), which the Plaintiffs relied upon to prosecute DIRECTV’s alleged violations, also renders class action waivers invalid, and Section 1751 remains “valid California state law.” Therefore, the majority erred in ignoring it.

Fourth, the majority’s decision contravenes international standards making arbitration clauses in adhesion contracts unenforceable. For example, Justice Ginsberg points out that the European Union bars enforcement of one-party-dictated mandatory consumer arbitration agreements because consumers cannot agree to arbitration that would effectively deprive them of the ability to enforce their rights.

Bryan Schwartz Law has had extensive experience fighting for employees who have no other choices but to accept a mandatory arbitration clause to get a job. We agree with the Ginsburg dissent that “arbitration is a matter of consent, not coercion” and believe the majority’s decision empowers the powerful economic enterprises but deprives the powerless, like workers and consumers, of their ability to protect their rights effectively.

Contact Bryan SchwartzLaw to learn how an arbitration agreement may affect your rights.

Bryan Schwartz Law's Principal Publishes Photography Book Highlighting Jewish Diversity

After 16 1/2 years of dedication to the project, Bryan Schwartz Law's principal has published Scattered Among the Nations, a book of photographs and stories of the world's most isolated Jewish communities. The coffee table book highlights sixteen diverse Jewish communities in Africa, Asia, Latin America, the Former Soviet Union, and beyond.

"My work every day as a civil rights lawyer is driven by the same passion for diversity, and my fascination with the workings of our multicultural planet, that have inspired this project," said Schwartz. "I am humbled and delighted to see it come to fruition, with such a beautiful product, after all of these years."

The publisher's blog post is at http://www.weldonowen.com/blog/3-worlds-most-isolated-jewish-communities.

The first review of the book is here.

Class Actions Appear Poised to Survive to Fight Another Day at High Court

At least five justices of the U.S. Supreme Court suggested at Tuesday’s oral argument in Tyson Foods, Inc. v. Bouaphakeo, No. 14-1146, that they would not impose further restrictions on class action litigation in that case.

The case involves pork-processing workers seeking overtime pay under the Fair Labor Standards Act (FLSA) for time spent donning and doffing protective gear beyond 40 hours per week, time for which Tyson Foods also failed to keep FLSA-mandated records. More than 3,300 former and current employees who held 400 different jobs on the plant floor were certified as a class in the trial court in Iowa. That decision relied on statistical modeling by the employees’ expert showing that, despite some differences in the protective gear required for the various jobs, most employees took between 17 and 22 minutes donning and doffing. The case went to trial and a jury awarded the class a verdict worth approximately $5.8 million.

Tyson unsuccessfully appealed the class certification decision to the U.S. Court of Appeals for the Eighth Circuit. At the Supreme Court, Tyson contended, first, that the statistical models could not sufficiently account for the different amounts of donning-and-doffing time spent by employees with different job duties and, second, that the certified class contained hundreds of members who had not worked more than 40 hours in a week.

For groups of employees or consumers who suffer injuries which are comparatively small but widespread, class actions are an essential tool to vindicate individual rights and ensure large corporations comply with existing law. Because the costs of bringing individual lawsuits may be prohibitive, class actions level the playing field for employees and consumers.

The Roberts Court showed its hostility toward class actions in two infamous 2011 decisions penned by Justice Scalia and reflecting a now-familiar 5-4 split along ideological lines: AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333, and Wal-Mart Stores Inc. v. Dukes (2011) 131 S. Ct. 2541. In the latter case, Justice Scalia decried class actions which rely on the use of statistics to calculate and apportion damages as “Trial by Formula” and reversed the lower courts’ certification of a class of female Wal-Mart employees who alleged sex discrimination. Two years later, in Comcast Corp. v. Behrend (2013) 133 S. Ct. 1426, Justice Scalia–writing for the same 5-4 majority–again reversed the lower courts’ class certification decision (in a case challenging the cable company’s anticompetitive practices) on grounds that the consumers’ statistical model did not sufficiently support the alleged damages suffered across the proposed class.

