Wednesday, October 11, 2017

California Court of Appeal Holds Employees Not Required to Prove Injury or Intent in a PAGA Representative Lawsuit for Employer’s Itemized Wage Statement Violations.

A wage statement allows an employee to determine whether her employer has correctly compensated her for her labor, or whether she has been short-changed. California Labor Code section 226(a) seeks to ensure that employees receive accurate wage statements by requiring employers to provide timely, itemized wage statements to their employees. In addition to being timely, wage statements generally must include the following nine categories of information: (1) gross wages earned; (2) total hours worked (with exceptions); (3) the number of piece-rate units earned and any applicable piece rate if the employee is paid on a piece-rate basis; (4) all deductions from pay; (5) net wages earned; (6) the dates of the pay period; (7) the name of the employee and only the last four digits of her social security number or an employee identification number; (8) the name and address of the legal entity that is the employer (with additional information required for farm labor contractors); and (9) all applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate by the employee (with additional information required for temporary service employers). 
California Labor Code sections 226(e) and 226.3 provide
hefty penalties for wage statement violations.

California has empowered both individuals and the government to bring legal claims for violations of Section 226(a). Because wage statements are critical for determining whether an employee receives fair and adequate pay, California’s statutes provide steep penalties for wage statement violations. 
  
Individuals have a private right of action for statutory damages under Labor Code section 226(e). Under Section 226(e), individuals may seek statutory damages (sometimes called statutory penalties) if they have suffered an “injury” as a result of their employer’s “knowing and intentional” failure to comply with Section 226(a). An employee who proves she was injured by the knowing and intentional acts of her employer may recover the greater of her actual damages or fifty dollars ($50) for the initial pay period and one-hundred dollars ($100) for each subsequent pay period during which a violation occurs, not to exceed an aggregate penalty of four-thousand dollars ($4,000). Cal. Lab. Code § 226(e).

The state may pursue civil penalties under Labor Code section 226.3, and individuals are empowered to sue for these civil penalties as representative plaintiffs on behalf of the government, pursuant to the Private Attorneys General Act of 2004 (PAGA). If the government’s Labor Workforce Development Agency (LWDA) or a PAGA plaintiff proves the employer violated Section 226(a), the Court may award civil penalties in the amount of two-hundred-and-fifty dollars ($250) for the initial pay period and one-thousand dollars ($1,000) for each subsequent pay period during which a violation occurs. Typically, an employer must have some prior notice of its wrongful practice before the higher, subsequent-violation penalty is imposed. See Amaral v. Cintas Corp. No. 2, 163 Cal. App. 4th 1157, 1209 (2008). 

In a recent decision from California’s First District Court of Appeal, Lopez v. Friant & Associates, LLC, -- Cal.Rptr.3d --, 2017 WL 4251126 (Cal. Ct. App. Sept. 26, 2017), the Court clarified that a PAGA representative plaintiff seeking civil penalties under Section 226.3 must only prove the violation of the requirements in Section 226(a) in order to succeed in his claims. In Lopez, the plaintiff brought a PAGA-only action seeking civil penalties for his employer’s failure to include the last four digits of employees’ social security or employee identification number on 5,776 itemized wage statements, in violation of Section 226(a)(7). Id. at *2. The trial court granted defendant’s motion for summary judgment, concluding that a PAGA plaintiff must show evidence of not only a violation of section 226(a) but also the employer’s “knowing and intentional” violation. Id. at *3. The PAGA plaintiff appealed arguing that he was not required to show either (1) a “knowing and intentional” violation or (2) “injury” within the meaning of section 226(e) to prevail on his PAGA claim. Id. The Court of Appeal looked to the plain language and legislative history of the statute and PAGA, and concluded that the PAGA plaintiff was correct on both positions. Id. **3-9. This ruling knocks out a major defense tactic for employers seeking to overcome claims of itemized wage statement violations in PAGA actions – namely, the notion that the PAGA plaintiff has failed to meet the proof requirements of Section 226(e) – and affirms the robust remedies available for wage statement violations under PAGA.

Statutory penalties under California Labor Code section 226(e) and civil penalties under section 226.3 for PAGA violations have a one-year statute of limitations.

If you believe your employer is failing to provide you with timely and accurate wage statements, contact Bryan Schwartz Law. 

Friday, October 6, 2017

The United States Supreme Court Hears Oral Argument on Individual Arbitration Agreements in Employment Contracts in Epic Systems Corp. v. Lewis and Consolidated Cases


On Monday, the Supreme Court of the United States heard oral argument in one of the most important employment cases in recent history. In Epic Systems Corp. v. Lewis, and consolidated cases, Ernst & Young LLP v. Morris, and N.L.R.B. v. Murphy Oil, Inc., petitioners asked the Court to address whether employees can join together to sue their employer for labor violations, or whether employers may enforce individual arbitration agreements. Transcript available here. Bryan Schwartz Law has previously blogged about the Morris, Lewis, and Murphy Oil cases here, here, and here. Based on the questioning at oral argument, the conservative justices of the Roberts Court appear poised to deliver a victory to big business at the expense of employees.

Background

Whether individual arbitration clauses in employment agreements are enforceable will depend on the Court’s interpretation of two federal laws, the Federal Arbitration Act of 1925 (FAA) and the National Labor Relations Act of 1935 (NLRA).

The FAA provides that arbitration agreements “shall be valid,” except, according to a savings clause, “upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. Arbitration agreements require parties to resolve legal disputes in front of a private arbitrator rather than in a court of law. Employers frequently seek to condition employment on a worker’s agreement to forego class-wide relief if a dispute arises, and instead pursue their claims in individual arbitrations.

