New life for whistleblower-retaliation claims

[This article by Bryan Schwartz and Cassidy Clark appeared first in the April 2022 edition of Plaintiff magazine.] 

Lawson and not McDonnell Douglas now provides the framework for litigating section 1102.5 whistleblower claims

California continues to affirm its commitment to employees who blow the whistle on their employers’ unlawful practices. Plaintiffs’ lawyers should take note. Favorable recent developments in California whistleblower retaliation law mean we should all be looking for potential Labor Code section 1102.5 and other whistleblower retaliation claims. 

The California Supreme Court, in Lawson v. PPG Architectural Finishes, Inc. (2022) 12 Cal.5th 703, explained that the evidentiary standard to establish liability in whistleblower cases is different, and lower, than the McDonnell Douglas burden-shifting framework typically utilized in discrimination cases. Under McDonnell Douglas, the ultimate burden is on the employee – but not so, for whistleblowers.

Whistleblowing employees force a heavy burden onto their employers after demonstrating that protected activity was a contributing factor in an adverse action. Paired with the legislature’s clarification that attorneys’ fees are available in whistleblower cases, codified in Labor Code section 1102.5, subdivision (j), Lawson reaffirms the state’s public policy interest in encouraging workplace whistleblowers to report unlawful acts without fearing retaliation.

Now, whistleblowers are stepping forward like never before, with a new awareness of health and safety in the wake of COVID, and social media increasingly available as a forum for raising concerns. Daily, whistleblowers impact global events, both with the war abroad, and at home, including at some of the biggest employers, from tech giants like Facebook to the federal government.

As plaintiffs’ lawyers, we are in the auspicious position to support whistleblowers and protect the public from employers’ harmful violations of the laws meant to protect us all.

California’s evolving statutory whistleblower protections

Many statutes protect California whistleblowers. For example, employees are specifically protected from retaliation for asserting their rights under FEHA (Gov. Code, § 12940, et seq.), filing a wage claim with the Labor Commissioner (Lab. Code, § 98.6), discussing working conditions (Lab. Code, § 232.5), complaining about workplace health and safety issues (Lab. Code, § 6310), using sick leave (Lab. Code, § 246.5), taking time off work for jury duty (Lab. Code, § 230, subd. (a)), among many other additional protected activities.

However, the most sweeping California whistleblower protection is Labor Code section 1102.5, enacted in 1984, which prohibits an employer from retaliating against an employee for disclosing information the employee reasonably believes violates the law. The protected disclosure may be to a government agency, a person with authority over the employee, or another employee who has authority to investigate or correct the violation. Under section 1102.5, an employee is also protected for refusing to participate in an unlawful practice. (Section 1102.5, subds. (b-c).) In California, “our Legislature believes that fundamental public policies embodied in regulations are sufficiently important to justify encouraging employees to challenge employers who ignore those policies.” (Green v. Ralee Engineering Co. (1998) 19 Cal.4th 66, 77.)

In 2003, in response to “a series of high-profile corporate scandals and reports of illicit coverups,” the legislature passed amendments to expand the Labor Code’s whistleblower protections. (Lawson, 12 Cal.5th at 710 (citing Assem. Com. on Judiciary, Analysis of Sen. Bill No. 777 (2003-2004 Reg. Sess.)).) These amendments included the addition of a procedural provision, section 1102.6. This section requires only that an employee show protected activity was a “contributing factor” under section 1102.5, by a preponderance of the evidence, before an employer must prove by clear and convincing evidence that the alleged action would have occurred for legitimate, independent reasons, apart from protected activities. With the addition of section 1102.6, the McDonnell Douglas burden-shifting framework was abandoned in whistleblower retaliation cases, according to Lawson. (12 Cal.5th at 709-710.)

What changed with Lawson?