A recent investigation and an editorial in The New York Times (articles available here, here, here, and here) documented and discussed the push by credit card companies and other large corporations to weaken class actions through class-action bans in consumer and employment contracts. As noted in the Times, Chief Justice John Roberts advocated in favor of class-action bans in consumer contracts as a private lawyer for Discover Bank before voting to uphold them in AT&T Mobility LLC v. Concepcion and American Express v. Italian Colors (2013) 133 S. Ct. 2304. The latter was a case in which the Supreme Court held that, even if an arbitration clause with a class waiver has the effect of preventing meaningful relief, it must generally still be upheld – severely undermining the enforcement of numerous statutes designed to protect the public from corporate abuses.

Thus, consumer and employee advocates were rightfully concerned when the Court granted certiorari in Tyson Foods. However, at oral argument, Tyson Foods’ advocate faced sharp questioning from several Justices, including Justice Kennedy (who had joined the majority in the three above-described class cases). Multiple Justices took issue with the fact that Tyson Foods was essentially asking the Court to resolve in their favor an avoidable problem of its own making: at trial, Tyson Foods opposed the plaintiffs’ efforts to bifurcate the trial, which would have allowed for a determination of the hours worked by each employee after the jury awarded aggregate damages. Justice Kennedy told counsel for Tyson: “you suggest in your brief that uninjured plaintiffs are included in aggregate damages, but you were the one that objected to the bifurcated trial.” Similarly, Justice Kagan stated: “it really was your decision not to have a bifurcated proceeding, where it would have been clear–it would have been proved separately in a highly ministerial way which employees worked over 40 hours.” Several Justices further noted that the trial court would address such concerns when apportioning the jury award on remand.

As to Tyson’s objection to the statistical model which supported class certification, five Justices appeared to agree that the question raised did not implicate Federal Rule of Civil Procedure 23 (governing class actions); instead, that question could be resolved under Anderson v. Mt. Clemens Pottery Co. (1946) 328 U.S. 680, an old FLSA case. That case held that where an employer fails to keep adequate records (as the FLSA requires), employees need not prove the exact hours worked and are entitled to a just and reasonable inference as to those hours. Put simply, an employer who fails to keep adequate time records as required by law cannot then use the absence of those records as grounds to escape liability for minimum wages or overtime premiums. Here, Tyson had not kept records of the time employees spent donning and doffing protective gear, and thus the employees were entitled to use statistical models based on video footage at the plant to determine the average time spent on those activities. Thus, Mt. Clemens gives the Court an opportunity to uphold the class determination based on existing substantive law rather than looking to Rule 23’s procedures. Justice Kennedy did not hold back in showing his cards, telling Tyson’s counsel: “it seems to me Justice Kagan is precisely right. You said, well, I want to start first with class action. She said, no, no. The point is we start with Mt. Clemens. That’s the substantive law for FLSA.”

Although predicting the outcome of Supreme Court decisions based on the Justices’ questions at oral argument is often a futile exercise, consumer and employee advocates were cautiously optimistic after argument on Tuesday. Reinforcing the Mt. Clemens precedent would be critical for workers seeking to prove the hours they worked when an employer has misclassified employees as exempt from overtime, kept imprecise records, or required off-the-clock work. However, despite what may turn out to be a rare victory before the Roberts Court for those who protect workers’ and consumers’ rights, the warning signs for the imposition of further restrictions on class litigation were apparent in the questions asked by several Justices, notably Justice Kennedy.

He probed both the advocates for the plaintiffs and the government (which intervened on behalf of plaintiffs in the case) as to whether the case would be “much closer” if decided solely under Rule 23, without the Mt. Clemens inference, asking counsel for plaintiffs: “do you concede that there is a strong possibility you might not be–have this class certified under section–under Rule 23, absent Mt. Clemens?” In doing so he signaled that, even if he sides with the Tyson Foods plaintiffs, he has no plans to abandon the majority from the AT&T Mobility, Wal-Mart Stores, Comcast, and Italian Colors cases.

Chief Justice Roberts expressed skepticism as to whether Mt. Clemens could even resolve the class certification question, arguing that Mt. Clemens addressed the amount of damages owed to a worker shown to have worked more than 40 hours in week, not a situation where the records failed to establish the employer’s liability for overtime in the first instance. Both Justices Scalia and Alito expressed their grave concern–as did Tyson’s counsel–that some of the class members might have worked less than 40 hours, notwithstanding that such concerns could be addressed by the trial court on remand, as discussed above.