Section 7 of the NLRA prohibits employers from interfering with employees’ right to engage in “concerted activities” for their “mutual aid or protection.” 29 U.S.C. § 157. Class actions have long been considered a concerted activity, which permit large numbers of employees who share common disputes with large employers to band together to pursue relief they would otherwise have foregone due to fear of being singled out for retaliation, or because the cost of hiring an attorney for their individual case would dwarf the amount of their individual wage claims. Agreements to arbitrate individually are in tension with the NLRA’s right to “concerted” activity.

During the years John Roberts has served as Chief Justice, the Supreme Court has consistently stretched the FAA to favor big business, and disfavor class actions.[1] In 2011 and 2013, the Supreme Court held that the FAA allows companies to use fine-print arbitration clauses to force consumer and merchant disputes to be arbitrated on an individual basis. See AT&T v. Concepcion, 563 U.S. 333 (2011) (Scalia, J.); American Express v. Italian Colors Restaurant, 133 S.Ct. 2304 (2013) (Scalia, J.). Bryan Schwartz Law previously blogged about Concepcion and Italian Colors here and here. These rulings effectively bar claims by millions of individuals who have each suffered a relatively small injury by a corporation, by baring them from using the class action mechanism.

Unlike consumers or merchants, federal law specifically recognizes a worker’s right under the NLRA to engage in “concerted activity” against employers. In Lewis v. Epic Systems Corp., and Morris v. Ernst & Young LLP, the Seventh and Ninth Circuit Courts of Appeal recognized “concerted activity” as a substantive federal right which would render individual arbitration clauses unenforceable against employees under the FAA’s savings clause. The employers appealed.

In Epic Systems Corp. v. Lewis, and the consolidated cases, petitioners asked the Court to determine whether the FAA gives an employer the freedom to condition employment on an employee’s agreement to proceed individually in arbitration. Put another way, the issue was whether the NLRA gives workers a chance at a more level playing field, by protecting  employees from their employer’s attempts to restrain their ability to act jointly to vindicate rights in an arbitral or other forum.

Oral Argument

Questioning from conservative Justices Roberts and Alito suggests they will back the employers’ arguments that the right to “concerted activity” ends at the courthouse or arbitral forum’s doors. These justices seem satisfied to interpret the FAA to permit companies to use forced individual arbitration to bar workers from coming together in a concerted or joint legal action against their employer. (See Transcript, pp. 5, 34-36, 41-44). They appear inclined to subordinate the purpose of the NLRA to the FAA’s mandate to honor arbitration agreements absent some very specific Congressional command. (See Transcript p. 4). Justice Thomas and the Supreme Court’s newest addition, Justice Gorsuch, were silent throughout the argument, but can be expected to vote with the vocal conservative Justices.

Justice Kennedy seems poised to contort the language of the NLRA to the benefit of employers, too. In the first question of the day, Justice Kennedy suggested the meaning of “concerted action” under the NLRA may somehow exclude class actions. (Transcript p. 5. Justice Kennedy raised a hypothetical of two employees seeking to arbitrate their wage claims. (Transcript pp. 15-16). He implied that employees’ concerted activity rights could be satisfied if each employee hired the same attorney for individual representation – though the whole point of class action is the efficiency of not having countless individual actions seeking the same relief. Justice Kennedy showed no apparent concern for workers’ potential confidentiality concerns, or conflicts of interest that can arise in separate individual representation of numerous employees against a single employer. (Transcript pp. 37). Justice Kennedy suggested, that “many of the advantages of concerted action can be obtained by going to the same attorney” (Transcript p. 39), but this is absurd: corporations and everyone else know that most workers will never step forward individually to prosecute their claims. Companies don’t want to arbitrate at all – they want to eliminate legal challenges by workers, and know the Supreme Court has gifted them a sledgehammer for doing so, with the creative distortion of the FAA to ban group litigation.

Even before Concepcion, Justice Kennedy has been willing to twist the plain language of the FAA to the benefit of employers. In Circuit City Stores, Inc. v. Adams, 532 U.S. 105, he interpreted the FAA to apply to all employment contracts, except for interstate transportation workers, despite the fact that the plain language of the FAA suggests the Act excludes all employees working in interstate commerce. 9 U.S.C. § 1 (“nothing herein contained shall apply to contracts of employment of seamen, or railroad employees, or any other class of workers engaged in foreign or interstate commerce.”) (emph. added).

To the Court’s progressive wing, the resolution of these issues could not be clearer – the NLRA is a Congressional command that falls within the FAA’s express savings clause, and the NLRA prevents employer restraints on employees’ concerted action, including joint efforts to seek labor law remedies.  

Justice Breyer made his view clear that the NLRA requires invalidation of forced individual arbitration agreements in employment contracts, because, under the NLRA, “what the employer cannot stop is joint effort” including bringing legal claims in a class or collective action. (Transcript, pp. 56-57). Enforcing individual arbitration agreements would gut a foundation of labor law that represents “the entire heart of the New Deal.” (Transcript, pp. 7-8).

Justice Ginsberg described as the “driving force” of the NLRA the recognition of an “imbalance” in bargaining power between employers and employees, and explained that the protection of employees’ “concerted activity” was meant to correct that imbalance. (Transcript, pp. 5-6). A worker with small monetary damages can thereby join with other workers sharing similar claims in order to bring a larger claim to recover their damages jointly. (Transcript, pp. 21).