After section 1102.6 became law, some California courts adopted it as a new evidentiary standard for whistleblower retaliation claims. (Lawson, 12 Cal.5th at 711.) But some courts continued to use the McDonnell Douglas standard, giving short shrift to section 1102.6. (Ibid.) Courts applying McDonnell Douglas to section 1102.5 adapted it to the whistleblower retaliation framework as follows:

First, a plaintiff was required to establish a prima facie case of retaliation by showing that she engaged in a protected activity, that she was subjected to an adverse employment action, and that there was a causal link between the two. (Morgan v. Regents of University of California (2000) 88 Cal.App.4th 52, 69). Second, the burden shifted to the employer to put forth evidence of a legitimate, nonretaliatory reason for the adverse employment action. (Id. at 68.) And third, the burden shifted back to the employee to prove the reason was pretext for impermissible retaliation. (Id. at 68-69; see also Lawson, 12 Cal.5th at 710.) The Lawson plaintiff ’s case was dismissed by the U.S. District Court on summary judgment, ostensibly because he failed to prove pretext, under this third element. He appealed.

On appeal, in 2020, the Ninth Circuit noted that California appellate courts conflicted on which evidentiary standard to apply, the McDonnell Douglas framework or that outlined in 1102.6, and certified a question to the California Supreme Court to clarify this issue (Lawson v. PPG Architectural Finishes (9th Cir. 2020) 982 F.3d 752.)

Lawson clarifies that section 1102.6, and not McDonnell Douglas, “supplies the applicable framework for litigating and adjudicating section 1102.5 whistleblower claims.” (12 Cal.5th at 712.) Lawson expressly disapproves state court cases relying on McDonnell Douglas-type burden shifting, including Hager v. County of Los Angeles (2014) 228 Cal.App.4th 1538, Mokler v. County of Orange (2007) 157 Cal.App.4th 121, and Patten v. Grant Joint Union High School Dist. (2005) 134 Cal.App.4th 1378.

How Lawson’s reading of section 1102.6 helps plaintiffs

Once an employee shows that the whistleblowing was a “contributing factor” to an adverse employment action, the burden shifts to the employer to demonstrate by clear and convincing evidence” that the alleged adverse employment action would have occurred “for legitimate, independent reasons” even if the employee had not engaged in protected whistleblowing activities. (Lawson, 12 Cal.5th at 712.) This means that the ultimate burden of proof under section 1102.6 lies with the employer to prove, convincingly, that the adverse action would have occurred without the whistleblowing activity.

The ultimate burden of proof in discrimination cases under McDonnell Douglas, to show pretext, is a heavy lift for many plaintiffs – as it was for the plaintiff in Lawson at the trial court. The Supreme Court in Lawson explains that even if the employer has a “genuine, nonretaliatory reason for its adverse action,” all a plaintiff has to do is show that the employer “also had at least one retaliatory reason that was a contributing factor in the action.” (Lawson, 12 Cal.5th at 715-16.) This recognizes the reality that unlawful whistleblower retaliation is often one of multiple reasons that employers can identify for their adverse actions.

The 1102.6 evidentiary standard is not focused on finding the one, “true” reason for the adverse action, as is the McDonnell Douglas framework. (Id. at 714.) Section 1102.6 recognizes the complexity of “mixed motive” cases, wherein employers may make decisions on the basis of both lawful and unlawful considerations. (Ibid.) Lawson says that section 1102.6 does not merely codify the “same-decision defense” under Harris v. City of Santa Monica (2013) 56 Cal.4th 203 in a whistleblower case – section 1102.6 provides the entire applicable framework for litigating and adjudicating section 1102.5 claims. (Lawson, 12 Cal.5th at 712.)

Some courts that referenced the section 1102.6 framework prior to Lawson applied a prima facie test akin to that from McDonnell Douglas as just the first step of their analysis. (See, e.g., Greer v. Lockheed Martin Corp. (N.D. Cal. 2012) 855 F.Supp.2d 979, 988.) Greer equates the first step of the section 1102.6 framework (a plaintiff must demonstrate, by a preponderance of the evidence, that the employee’s whistleblowing was a contributing factor to an adverse employment action) with the McDonnell Douglas framework: (1) the plaintiff engaged in a protected activity; (2) the plaintiff was subjected to an adverse employment action; and (3) there is a causal link between the two. (Greer, 855 F.Supp.2d at 988.) The Supreme Court in Lawson described Greer as one of the decisions in federal courts that showed “widespread confusion” about the evidentiary standards. Lawson brings clarity, holding that section 1102.6 allows plaintiffs to establish liability under section 1102.5 without reliance on McDonnell Douglas. (Lawson, 12 Cal.5th at 717.)