In other words, employees and consumers may win in Tyson Foods, but the current Roberts Court majority at oral argument offered little assurance that they will preserve the safety of the public policy interests protected by consumer and employment class actions going forward

Ninth Circuit Preserves California Employees’ Rights under PAGA

On Monday, the U.S. Court of Appeals for the Ninth Circuit protected the right of employees in California to bring representative actions under the Private Attorneys General Act of 2004, commonly known as PAGA. That decision, Sakkab v. Luxottica Retail North America, No. 13-55184 (9th Cir. Sept. 28, 2015), means that an employee who has signed a mandatory arbitration agreement which attempts to bar representative claims against the employer may nonetheless bring a representative claim under PAGA.

PAGA emboldens aggrieved employees to step into the shoes of the California Labor Workforce Development Agency to enforce California’s Labor Code. Penalties recovered from employers who have violated the Labor Code are then divided between the State and the aggrieved employees.

As discussed in previous blog posts, employees’ right to bring representative actions suffered a significant blow when the U.S. Supreme Court held in AT&T Mobility v. Concepcion, 131 S. Ct. 1740 (2011), that the Federal Arbitration Act preempted California’s law (and those of other states) which invalidated consumer contracts that prohibited representative actions. However, the California Supreme Court subsequently ruled that, notwithstanding Concepcion, PAGA waivers are unenforceable as a matter of state law in Iskanian v. CLS Transportation Los Angeles (2014) 59 Cal.4th 348. In that case, the California Supreme Court reasoned that the state legislature chiefly enacted PAGA to ensure compliance with the state’s labor code through qui tam actions, not merely to assert the individual rights of private litigants. On that basis, the court in Iskanian concluded that the Federal Arbitration Act – which concerns bargaining between private parties – did not preempt PAGA.

Following Iskanian, employers in Sakkab and other cases nonetheless argued that the Federal Arbitration Act preempts the unenforceability of PAGA waivers under California law. On two occasions this year, the U.S. Supreme Court has declined to consider that argument: first with respect to Iskanian and second as to Bridgestone Retail Operations, LLC v. Brown, 2015 WL 86028, No. 14-790.

That argument failed again this week before the Ninth Circuit, which emphasized the public benefits of representative PAGA actions in concluding that the Federal Arbitration Act does not preempt California’s ability to protect employees through such actions. In that regard, the Ninth Circuit agreed with the California Supreme Court in Iskanian that enforcing an employee’s waiver of the right to bring a representative PAGA action allows an employer to dodge responsibility for its own violations of the law. The Ninth Circuit further stressed PAGA’s central role in enforcing California’s labor laws, stating that “[t]he explicit purpose of the rule barring enforcement of agreements to waive representative PAGA claims is to preserve the deterrence scheme the legislature judged to be optimal.” Sakkab at 28.

Bryan Schwartz Law applauds the Ninth Circuit for trusting the state legislature’s judgment that it could significantly reduce violations of the California Labor Code by allowing employees to vindicate the state’s interest in strong labor protections.

Court Gives Uber Drivers Green Light for Class Action

Today, a district court granted class certification to Uber drivers alleging they have been misclassified as independent contractors. As discussed in previous posts to this blog earlier this year and last year, the growing sharing economy continues to pose challenges for hard-won worker protections – today’s decision is an important step towards ensuring technological innovation does not undermine important worker protections.

The court’s 68-page order lucidly lays out California’s test for an employment relationship, as stated in S.G. Borello & Sons, Inc. v. Dep’t of Indus. Relations (“Borello”), 48 Cal. 3d 341 (1989), and more recently clarified in Ayala v. Antelope Valley Newspapers, Inc., 59 Cal. 4th 522 (2014). Order at 10-13.

Under Borello, whether an employment relationship exists depends on one primary factor and several secondary factors.[1] The “most significant consideration” is the putative employer’s “right to control work details.” Borello, 48 Cal. 3d at 350. The California Supreme Court’s recent decision in Ayala clarified that the “pertinent question under California’s right-of-control test is not how much control a hirer [actually] exercises, but how much control the hirer retains the right to exercise.” Order at 11 (citing Ayala, 59 Cal. 4th at 533 (emphases in original) (citation omitted)).