Justice Kagan pointed to the Supreme Court’s prior precedent, federal statutes, and the Constitution in support of the progressive wing’s straightforward position. The Supreme Court in Eastex v. N.L.R.B., 437 U.S. 556, 565-566, 566 n. 15 (1978) recognized that the NLRA protects employees from retaliation by their employers when they resort to “administrative and judicial forums” for their mutual aid and protection. (Transcript, pp. 6-7). Sections 102 and 103 of the Norris-LaGuardia Act of 1932, upon which the NLRA was modeled, state that any contract that prevents concerted activities of workers for their mutual aid and protection “shall not be enforceable in any court.” (Transcript, pp. 18). Once such a basic right has been articulated, as in, e.g., the First Amendment right to free speech, its broad protection may not be easily narrowed in its exercise. (Transcript, pp. 66).  

To Justice Sotomayor, the NLRA is a federal law that invalidates contracts that constrain concerted activity, making forced individual arbitration clauses illegal and unenforceable, in much the same way that “state law concepts like fraud[ and] duress,” invalidate contracts. (Transcript pp. 13-14).

No Proportional Check on Corporate Wrongdoing

The conservative justices of the Roberts Court appear determined to interpret the FAA based on its text, or as Congress intended, but rather by any means available to protect large corporations against consumers, small businesses, and now employees. Berkeley Law’s Dean, and the famed constitutional law scholar Erwin Chemerinsky, has observed that to effectively protect their rights employees need a proportional response to violations by large corporations:

With the rise of the large corporation in the early twentieth century, courts and legislatures developed class actions as a procedural device to protect individuals from the harms of exploitation by large entities. Courts and legislatures realized that large entities have incentives to engage in widespread but small violations of the law, because corporations know that people cannot afford to sue over a small violation of the law. When individual litigation is not economically rational, the threat of litigation is not an effective deterrent to illegal behavior. Absent a robust government bureaucracy dedicated to enforcing consumer- or employee- protection laws, class actions are an essential aspect of law enforcement. And even the most aggressive enforcement agency cannot deal with even a significant fraction of law violations. Litigation is essential for deterring wrongdoing and class actions suits are necessary when a large number of people suffer a relatively small injury.[2]

If the Supreme Court proceeds as expected, based on Monday’s oral argument, millions of workers will lose an effective means to remedy many violations of their rights. More and more employees will be forced to enter into individual arbitration agreements and face their employers alone.





[1] Jessica Silver-Greenberg & Robert Gebeloff, “Arbitration Everywhere, Stacking the Deck of Justice,” N.Y. Times, Oct. 31, 2015.
[2] Erwin Chemerinsky, The Case Against the Supreme Court, § II.5 (2014).

Monday, October 2, 2017

Appellate Court Hits Tipped Workers

On September 6, 2017, the Ninth Circuit in Marsh v. J. Alexander’s LLC, No. 15-15791 (9th Cir. 2017) dealt a blow to tipped workers. The Court rejected U.S. Department of Labor (DOL) regulatory guidance that would have strengthened tipped workers’ claims to full minimum wage for the hours spent working outside the scope of tipped work. Currently, unlike California law (which rejects such a notion), the federal Fair Labor Standards Act (FLSA) allows employers to reduce a tipped worker’s wages based on what that worker earns in tips, thereby passing the payment of wages to the customer. This wage reduction for employers is called a “tip-credit.” The DOL’s interpretation of this provision would have made it so that the tip-credit would not apply to the hours an employee spent doing non-tipped work. In other words, when a waiter spends time cleaning, taking out trash, folding napkins and other non-tipped work, the DOL interpretation would have considered this type of work a “dual job,” separate from the employee’s tipped work, for which the worker is entitled to receive full minimum wage. The Ninth Circuit disagreed with the DOL’s interpretation, a decision further disempowering low-wage workers.

Tip-credit Explained
The FLSA generally requires employers to pay a cash wage of $7.25 per hour to their employees. 29 U.S.C. § 206(a)(1)(c). But where an “employee engage[s] in an occupation in which he customarily and regularly receives more than $30 a month in tips,” id. § 203(t), his or her employer may pay a reduced cash wage and claim the employee’s tips as a credit towards the $7.25 per hour minimum, id. § 203(m).

As part of the DOL’s clarification of the statutory phrase “more than $30 a month in tips,” the DOL promulgated the “dual jobs” regulation, which maintains that an employee can be “employed in a dual job.”. 29 C.F.R. § 531.56(e). The regulation provides that if the employee is engaged in one occupation in which “he customarily and regularly receives at least $30 a month in tips,” and is also engaged in a second occupation in which the employee does not receive the required amount of tips, then the employer can take a tip credit only for the first occupation. Id. To further clarify enforcement, the DOL provided guidelines in its Field Operations Handbook (“FOH”), of 29 C.F.R. 531.56(e) to interpret the regulation.

The FOH provides that “an employer may not take a tip credit for the time that a tipped employee spends on work that is not related to the tipped occupation.” FOH § 30d00(f) (2016). For example, the FOH states that “maintenance work (e.g., cleaning bathrooms and washing windows) are not related to the tipped occupation of a server; such jobs are nontipped occupations.” Id. As such, the FOH would support the conclusion that the employee is effectively employed in “dual jobs.” The Ninth Circuit, however, takes issue with this interpretation.

The Ninth Circuit points out that the DOL regulation itself provides two examples of situations where an employee is not employed in dual jobs: (1) “a waitress who spends part of her time cleaning and setting tables, toasting bread, making coffee and occasionally washing dishes or glasses”; and (2) a “counterman who also prepares his own short orders or who, as part of a group of countermen, takes a turn as a short order cook for the group.” 29 C.F.R. § 531.56(e). These examples appear to come at odds with the FOH, especially applied to the facts in Marsh.