Assessing potential section 1102.5 claims

When assessing a potential 1102.5 claim, we should be prepared to address some of the considerations unaltered by Lawson. We should always investigate: whether the employee’s belief that an activity was unlawful was reasonable; whether the employee disclosed the unlawful activity externally to a government entity, or internally to someone with authority over the employee or the power to investigate or rectify the violation; and, whether an adverse action occurred after the disclosure, setting up an allegation that the disclosure was a contributing factor in what occurred.

Recall that section 1102.5 protects not just those who report violations of law, but also employees who are perceived by employers to have engaged in whistleblowing activity even if they did not do so (subsection 1102.5(b)), employees who testify before a public body about a practice they reasonably believe is unlawful (subsection 1102.5(a)), employees who refuse to participate in activities they reasonably believe are unlawful (subsection 1102.5(c)), and family members of individuals who engage in activities protected by the statute (subsection 1102.5(h)).

The one-two punch of sections 1102.5 and 1102.6 is intended to encourage employees to come forward about the legal violations of their employers without fear of retaliation. We can deploy these statutes not only to protect employees, but to help rectify the many underlying concerns that whistleblowers are raising.

Section 1102.5 fees

Beyond Lawson, the relatively recent addition of subsection 1102.5(j) makes clear that courts should award reasonable attorneys’ fees to a plaintiff who brings a successful action for whistleblower retaliation under section 1102.5, but not to a defendant who defeats whistleblower claims. Previously, if plaintiffs’ attorneys wanted to seek fees for whistleblowers, they had to do so under the California Labor Code Private Attorneys’ General Act (PAGA), or another statute.

Conclusion

Given the explosion of whistleblowing activity, coupled with new pro-whistleblower developments in California, plaintiffs and their lawyers are in a better position than ever to pursue whistleblower retaliation claims.

The Future of Workers’ Rights

On April 1, 2022, workers voted convincingly to form a labor union at Amazon’s facility in Staten Island, New York. Amazon’s fight against unionization met its match, defeated not by well-funded external labor unions, but by a low-budget, independent group, the Amazon Labor Union (ALU). The ALU spent $120,000 on the campaign, raised through GoFundMe, defeating the trillion+-dollar Amazon empire’s push to suppress worker organizing. The company spent $4.3 million in 2021 alone on anti-union consultants to help keep its 1.1 million workers disorganized and disempowered.

The workers voted 2,654 to 2,131 in favor of creating the ALU, the first-ever Amazon union. The darkhorse victory grew out of the determination, courage and conviction demonstrated by Christian Smalls and Derrick Palmer, who had worked at the facility, and whose authenticity resonated during the 11-month-long union campaign. In the spring of 2020, after learning organizing efforts were underway in their New York City warehouses, Amazon launched a smear campaign against the organizing lead, Smalls. Amazon General Counsel David Zapolsky questioned Small’s street-casual demeanor and called him “not smart, or articulate” – unfounded stereotypes which reveal thinly-veiled racism exhibited by the Amazon executive team. Amazon attempted to silence Smalls by firing him in 2020 after he led a walkout to protest COVID-related health and safety issues.

The termination sparked something in Smalls, and he and his partner, Derrick Palmer, began their union campaign in earnest in early 2021. Concurrently, Amazon ran two major campaigns against unionizing efforts in Alabama and New York City. Amazon paid anti-union consultants $3,200 per day, each, to host mandatory meetings for captive audiences of employees, and one-on-one meetings with workers to turn them against the union organizing efforts. The mandatory meetings were typically led by Amazon managers who delivered scripted anti-union speeches and slideshows, but the efforts backfired, when contrasted with Smalls’ grassroots approach.