Importantly, the court concluded that the Borello test can be answered for each Uber driver on a common basis. That is, the central question in the case – whether Uber drivers are independent contractors or employees – can be resolved by reference to common policies, common practices, and common evidence including evidence that Uber uniformly sets its rates for drivers, uniformly monitors drivers’ performance, and uses uniform employment contracts for each of its drivers. Order at 38.

In reaching its decision to certify the class, the court rejected Uber’s argument that individualized issues would bog down the litigation because:

[O]n one hand, Uber argues that it has properly classified every single driver as an independent contractor; on the other, Uber argues that individual issues with respect to each driver’s “unique” relationship with Uber so predominate that this Court (unlike, apparently, Uber itself) cannot make a classwide determination of its drivers’ proper job classification.

Order at 6.

Thus, the fact that Uber itself made a uniform determination in misclassifying its drivers as independent contractors weighed in the court’s holding that such a determination could also be made uniformly by a court or trier of fact. Order at 6 (citing In re Wells Fargo Home Mortgage Overtime Pay Litig., 571 F.3d 953, 957 (9th Cir. 2009)

After an exhaustive review of each factor under the Borello common law employment test, the court held that, “every (or nearly every) consideration under the California common-law test of employment can be adjudicated with common proof on a classwide basis.” Order at 56.

Similar lawsuits have been filed against other app-based companies such as Lyft. See Cotter v. Lyft, Inc., 13-cv-4065-VC (N.D. Cal.). Moreover, the Department of Labor has recently released guidance reaffirming the basic principle that “most workers are employees under the FLSA’s broad definitions.” In light of these legal developments, companies that have benefitted from the fast-growing sharing economy should reevaluate their employee classification decisions.

For example, Instacart, a company that provides online grocery deliver services, recently reclassified its workforce, citing the positive business benefits of maintaining employees rather than independent contractors. Similar companies that seek similar benefits from independent contractors face the real possibility of expensive legal action.

In you have concerns that you may have been misclassified in your job please contact Bryan Schwartz Law.

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[1] The secondary factors are:

(a) whether the one performing services is engaged in a distinct occupation or business; (b) the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision;

(c) the skill required in the particular occupation;

(d) whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work;

(e) the length of time for which the services are to be performed;

(f) the method of payment, whether by the time or by the job;

(g) whether or not the work is a part of the regular business of the principal; and

(h) whether or not the parties believe they are creating the relationship of employer-employee;

(i) the alleged employee’s opportunity for profit or loss depending on his managerial skill;

(j) the alleged employee’s investment in equipment or materials required for his task, or his employment of helpers;

(k) whether the service rendered requires a special skill;

(l) the degree of permanence of the working relationship; and

(m) whether the service rendered is an integral part of the alleged employer’s business.

Borello, 48 Cal. 3d at 351, 354-55.

Bryan Schwartz Law Announces Landmark Settlement with Bank of America for $36 million for Failure to Pay Overtime

Bryan Schwartz Law Announces Landmark Settlement with Bank of America for $36 million for Failure to Pay Overtime

Settlement Covers 365 Plaintiffs Who Served as Residential Real Estate Appraisers

Today, employment and civil rights attorney Bryan Schwartz announced a settlement between Landsafe Appraisal Services, Inc., a subsidiary of Bank of America (NYSE: BAC) and 365 current and former employees working as residential real estate staff appraisers. The plaintiffs had sought damages for their misclassification as exempt from overtime, which left them working long hours, day in and day out, without additional compensation.  Plaintiffs are seeking preliminary court approval in September 2015.

The lawsuit was first filed in April 2013 in federal court in Orange County. It alleged that Bank of America erroneously applied the "administrative" and "professional" exemptions to residential staff appraisers. Plaintiffs maintained that they typically worked from early in the morning until late at night, churning out reports that are a required part of every mortgage loan. The job required no special academic degree - just a state license.

One of the named plaintiffs, Ethel Joann Parks of Manteca, California worked for Bank of America’s Landsafe until 2012. For years, she regularly toiled from 6 a.m. to 10 p.m. completing appraisal reports and, in the process, missing out on daily life and major family events. Rarely did she have time throughout the day to take a break to eat or rest because the artificially short deadlines set by Bank of America forced her to constantly keep working.