Marsh Challenge to Tip Credit Application to Non-Tipped Work
In Marsh, plaintiffs argued in reliance on the DOL guidance that certain job-related duties that were not tipped work should be excluded from the FLSA tip credit, and plaintiffs should be paid the minimum wage for the time engaged in these distinct duties. Marsh, No. 15-15791 at 15. Plaintiffs contended that the defendant employer should pay its servers minimum wage – without a reduction for tips - when the servers engaged in duties such as stocking food, taking out trash, sweeping floors, wiping down tables and walls, or other tasks that require no customer interaction. Id.

The Ninth Circuit court disagreed and held that the FOH was not entitled to deference because the “dual jobs” regulation is unambiguous. See Auer v. Robbins, 519 U.S. 452, 462 (1997) (holding that courts should consider agency guidance in cases where the regulation is ambiguous); see also Chase Bank USA, N.A. v. McCoy, 562 U.S. 195, 208 (2011). Looking back to the FLSA and the “dual jobs” regulation, the court determined that the dual jobs regulation interprets § 203(t)’s reference to employees “engaged in an occupation” to mean employed in a “job,” not performing an activity. See 29 C.F.R. § 531.56(e) (emphasis added). Furthermore, citing Abramski v. United States (2014), the Court wrote that “nothing in the FLSA’s ‘context, structure, history, [or] purpose’ suggests that Congress intended to use the term ‘occupation’ in § 203(t) to mean discrete duties performed over the course of the day.” Abramski v. United States, 134 S. Ct. 2259, 2267 (2014). Based on the regulation, the Ninth Circuit determined that plaintiffs could not state a claim by alleging that their discrete tasks or duties comprised a dual job.

The Future for Tipped Workers
Marsh illustrates the continuing controversy around the tip-credit provision, including its discriminatory effects and how it continues to push costs of labor onto the consumer. In its interpretation of the tip credit, the Marsh Court limits the ability of the minimum wage to protect the well-being of low-wage service workers, perpetuating a system that has grown the ranks of the working poor. For employees living hand-to-mouth, being paid at least the minimum wage may be the difference between making rent and eviction, eating and starving, providing for children or having them under the care of the state.



Monday, September 11, 2017

Vocational Students Deserve Better


I have been litigating several cases against cosmetology schools which unfairly take advantage of their students to perform unpaid, extensive, revenue-generating work for the schools, peddling branded products, performing services on paying clients, and also, being assigned extensive menial labor in the school salons. These school salons sell cheap haircuts and other cosmetology services to the public, in unfair competition with other low-cost salons - which have to pay their workers' wages. We have sought recovery of the cosmetology students' minimum wages under federal and California law.

After a series of losses in similar cases across the country - and not just in my cases - I went to the Ninth Circuit this morning for what could be our last shot at some justice. The experience reminded me of Jimmy Stewart in Mr. Smith Goes to Washington - except without Clarissa Smith screaming from the audience to try to redeem me - https://www.youtube.com/watch?v=aAjDmw6IrFg.

Here's how I wish I would have concluded my oral argument - I didn't have the time or opportunity to say it:


As I walked to the courthouse early this morning, south of Market Street in San Francisco, I was struck as I have been before by how many people here in the cradle of our tech civilization are left behind, living in poverty on the streets. I don't know each person's story - but how many worked hard, only to be left without wages, without real training, and deep in debt, like the Plaintiffs here? There is so much despair in this tech economy, leaving people behind, that it is shaping elections, moving world events in a dangerous, hopelessness-and-anger-driven direction. Because if you cannot go to school, work hard, and get paid a basic living wage to cover your bills, then the American dream is lost, and our hope is gone.

The federal Fair Labor Standards Act was not designed with a hole in the minimum wage big enough to drive an entire business model through. It was designed, as this Court has said before, to protect "employees" in the broadest sense ever included in any one Act - to provide protection to anyone suffered or permitted to work. If cleaning floors and mirrors, taking out trash, answering phones, selling shampoo and haircuts - are not compensable work - then what is?

The Ninth Circuit has been a bulwark against oppression and injustice before, even in recent days. Let it be so again today.

Tuesday, September 5, 2017

Equal Pay for Equal Work Gets Another Chance at the Ninth Circuit in Rizo v. Yovino

Can employers rely solely on employees’ prior salaries to justify unequal pay for equal work?

This is the essentially the question the Ninth Circuit addressed earlier this year in Rizo v. Yovino. In the Rizo case, a female math consultant hired by the Fresno County Schools, Aileen Rizo, was underpaid thousands of dollars compared to her male peers solely because Ms. Rizo’s prior salary was comparatively lower than that of her male peers despite her male peers having less experience. To the dismay of advocates for pay equity nationwide, the Ninth Circuit held that the federal Equal Pay Act of 1963 (29 U.S.C. § 206(d)) does not prohibit an employer from relying solely on employees’ past salary histories to set compensation.[1] 854 F.3d 1161, 1167 (9th Cir. 2017).