Smalls organized workers by waiting at a Staten Island MTA bus stop that brings workers to and from the LDJ5 Amazon sorting center and the JFK8 fulfillment center. Smalls would wait at the MTA bus stop for hours at a time, days on end – even after being arrested and accused of trespassing and resisting arrest on Amazon property. The bus stop outside the warehouse became a place of refuge for workers to enjoy Palmer’s homemade baked ziti, empanadas, and West African rice dishes alongside a makeshift bonfire to warm colleagues waiting for the bus in the cold. Meantime, Smalls and his team used unconventional organizing methods such as Twitter and TikTok to raise money, recruit legal representation, and gain supporters.

The momentous victory of the ALU is especially important in the light of the drastic decline in union membership in the U.S., which fell from 20% in 1983 to 10.3% in 2021. Early unions’ intentions were to raise wages obtain basic worker protections, and level the playing field. In fact, many of today’s employment laws would not exist had workers not unionized. However, despite these great ideals, anti-union campaigns and the unfortunate reproduction of bias within some unions have been barriers to progress. Gradually, as unions became more institutionalized, many workers began to feel suspicious of them. Amazon warehouse workers in Staten Island, the majority of whom are young, Black, Latino, working class and urban, may not have felt that established unions spoke for them.

Smalls, a 33-year-old Black man operating independently, and his ALU, stepped into this void. When asked about traditional unions, Smalls said he felt that established unions were “disconnected” from innovative styles of organizing. To emphasize his point, Smalls camped out at the MTA bus stop for 10 months as union president. The ALU’s innovative use of scrappy resources such as social media, the MTA bus stop, and makeshift advertisements made with tape and cardboard, may be revealing a new era in workers’ rights. In the envisioned new era, leadership takes nontraditional forms, where union presidents come from diverse backgrounds and socioeconomic statuses, and organizing methods are no longer restricted to well-staffed offices and dues-financed operations. Smalls, with his collection of tattoos, gold grills, and former career as a rap singer, may be the future of labor unions in America, an outsider to mainstream power structures driven only by his passion to make people’s working conditions better. 

Undoubtedly, advocating for your rights in the workplace is a terrifying endeavor, especially against a giant like Amazon, but by harnessing the strength of community, Smalls was not alone. What Smalls and his team have shown is that this source of strength, plus some clever grassroots labor organizing, can fell giants.

Bryan Schwartz Law stands unwaveringly with workers in advocating for their rights. When such rights are violated, Bryan Schwartz Law will empower workers to fight back. If you feel that your employer has compromised your rights in the workplace, including your right to concerted action with your co-workers, reach out to us here.

Reflections on International Women's Day

Today marks the 111th annual International Women’s Day. Bryan Schwartz Law is an ardent supporter of women’s rights, and has fought for working women since our firm’s founding in 2009. Supporting women in the workplace means more than just remedying cases of gender discrimination: it requires us to support Black women who are discriminated against because of their gender and race, to support disabled women who experience the dual marginalization of gender and disability, and to work at all other intersections of oppression.

Women today face a terrifying legal landscape, one in which women sometimes feel they take a step backward nearly every time they take a step forward. Emboldened by a conservative Supreme Court, more and more states are working to gut Roe v. Wade and return to a time where only women wealthy enough to take time off work and travel out of state are able to get safe, legal abortions. Young queer women across the South face new legislation that aims to literally silence the queer experience and queer history, while at the same time Texas has begun to criminalize parents who support their child’s gender, regardless of what their birth certificate says. Breonna Taylor’s killer has been acquitted, and Black women continue to live with an unacceptable threat of police violence. Women in Ukraine face unspeakable violence and displacement that grows every day.

And yet, amidst all of this, there are silver linings. Ketanji Brown Jackson is poised to become the first Black woman to serve on the Supreme Court, an accomplishment that is both momentous and 233 years too late. The U.S. women’s soccer team just won a six-year fight to be paid the same as the men’s national soccer team, remedying a pay inequity that persisted despite the women’s team routinely outperforming the men’s team in the world’s biggest tournaments. Globally, eight countries swore in their first female head of state in 2021. And, President Biden just signed into law a bill prohibiting forced arbitration in sex harassment and assault cases.