Ms. Parks decided to step forward because she felt that bank failed to treat her, and other staff appraisers, “as human beings” with “family and personal needs that should be acknowledged.” She added, “I am vindicated by this lawsuit and the exceptional relief obtained on behalf of the class.  I hope it will force banks and appraisal management companies throughout the country to reconsider pressuring their staff appraisers to work long hours without paying overtime.”

“We have seen over and over again across the economy that employees are misclassified, depriving them of overtime compensation, when under state and federal law they are due the wages,” said Bryan Schwartz, founder of Bryan Schwartz Law, lead counsel for the 365 class members, along with the Los Angeles-based firm of Schonbrun Desimone Seplow Harris & Hoffman.  “These individuals worked hard, generated thousands of reports a month for the employer to sell mortgages, and were not compensated for their efforts as the law requires. We hope this settlement helps change the playing field for these and many other employees nationwide,” Attorney Bryan Schwartz added.

Judge David O. Carter certified a nationwide class action in December 2013 under the federal Fair Labor Standards Act, and certified a class action in California in June 2014 under the California Labor Code. In May 2015, the Court granted plaintiffs summary judgment as to the major defenses Bank of America was asserting, and rejected the bank’s effort to kick the suit out of court.  This resulted in a ruling under which Bank of America would likely owe the workers considerable back wages for overtime and missed meal and rest periods. The bank asked the Court for permission to appeal the summary judgment decision immediately, denying any wrongdoing. The case was set to go to trial on August 31st, but the $36 million settlement, if and when approved by the Court, resolves all claims.

For Attorney Schwartz, this is just one of many recent out-of-court settlements in service of employees who were denied lawful compensation for their efforts.  In 2014, Schwartz and his co-counsel settled another part of the same case against Bank of America (as to review appraisers) for $5.8 million. This makes nearly $42 million for workers in the suit as a whole.  Schwartz has also achieved numerous other multi-million dollar settlements on behalf of thousands of misclassified workers nationwide.

“Employers take grave risks by cutting corners, and not fairly compensating their employees in tune with state and federal law.  My firm and many others, including my co-counsel, are working to end wage theft in the economy…quickly,” added Schwartz.

The Plaintiffs are seeking the Court's preliminary approval of the settlement in September, and hope to have the Court's final sign-off so class members will receive their ample payments within the next several months.

The case is Terry P. Boyd et al. v. Bank of America Corp. et al., case number 8:13-cv-00561, in the U.S. District Court for the Central District of California.

It Doesn’t Hurt to Ask: New CA Law Protects Right to Ask for Reasonable Accommodation Under California’s Anti-Discrimination Law

Governor Brow­­­­n recently signed into law Assembly Bill 987, overturning the wrong result in Rope v. Auto-Chlor System of Washington, Inc., 220 Cal. App. 4th 635 (2013), review denied (Jan. 29, 2014), and thereby ensuring that all Californians need not fear retaliation should they request a reasonable accommodation from their employer.

In Rope, the plaintiff sought to donate his kidney to his sister. Accordingly, he requested leave from his employer to undergo the transplant surgery and recover from the operation. After repeatedly ignoring Mr. Rope’s requests for leave, the employer eventually approved an unspecified amount of leave. However, only two months before the operation date, Mr. Rope’s employer fired him for allegedly poor performance. Importantly, Mr. Rope had received only positive performance reviews during his employment and had no disciplinary problems prior to his termination.

Mr. Rope filed suit asserting multiple claims including retaliation for requesting a reasonable accommodation under the Fair Employment and Housing Act (FEHA). The trial court dismissed his lawsuit on demurrer, including the retaliation claim. Mr. Rope appealed.

To the dismay of worker advocates statewide, the Court of Appeal affirmed the trial court’s dismissal of Mr. Rope’s retaliation claim. The appellate court interpreted the retaliation provision under the FEHA to require that 1) an employee “engaged in activities in opposition to the employer at the time of the alleged retaliation,” and 2) the employer knew about it. Id. at 653. While the Court of Appeal acknowledged that the FEHA “encompasses a broad range of protected activity,” does not require that an employee “file a formal charge,” and that “[t]he determination as to what constitutes a protected activity is inherently fact driven,” the court nevertheless held that requesting a reasonable accommodation categorically is not “protected activity” under the FEHA. Id. at 652-653. The court did not interpret an employee’s request for reasonable accommodation as “opposition” to an employer. Id. at 652-53.