The primary flaw in the Ninth Circuit’s opinion stemmed from an overbroad interpretation of its precedent, Kouba v. Allstate Insurance Company. 691 F.2d 873, 876 (9th Cir. 1982). In Kouba, the employer paid its employees a minimum guaranteed salary plus commissions based on employees’ sales. Id. at 874. In setting new employees’ minimum salaries, the employer considered “ability, education, experience, and prior salary.” Id. In this context, where the employer did not rely exclusively on prior salary history in setting employee compensation, the Court previously held that “the Equal Pay Act does not impose a strict prohibition against the use of prior salary.” Id. 878. The Court emphasized that an employer who uses prior salary to set compensation “must” provide “business reasons” that “reasonably explain its use of that factor,” and provided the trial court with a non-exhaustive list of fact-specific questions to consider in evaluating the “reasonableness of this practice.” Id. (emph. added).

Unlike in Kouba, the County in Yovino set new employees’ compensation by increasing their most recent prior salaries by 5% without taking into account employees’ experience or skill. Yovino, 854 F.3d at 1164. Applicants with a master’s degree were given a flat $1,200 bump. Id. Because of the well-established fact that women in nearly every occupation are paid less than men even when controlling for a host of possibly explanatory variables[2], the County’s exclusive use of employees’ prior salary perpetuated the gender wage gap in contravention of the purpose of the Equal Pay Act. The Tenth and Eleventh Circuits have come to this same conclusion. See, e.g., Riser v. QEP Energy, 776 F.3d 1191, 1199 (10th Cir. 2015) (“the EPA precludes an employer from relying solely upon a prior salary to justify pay disparity”); Irby v. Bittick, 44 F.3d 949, 955 (11th Cir. 1995) (“prior salary alone cannot justify pay disparity”).

The Ninth Circuit, diverging from two of its sister circuits, failed to give sufficient weight to the context in which Kouba was decided, particularly with respect to the fact that the Kouba employer used sex-neutral factors in addition to prior salary history. Instead, the Court read Kouba as permitting a “salary differential based solely on prior earnings” without “attribut[ing] any significance to [the Kouba employer’s] use of these other factors [i.e., ability, education, and experience].” Yovino, 854 F.3d at 1166.

Fortunately, this is not the end of the story. Last week, the Ninth Circuit granted Ms. Rizo’s request for a rehearing en banc, meaning that all eligible judges serving on the Ninth Circuit will rehear the case.

Fifty four years have passed since the Equal Pay Act was signed into law to end the “serious and endemic problem of employment discrimination in private industry—the fact that the wage structure of ‘many segments of American industry has been based on an ancient but outmoded belief that a man, because of his role in society, should be paid more than a woman even though his duties are the same.’” Corning Glass Works v. Brennan, 417 U.S. 188, 195 (1974). Now, the Ninth Circuit has an opportunity to reconsider its erroneous interpretation of the Equal Pay Act and, in the process, move our country closer to achieving the goal of equal pay for equal work.
[1] California’s state law analog, the Fair Pay Act, expressly prohibits the exclusive use of “[p]rior salary” to “justify any disparity in compensation” with respect to sex, ethnicity, and race. Cal. Lab. Code §§ 1197.5(a)(3), (b)(3).

[2] See Brief for Equal Rights Advocates et al. as Amici Curiae in Support of Plaintiff-Appellee’s Petition for Rehearing and Rehearing En Banc, pp. 12-15, Rizo v. Yovino (9th Cir. 2017) (No. 16-15372), available at https://nwlc.org/wp-content/uploads/2017/05/5.22.17_Final_Rizo-v.-Yovino_Motion-and-Amicus-Brief-ISO-Petition-for-Reharing-and-Rehearing-En-Banc.pdf

Tuesday, August 29, 2017

California Appellate Court Rules that Victims of Outrageous Workplace Discrimination May Sue Supervisors for Intentional Infliction of Emotional Distress


Earlier this month, a the Fourth District Court of Appeals in San Diego ruled that an employee’s claim against a former supervisor for intentional infliction of emotional distress (“IIED”) in connection with discriminatory conduct could proceed and was not barred by the workers’ compensation exclusivity rule. [Link to opinion in Light v. California Department of Parks &Recreation.] The employee Melony Light, a park aide and office assistant for the California Department of Parks and Recreation, alleges that she was subjected to discriminatory treatment by her supervisor Leda Seals, after Light refused to participate in and defend Seals’ ongoing harassment of a co-worker, Delane Hurley, whom Seals believed to be a lesbian. Among other acts (as alleged by Light), Seals subjected Light to ongoing verbal abuse, demanded that Light lie to Human Rights Office investigators about Seals’ treatment of Hurley, and physically intimidated Light. Eventually, the Department eliminated Light’s working hours, in keeping with one of Seals’ threats to Light.

Light sought and received a worker’s compensation award worth nearly $13,000 for anxiety, nausea, loss of appetite, migraines, asthma attacks, body aches and pains, digestive problems, vomiting, severe abdominal cramps, and tightness in the chest. Under the worker’s compensation exclusivity rule, the worker’s compensation system is generally the exclusive remedy for workers injured on the job, whether the injury is physical or psychological. The policy behind the rule is the  “compensation bargain,” under which the employer assumes no-fault liability for workplace injuries, granting the employee relatively swift and certain compensation, but limiting the range of tort remedies available.

But the exclusivity rule is not absolute and, relevant here, a line of cases developed which established that employees may sue employers for IIED where the actionable conduct also violates the California Fair Employment and Housing Act (“FEHA”). These cases established that discriminatory acts fall outside the normal risks inherent to the employment relationship, and thus do not fall within the worker’s compensation bargain. See, e.g., Nazir v. United Airlines, Inc. (2009) 178 Cal.App.4th 243, 288 (“A claim for distress arising out of employment is not barred where the distress is engendered by an employer’s illegal discrimination practices.”). This FEHA exception recognizes that discrimination in the workplace is an exceptional injury, for which the worker’s compensation system alone cannot make an employee whole.