Bryan Schwartz Law is committed to partnering with and advocating for women, whether they have been paid less than their male counterparts, denied disability accommodations that would allow them to thrive, or terminated because they spoke out against inequities they see in their own workspace. If you are a woman who has been treated unfairly in the workplace, please contact Bryan Schwartz Law.

State of California Joins the Fight Against Tesla's Racism

The California Department of Fair Employment and Housing (DFEH) has filed a lawsuit echoing the race harassment/discrimination allegations in Bryan Schwartz Law's class action against Tesla that we've been litigating since 2017, with the California Civil Rights Law Group. We are seeking to represent a class of over 3,000 Black/African-American workers at the Fremont factory.

Many of our clients exhausted with the DFEH over the years, describing constant use of the N-word throughout Tesla's factory, graffiti like swastikas and KKK symbols, and much more. The agency's years-long investigation substantiating our claims finally culminated in the new DFEH lawsuit, filed yesterday. The suit documents inadequate responses by the company and its HR department over many years, and goes beyond our suit (focused on Fremont factory production workers), to all Black workers in different facilities throughout California.

Tesla's public response seeks to suggest that the DFEH's suit makes allegations about matters that happened in the past - as though the company has improved its treatment of Black workers. Nothing could be further from the truth. Despite having complaints of racist harassment and discrimination continually over the last 10 years, and most recently, being hit with a $137 million federal court jury verdict for a single worker proving these allegations, Tesla has not improved the work environment. 

Tesla brags about its "majority-minority" workforce, but the fact that Tesla employs thousands of Black workers, many in physically-demanding, modest-wage positions, does not excuse the company's routine mistreatment of these workers. Black workers continue to deal day-in, day-out, with egregious racist harassment and discrimination, the N-word, physical attacks, and much more. As dozens of our clients testified in sworn declarations in court filings a year ago, many workers still call Tesla's Fremont factory "The Plantation," or the "Slave Ship," because of its resemblance to the American South during the era of slavery. Southern plantations that perpetuated slavery were "majority-minority" places, too.

It is shocking that this mega-tech company, presenting itself as the face of the future, with its focus on electric vehicles, solar energy, etc., is perpetuating racism that should be - but is not - a relic of America's troubled past. Cooperating with the DFEH, we will hold Tesla accountable for its shameful conduct.

California Supreme Court Declines to Hear Appeal in Case Upholding Janitors' Rights

A group of displaced janitors just won a major victory. This month the California Supreme Court declined to hear an appeal in SEIU-USWW v. Preferred Building Services, Inc., leaving in place an appellate court decision that affirms the rights of janitorial workers under the Displaced Janitor Opportunity Act (“DJOA”).

The DJOA is an essential law that ensures that janitorial workers have the job security they deserve. If a building owner or manager terminates their contract with a contractor providing janitorial services, any successor contractor hired within 30-days must retain many of the janitorial workers employed when the contract ends for a sixty-day transition period. If the janitorial workers continue to perform well, the new contractor must then keep them on permanently. This law is a vital piece of legislation that helps janitorial workers have stable and fair working conditions.

In SEIU-USWW, a group of janitors sued the contractor who replaced their employer (also a contracting agency) for failing to retain them as employees. The plaintiffs’ employer had tried to avoid their obligations under the DJOA by effectively terminating all of the janitors they employed three days before the official end of their contract with the building. The defendant then argued that since there were no janitors employed at the time that the contract ended, the next contractor did not have to retain any of the original janitorial staff. 

The court did not buy these evasive arguments. The appellate court affirmed the trial court’s decision that the original contractor's contract ended the last day that the janitors provided services, regardless of the date specified in their agreement with the building owner. The appellate court then upheld the summary judgment in favor of the plaintiff janitors. The defendant contractor appealed, but the California Supreme Court declined to hear the appeal, instead choosing to leave this victory for janitorial workers undisturbed. 