Other courts have reached different results in similar circumstances, noting that “[i]t would seem anomalous … to think Congress intended no retaliation protection for employees who request a reasonable accommodation unless they also file a formal charge. This would leave employees unprotected if an employer granted the accommodation and shortly thereafter terminated the employee in retaliation.” Shellenberger v. Summit Bancorp, Inc., 318 F.3d 183, 191 (3d Cir. 2003) (in the context of a lawsuit brought under the Americans with Disabilities Act). The Third Circuit’s concern was warranted, given the outcome in Rope.

Assembly Bill 987 corrects the anomalous result in Rope by ensuring that employees can request reasonable accommodations in the workplace without fear of retaliation. Employers should take notice that, separate from their duty to engage in the interactive process, they may not retaliate against an employee for requesting a reasonable accommodation.

If you believe your employer retaliated against you because you requested a reasonable accommodation, please contact Bryan Schwartz Law.

“Sharing Economy” is Not Sharing the Wealth: Independent Contractor Misclassification a Growing Problem

An increasing number of workers are classified as freelancers and independent contractors in the new “sharing” economy, according to an article in today’s New York Times. Indeed, the Times reports that the number of part-time independent contractors and freelancers has increased by more than fifty percent since 2001. The abuse of independent contractor status is directly connected to the income gap and the shrinking middle class in America

The Times article describes that, in recent years, companies have increasingly relied on independent contractors, freelancers, temps, and outsourcing to complete work that at one time would have been done by full time employees. As a result, workers have gained more flexibility in setting their own schedule, but lose out on the steady income stream they could once depend on.

            The corporate motivation for these new models dates back to the 1970s when companies where encouraged to focus on their “core competencies.” This led to companies outsourcing more and more tasks to non-employees and cutting back heavily on their payroll expenditures.

As these practices have become more popular, wages have dropped. According to a study by Michael Greenstone and Adam Looney, men were making substantially less in 2009 than men of the same age and education level were making in 1969, adjusted for inflation.

With these changing practices come new legal challenges. The article cites to a California Labor Commissioner decision regarding Uber, the well-known tech company that employs nearly 200,000 drivers, labeling them “independent contractors.” The Labor Commissioner ruled that an Uber driver had been misclassified and was in fact Uber’s employee. It remains to be seen how this decision, which is under appeal, will affect other Uber drivers. Bryan Schwartz Law’s co-counsel, Goldstein Borgen Dardarian & Ho, has a class action along the same lines pending in the United States District Court for the Northern District of California (Gillette v. Uber Technologies Inc.) and a similar action is pending against Lyft in the same court (Cotter v. Lyft Inc.).

The distinction between being an independent contractor and being an employee can be vast for workers. For example, nonexempt employees are guaranteed meal and rest breaks and overtime pay, while independent contractors are not. Independent contractors are often paid by the task, rather than by the hour, which can lead to workers being compensated below the minimum wage for uncompensated work. Independent contractors receive no Social Security, Medicare, unemployment, and other benefit contributions from the places they work, while employees receive all these protections.

The end result is that when workers are misclassified as independent contractors rather than employees, their employers often illegally under compensate them. Bryan Schwartz Law has represented many workers in misclassification cases nationwide, negotiating millions of dollars in back wages and penalties for them.

            In you have concerns that you may have been misclassified in your job please contact Bryan Schwartz Law. 

Landmark U.S. Supreme Court Ruling Extends Right to Legally Recognized Same-Sex Marriage across the Country

The United States Supreme Court issued a huge victory today for proponents of marriage equality and equal protection through its ruling in Obergefell, et al. v. Hodges, Director, Ohio Dept. of Health, et al. The opinion states:

“The Court, in this decision, holds same-sex couples may exercise the fundamental right to marry in all States. It follows that the Court also must hold – and it now does hold-that there is no lawful basis for a State to refuse to recognize a lawful same-sex marriage performed in another State on the ground of its same-sex character.” Slip Op. at 28.

Today’s five-to-four decision expands the rights of same-sex couples to marry and receive the same protections afforded opposite-sex couples nationwide. LGBTQ persons can no longer lawfully be denied the right to marry or have their spouse and children recognized as such under the law.