However, the viability of the FEHA exception to the exclusivity rule was placed in doubt by another recent ruling of the Fourth District in Yau v. Santa Margarita Ford., Inc. (2014) 229 Cal.App.4th 144, which concluded – without mention of FEHA – that the only viable exception to the exclusivity rule is for workplace injuries incident to a claim for wrongful termination in violation of public policy (also known as Tameny claims). The Yau court took the position that the California Supreme Court had severely limited the ability of employees to bring intentional infliction of emotional distress claims in Miklosy v. Regents (2008) 44 Cal.4th 876 , but the Court in Light concluded that its sister appellate panel had misread Miklosy, which involved an intentional infliction of emotional distress claim in the context of whistleblower retaliation and did not discuss FEHA.

 The opinion, authored by Justice Judith McConnell, also rejected the notion that an employee cannot bring an IIED claim against a supervisor, because FEHA does not permit claims against supervisors, finding that an IIED claim is not merely a different rubric to recover for a FEHA (or other workplace violation), but “is a substantively different claim, aimed at a different wrong, and protects a different interest.” In that regard, an IIED claim entails: (1) extreme and outrageous conduct by the defendant, with the intention of causing, or reckless disregard of the probability of causing, emotional distress; (2) the plaintiff’s suffering severe or extreme emotional distress; and (3) actual and proximate causation. IIED claims thus impose a high bar – and although not all FEHA cases will involve extreme and outrageous conduct by an individual supervisor or manager, many cases will.

The opinion further took aim at the trial court’s conclusion that Light had failed to raise triable issues of material fact as to any adverse employment action sufficient to support a claim for retaliation under FEHA at the summary judgment stage. Justice McConnell noted that Seals had explicitly threatened Light, telling her that she would be moved to a different workplace or terminated if she did not lie to the Human Rights Office. Then, when Light failed to follow orders, her scheduled hours were eliminated. Moreover, Light had been denied training and passed over for promotions. The Fourth District thus concluded that the trial court had erred and that Light’s FEHA retaliation claim could proceed.


In sum, while Light did not introduce the FEHA exception to the worker’s compensation exclusivity rule, the holding establishes its continued viability after Miklosy and Yau. Moreover, because Miklosy and Yau did not involve FEHA claims, Light does not create a direct conflict with those prior cases, making it unnecessary for the Supreme Court to resolve the tension between these lines of cases. Light provides clear encouragement to employees and their advocates to pursue IIED claims against individual managers and supervisors for discriminatory and outrageous conduct, in addition to FEHA claims against the employer. It also sends a clear message to employers that discrimination is not a “normal” part of the employment relationship, even if it is all too common, and that the risk to employers, managers, and supervisors of failing to prevent or take action against discriminatory conduct are substantial.

Monday, July 24, 2017

Ninth Circuit Protects Immigrant Workers

In an era of increasing uncertainty and danger for immigrants, two recent Ninth Circuit decisions demonstrate a commitment to protecting all workers’ rights. 

In April, the Ninth Circuit held that conditioning an employee’s reinstatement on his or her immigration status violates California public policy. In Santillan v. USA Waste of California, Inc., 853 F.3d 1035 (9th Cir. 2017), Gilberto Santillan was a residential garbage truck driver for 32 years. In 2011, Santillan filed a formal grievance through his union asserting that he was wrongfully terminated. In a settlement, USA Waste agreed to reinstate Mr. Santillan, provided that he provide proper work authorization pursuant to the 1986 Immigration Reform and Control Act (IRCA). Santillan could not provide an expiration date for his work authorization, and six days later USA Waste again terminated Santillan, citing his failure to comply with IRCA. 

Santillan subsequently filed a complaint alleging wrongful termination in violation of public policy. The Ninth Circuit reversed summary judgment for USA Waste, holding that the employer failed even to provide a legitimate non-discriminatory reason for termination. The court first reasoned that Mr. Santillan was exempt from IRCA’s requirements, because it only requires authorization for new employees hired after 1986. Mr. Santillan was hired in 1979 and was reinstated, not newly hired. The court then held that the 2011 settlement agreement violated California public policy, reasoning that an employer cannot condition reinstatement on immigration status. 

Last month, the Ninth Circuit held that an employer’s attorney can be liable for retaliation where they report an employee to Immigration and Customs Enforcement (ICE). In Arias v. Raimondo, No. 15-16120, 2017 WL 2676771, (9th Cir., June 22, 2017) José Arnulfo Arias filed claims against his employer, Angelo Dairy, for violations of the Fair Labor Standards Act (FLSA) in 2006. The state court trial was set for August 2011. In June 2011, Defendant’s attorney, Anthony Raimondo notified ICE that Arias may be undocumented, to get him deported. Raimondo had reported employees to ICE in at least five other cases. Arias then filed a FLSA retaliation complaint against both Angelo Dairy, which settled prior to the Ninth Circuit decision, and Raimondo. The Ninth Circuit held that Raimondo could be held liable under FLSA for retaliation, reasoning that retaliation provision broadly refers to any person and expressly extends to legal representatives. It further reasoned that the purpose of anti-retaliation provisions is to ensure that workers can exercise their rights without interference. 

These decisions are important victories for immigrant workers and their advocates. In California, immigrant workers – even undocumented workers – have the same entitlement to employment protections as other workers. Though dangers remain for immigrant workers, the Ninth Circuit has created stronger protections by removing barriers to reinstatement for immigrant workers. Employers and their agents may also be liable if they report employees to ICE after they assert their rights.