 Following the watershed decision in United States v. Windsor, 133 S. Ct. 2675 (2013) invalidating the Defense of Marriage Act which defined marriage as the union of a man and woman in federal law, same-sex couples have exercised their right to wed only in states which allow and/or recognize same-sex marriage. Plaintiffs, fourteen same-sex couples and two men whose partners are deceased, demonstrated the injury suffered by those denied the rights and benefits of marriage afforded to opposite-sex couples. For example, Plaintiff James Obergefell, met his partner over two decades ago and married his partner in Maryland months before his partner’s death as a result of a debilitating disease. Despite making a committed union with his partner, Obergefell was not listed on his partner’s death certificate as his spouse in their home state of Ohio. Plaintiffs April DeBoer and Jayne Rowse celebrated a commitment ceremony in Michigan before expanding their family to include three special needs children.  Yet, due to Michigan’s prohibitions on same-sex couple adoption, if tragedy were to strike yet the parent prohibited from adopting the child survived, their children could be considered orphaned.

The Supreme Court addressed the question of whether the Constitution compels the right to marry for same-sex couples under the Due Process and Equal Protection Clauses of the Fourteenth Amendment.  The majority opinion held that marriage is a fundamental right under the Constitution and could no longer be denied same-sex couples under the law. Drawing from the decisions in Loving v. Virginia, 388 U.S. 1 (1967), Griswold v. Connecticut, 381 U.S. 479 (1965), Zablocki v. Redhail, 434 U.S. 374 (1978), and Turner v. Safley, 482 U.S. 78 (1987), the Court found the right of same-sex couples to marry inherent in the concept of individual autonomy and fundamental because of the support it provides to the union of two committed individuals. The Court held that basic components of many marriages related to child-rearing, procreation, and education also supported their conclusion. Additionally, the Court  identified precedent protecting the right of married couples not to procreate to reject respondent’s arguments that the right to marry must be conditioned on “the capacity or commitment to procreate.” Slip Op. at 16. The Court discussed rights and protections denied to same-sex couples, many of which concern workers’ rights including rights and benefits of survivors, health insurance, and workers’ compensation benefits, to conclude that “[u]nder the Constitution, same-sex couples seek in marriage the same legal treatment as opposite-sex couples, and it would disparage their choices and diminish their personhood to deny them this right.” Slip Op. at 19.

Bryan Schwartz Law applauds the Supreme Court for overruling the infringement of central precepts of equality as it concerns same-sex couples. The firm joins in celebrating this groundbreaking victory for marriage equality.

King v. Burwell: Supreme Court preserves Obamacare’s tax subsidies helping millions of Americans afford health insurance

               Millions of Americans who have suffered from unaffordable health care for decades find a reason to celebrate today. The Supreme Court (6-3)[1], through King v. Burwell, affirmed that refundable tax credits for health insurance coverage purchased are available to those individuals with household incomes between 100 percent and 400 percent of the federal poverty line, regardless of whether they enroll in an insurance plan through a Federal or a State Exchange.[2] This decision preserves one main tenet of Obamacare, which helps millions of poor and middle-class people buy affordable health insurance.

I.                    The Patient Protection and Affordable Care Act (the “Affordable Care Act” or the “ACA”) has adopted three interlocking reforms. 

              The majority started its opinion by explaining the background and purposes of the ACA because this case is closely related to whether the Congress intended the ACA’s three interlocking reforms to equally apply in each State regardless of who establishes the State’s Exchange.  In general, the ACA adopts the three key reforms that made the Massachusetts health system successful.

              The first reform consists of the guaranteed issue and community rating requirements. These two requirements bar insurers from denying coverage to anyone because of their health (the guaranteed issue requirement) and from charging a person higher premiums because of their health conditions (the community rating requirement) to ensure that everyone has equal access to health insurance coverage. However, these two requirements created an unintended “adverse selection” consequence: people do not want to purchase health insurance until they become sick. As a result, insurers are forced to increase overall premiums to account for the fact that only those who are already sick rather than healthy buy insurance, which in turn creates an economic “death spiral”—as premiums become higher, the number of people buying insurance sinks, and the uninsured number dramatically increases.

               Years after Massachusetts adopted only these two requirements to its state health insurance system and experienced the death spiral, the second and the third reforms were added to its health system – coverage and subsidizing requirements –and the ACA also adopts them. Under the coverage requirement, each individual is required to maintain health insurance coverage or make a payment to the IRS. Given healthy people are required to purchase health insurance, health insurance premiums may become lower. Also, low-income individuals are exempt from the coverage requirements when they have to spend more than eight percent of their income on health insurance. Yet, to avoid adverse selection or death spiral caused by exemptions, refundable tax credits are available to subsidize individuals with household incomes between 100 percent and 400 percent of the federal poverty line. Accordingly, these three reforms are interlocking with each other and closely intertwined. When interpreting ambiguous phrases under the ACA, the Supreme Court emphasizes consideration of whether the purposes of these requirements may be served.   

      

II.                  The issue before the Court: Is the phrase, “an Exchange established by the State” under Section 36B of the Internal Revenue Code ambiguous?

In addition to the three reforms, the ACA also requires the creation of an “Exchange” in each state. An Exchange is a marketplace where people can compare and buy different types of health insurance. The ACA gives each state the opportunity to establish its own State Exchange but provides that the federal government must establish the Federal Exchange in the state if the state chooses not to establish one. The issue before the Supreme Court was whether tax credits could be available in the states that have a Federal Exchange rather than a State Exchange. In other words, the question is whether “Federal Exchanges” are included under Section 36B of the Internal Revenue Code, a critical component of the ACA, even when Section 36B provides that refundable tax credits are subsidized to those who enroll in health plans through “an Exchange established by the State under Section 1311 of the ACA.” See 26 U.S.C. §36B(b)(2)(A). The IRS promulgated a new rule that makes tax credits available regarding both State and Federal Exchanges. 

Four petitioners currently living in Virginia who could only enroll in a health plan through a Federal Exchange challenged the IRS’s rule and argued that they should not receive any tax credits because Federal Exchanges are not “established by the State.” Without the tax credits, the petitioners argued, they would be exempt from the ACA’s coverage because their cost of buying health insurance would exceed eight percent of their income. See 26 U.S.C. §5000A(e)(1). Both the District Court and the Fourth Circuit deferred to the rule and interpretation made by the IRS. The Supreme Court granted certiorari and affirmed the Fourth’s Circuit’s decision on different grounds. 

                The High Court denied deferring to the IRS’s new rule and interpretation and held it was unlikely that Congress would have delegated the IRS to determine the issue of tax credit availability, given this should be a question of deep “economic and political significance.” Therefore, the Court reasoned that it should determine the correct reading of Section 36B. In assessing the ambiguity of a statute, the Court first decided whether the language is plain by reading the words “in their context and with a view to their place in the overall statutory scheme.” Evaluating the term “Exchanges” used in different provisions under the ACA, the Court held that the meaning of the phrase “established by the State” is ambiguous in context and rejected petitioners’ arguments to adopt the plain meaning of the phrase. For example, assuming this phrase excludes the Federal Exchanges, nobody purchasing insurance through Federal Exchanges would be qualified for tax credits - seemingly an interpretation contrary to the ACA’s expectation that State Exchanges and Federal Exchanges are equivalent.

Given that the phrase was ambiguous, the Court further decided “Federal Exchanges” must be included in Section 36B to avoid creating the “death spirals” that the Congress enacted the ACA to prevent. The rationale is simple: If tax credits are not available to Federal Exchanges, excessive numbers of exemptions will destroy the coverage requirement, and adverse selection will appear. Justice Roberts emphasized that Congress “passed the Affordable Care Act to improve health insurance markets, not to destroy them.” 

             Obamacare also mandates employers with 50 or more employees to offer their full-time employees health insurance coverage. (Full-time employees are defined as those who work 30 hours or more per week).

Today Bryan Schwartz Law celebrates this important step forward for American access to affordable health care.

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[1] Chief Justice Roberts wrote the majority opinion and was joined by Justices Kennedy, Ginsburg, Breyer, Sotomayor and Kagan. Justice Scalia filed a dissenting opinion, in which Justices Thomas and Alito joined.

[2] At this point, 16 States and the District of Columbia have established their own State Exchanges, whereas the remaining 34 States have elected not to establish their own Exchanges and relied on the Federal Exchanges established and operated by the Secretary of Health and Human Services.