Thursday, July 13, 2017

The California Supreme Court Holds PAGA Representative Plaintiffs are Entitled to Robust Discovery


Today, the California Supreme Court issued an important decision, holding that workers prosecuting wage violations under California’s Private Attorneys General Act of 2004 (“PAGA”) are entitled to receive witnesses’/class members’ contact information without having to prove their entire case first. As explained in Williams v. Superior Court (Marshalls of CA), “California law has long made clear that to require a party to supply proof of any claims or defenses as a condition of discovery in support of those claims or defenses is to place the cart before the horse.”[1] The entire decision is required reading for any wage and hour and/or class action practitioner in California, but a few points are worth highlighting here.

I.            PAGA Plaintiffs Are Not Required to Prove the Merits of Their Case Before Receiving State-wide Contact Information for Witnesses/Potential Class Members.

For California employees, the biggest win from the Williams decision is the California Supreme Court’s holding that a worker bringing a representative PAGA enforcement action, like any other plaintiff in a civil state court lawsuit, is not required to prove their case before receiving the information and documents needed to prove their case on behalf of themselves and their co-workers.

The outcome in Williams flows from a plain reading of PAGA and California’s discovery statute, neither of which impose the “modicum of substantial proof” standard MarshallsCA advanced, i.e., “a PAGA-specific heightened proof standard at the threshold, before discovery.”[2] To the contrary, “to insert such a requirement into PAGA would undercut the clear legislative purposes the act was designed to serve” because it would necessarily undermine a representative plaintiff’s ability “to advance the state‘s public policy of affording employees workplaces free of Labor Code violations, notwithstanding the inability of state agencies to monitor every employer or industry.”[3]

Of course, a trial court retains discretion for a “special reason to limit or postpone a representative plaintiff‘s access to contact information for those he or she seeks to represent, but the default position is that such information is within the proper scope of discovery, an essential first step to prosecution of any representative action.”[4]

II.             High Court Reaffirms the Broad Scope of Discovery in California.
The California Supreme Court also used the Williams case to reaffirm the broad scope of civil discovery in California state court. While broad discovery requests may result in “a defendant’s inevitable annoyance,” the Court recognized that the California Legislature “granted such a right anyway, comfortable in the conclusion that ―[m]utual knowledge of all the relevant facts gathered by both parties is essential to proper litigation.”[5]

The Court also clarified that the three-step framework established in Hill v. National Collegiate Athletic Assn.[6], not the “compelling interest” analysis in White v. Davis, should be applied to resolve most parties’ privacy objections to discovery requests unless a request constitutes an “obvious invasion[] of interests fundamental to personal autonomy.”[7] The Court made clear that routine requests for witnesses’/class members’ contact information typically do not warrant “compelling interest” scrutiny, and strongly implied that the Hill test should frequently result in the production of witness/class member contact information, particularly where the parties agree to use a Belaire-West notice and opt-out process.[8]

III.            Defendants Asserting “Burden” Objections to Discovery Requests Must Provide Specific Facts About the Cost and/or Administrative Difficulty of Complying.

The Court also underscored that a defendant may not refuse to produce discovery merely because a defendant disagrees with a plaintiff’s legal theory. In so holding, the Court emphasized that “the way to raise” a perceived legal deficiency in a plaintiff’s case “is to plead it as an affirmative defense, and thereafter to bring a motion for summary adjudication or summary judgment, not resist discovery until a plaintiff proves he or she” can overcome the defendant’s affirmative defense.[9] This aspect of the Williams decision will hopefully go a long way towards incentivizing defendants to defend against plaintiffs’ claims on the merits instead of engaging in discovery gamesmanship, typically resulting in unnecessary and costly motion practice.


Moreover, if responding to a discovery request poses a genuine burden for a company, then the company must provide “evidence of the time and cost required to respond” to support its burden objection.[10] While unsurprising, this portion of the opinion should be used by workers’ advocates who receive generalized “burden” objections from defendants which lack any specific facts regarding the nature of the supposed burden to respond. 

In Williams, the Court illustrated its point with an example: “depending on the nature of any computer database Marshalls might maintain, providing information for 10,000 employees might prove little different than for 1,000, or 100.” If Marshalls had shown that, for example, each store had its own computer database of employees’ information unconnected to any other store’s database and no other centralized employee database existed, then the company might have had solid grounds to assert that coordinating data retrieval between “approximately 130 stores” in California would have been too costly and time-consuming.[11] In that case, the trial court might have ordered cost sharing between the parties, or a narrower production of information.[12] On the other hand, if Marshalls had been able to produce contact information relatively easily regardless of whether it produced employee information for one store as opposed to all of its stores, then Marshalls’ burden objection likely would not have been sustained. 

In the actual case, Marshalls provided no “supporting evidence” regarding the nature of the “time and cost required to” produce contact information for the witnesses/potential class members.[13] Accordingly, the company’s “burden” argument lacked any legal merit.[14]

IV.            Conclusion

Williams will be cited by wage and hour practitioners for years to come because it both provides much needed clarification regarding the scope and operation of California’s civil discovery rules as applied to PAGA representative actions, and also affirms the common sense principle that a worker should not have to prove his or her case before receiving the basic information he or she needs to do so.

Workers and workers' advocates should celebrate this tremendous victory weighing in favor of access to justice, and ultimately, robust enforcement of California’s vital labor laws.

***

If you have believe that you and your co-workers are or have been subject to unlawful pay practices, then please contact Bryan Schwartz Law.





[1] Williams v. S.C. (Marshalls of CA), No. S227228, 2017 WL 2980258, slip op. at 20 (Cal. July 13, 2017) (“Williams”)
[2] Williams slip op. at 12, 14.
[3] Williams slip op. at 13.
[4] Williams slip op. 11.
[5] Williams slip op. at 20.
[6] 7 Cal. 4th 1, 35. (1994).
[7] Williams slip op. at 29.
[8] Williams slip op. at 25-29.
[9] Williams slip op. at 31 (citing Union Mut. Life Ins. Co. v. Superior Court, 80 Cal. App. 3d 1, 12 (1978)).
[10] Williams slip op. at 18 n. 6.
[11] Williams slip op. at 4.
[12] Williams slip op. at 18 n. 5.
[13] Williams slip op. at 18.
[14] Williams slip op. at 19 (citing Sinaiko Healthcare Consulting, Inc. v. Pacific Healthcare Consultants, 148 Cal. App. 4th 390, 402 (2007)).

Wednesday, July 5, 2017

Ninth Circuit Holds Mortgage Underwriters are Entitled to Overtime Under the Fair Labor Standards Act

Today, the Ninth Circuit held in McKeen-Chaplin v. Provident Savings Bank that mortgage underwriters are entitled to overtime compensation under the federal Fair Labor Standards Act (“FLSA”). The McKeen-Chaplin opinion clarifies the legal analysis for evaluating whether an employer has met the second prong of the administrative exemption test under the FLSA by strongly endorsing the “administrative-production dichotomy.”[1] McKeen-Chaplin, No. 15-16758, 2017 WL 2855084, at *7 (9th Cir. July 5, 2017) (“McKeen-Chaplin”). Under the administrative-production dichotomy framework, “whether [an employee’s] primary duty goes to the heart of internal administration—rather than marketplace offerings” is the key test in determining whether an employer has met the second prong of the FLSA’s administrative exemption. Based upon this important precedent, generally speaking, if an employee’s duties are focused on the core business of a company – like underwriters, working on a bank’s mortgage products – then the employee is not administratively exempt, and is entitled to overtime.
All employees are guaranteed minimum and overtime compensation under the FLSA unless their job duties fall under a specific exemption, such as the administrative exemption. McKeen-Chaplin, at *2. The burden is on the employer to show that a particular exemption defense “plainly and unmistakably” applies to a particular job position. Id. For the administrative exemption to apply, an employee must:

(1) be compensated not less than $455 per week;
(2) perform as her primary duty office or non-manual work related to the management or general business operations of the employer or the employer’s customers; and
(3) have as her primary duty the exercise of discretion and independent judgment with respect to matters of significance.

McKeen-Chaplin, at *3. An employer must completely satisfy all three prongs of this test for the administrative exemption to apply (i.e., for an employer to avoid paying overtime and minimum wage compensation by claiming the administrative exemption applies to its workers). Id.

In McKeen-Chaplin, the Ninth Circuit held that mortgage underwriters are entitled to overtime under the FLSA. In so holding, the Court summarized the operative facts as follows:

Provident’s mortgage underwriters do not decide if Provident should take on risk, but instead assess whether, given the guidelines provided to them from above, the particular loan at issue falls within the range of risk Provident has determined it is willing to take. Assessing the loan’s riskiness according to relevant guidelines is quite distinct from assessing or determining Provident’s business interests. Mortgage underwriters are told what is in Provident’s best interest, and then asked to ensure that the product being sold fits within criteria set by others.

Id. at *4.

In other words, because mortgage underwriters follow their employer’s policies to produce their employer’s products and do not set the employer’s policies or determine their employer’s business objectives, the employer failed to meet the second prong of the three-part administrative exemption test. Because the employer failed to meet all three prongs of the administrative exemption test, and no other exemption applied, the Ninth Circuit held that mortgage underwriters are entitled to overtime compensation.

The Ninth Circuit rejected the lower court’s reasoning that mortgage underwriters performed “quality control” work as a basis to assert that they engaged in work directly related to the company’s management or general business operations. Id. at **6-7. The Ninth Circuit noted, as a factual matter, that the employer maintains a separate, multi-step quality control process which “is not staffed by mortgage underwriters.” Id. at *6.
To drive home the point that merely because a “role bears a resemblance to quality control” does not make such a position exempt from overtime/minimum wage protections, the Ninth Circuit analogized the duties of mortgage underwriters to the undisputedly non-exempt “assembly line worker who checks whether a particular part was assembled properly.” Id. at *7. Even though an assembly line worker inspects a widget on the assembly line to ensure it meets the standards of the employer, the assembly line worker – like the underwriters in McKeen-Chaplin - nevertheless is bound by the product quality standards set by the employer.
Unless employees’ job duties “plainly and unmistakably” make them “administrators or corporate executives” responsible for the employer’s “internal administration,” employers may not avoid paying overtime by classifying them as exempt using the administrative exemption. Id. at **2, 7.
***


If you have concerns that you may have been incorrectly classified as an exempt employee and deprived of overtime pay, then please contact Bryan Schwartz Law.




[1] The Ninth Circuit was careful to acknowledge that “the [administrative-production] dichotomy is only determinative if the work falls squarely on the production side of the line.” McKeen-Chaplin, at * 4 (citing 69 Fed. Reg. 22122, 22141 (Apr. 23, 2004).
In addition, because the Ninth Circuit decided this case solely with respect to the second prong of the administrative exemption test, it did not need to address prong (3), i.e., whether mortgage underwriters have as their primary duty the exercise of discretion and independent judgment with respect to matters of significance. McKeen-Chaplin, at *1 n. 1.