Now that the appeal has been denied, the appellate court’s ruling is final. This appellate court’s decision, and the California Supreme Court’s decision not to hear an appeal on the case, should serve as a reminder to employers that they can’t get away with end-runs around worker protections. For employers that try to get around their statutory obligations, workers’ advocates are ready to fight back, empowered by strong statutory protections.

If you are a janitorial worker and have been terminated or forced to resign after a change in contractors, please contact Bryan Schwartz Law. 

The Jury Has Spoken: Tesla Liable for $136.9 Million in Individual Race Harassment Case

Owen Diaz was vindicated after fighting back against the appalling racial harassment he endured at the hands of Tesla. He won a resounding victory this month when a jury awarded him $136.9 million, including an enormous $130 million in punitive damages. This verdict is one of the largest of its kind.

Mr. Diaz, who is African-American, worked at Tesla‘s Fremont factory as an elevator operator. Supervisors accosted him using racial epithets frequently, including the N-word, and Mr. Diaz found racist caricatures and swastikas written in the factory and bathrooms. Mr. Diaz complained to management, which did nothing. Dismayed but undeterred, Mr. Diaz courageously stood up to Tesla’s behavior “straight from the Jim Crow era and filed a lawsuit against Tesla.

Tesla fiercely litigated against Mr. Diaz over the four years that followed, but Mr. Diaz prevailed. Tesla argued that even though Mr. Diaz worked at Tesla, followed Tesla workers’ instructions, and earned a rate of pay set by Tesla, that it somehow had no responsibility to prevent the awful treatment he and other African-American workers at the Fremont Tesla factory endured. The jury did not fall for it.

Tesla also argued that Mr. Diaz had not shown any evidence of race discrimination, but the jury saw through that ruse. At one illustrative point in the trial proceedings, Tesla’s attorney asked a witness if the N-word was used in the workplace. After the witness confirmed it was, Tesla’s attorney asked if the epithet was used in a friendly way, completely failing to recognize that such degrading language has no place in any workplace, in any context, for any reason. The evidence of race discrimination at Tesla was so overwhelming that the jury returned an unprecedented verdict with $130 million in punitive damages, finding that Tesla intentionally violated the law.

Tesla forces most employees to sign arbitration agreements, which prevents them from coming together to hold Tesla accountable for its discriminatory treatment and veils in secrecy much of Tesla’s unlawful employment practices. Thanks to Mr. Diaz’s courage, Tesla is at last being held accountable publicly and by the community for its disgraceful and unlawful actions.

Whether Tesla’s expensive loss prompts corporate changes is yet to be determined; as Bryan Schwartz Law previously wrote, Tesla CEO Elon Musk stated that it was “worth it” to intentionally violate securities law and incur a $20 million fine, and he unlawfully threatened employees with a loss of stock options if they chose to unionize. Hopefully, this verdict pushes Tesla to begin to treat its workers with fairness and respect.

Tesla’s disdain for the employees on which it relies – particularly its non-white employees – is familiar to Bryan Schwartz Law. Bryan Schwartz Law has been litigating against Tesla in a race discrimination class action lawsuit, along with co-counsel the California Civil Rights Law Group, which also represents Mr. Diaz. If you have been the subject of race discrimination at Tesla, please contact Bryan Schwartz Law.

A Victory for App-Based Drivers: California Superior Court Strikes Down Proposition 22

In a momentous win for app-based drivers, the California Superior Court struck down Proposition 22 on August 20th, 2021. Gig companies such as Uber and Lyft spent an unprecedented $200,000,000+ to pass Proposition 22 in order to exempt themselves from treating app-based drivers as employees. Designating these workers as independent contractors allows companies like Uber and Lyft would to avoid their obligations to provide basic protections to their drivers, including a minimum wage, health insurance, contributions to workers compensation, and the ability to unionize. Bryan Schwartz Law has written before about these and other dangers of Prop 22: as independent contractors, drivers are paid an effective rate of about $5.64 per hour, well under the minimum wage, and would be denied an array of vital benefits and protections. 

Although proponents of Proposition 22 claimed that it would protect the independence of app-based drivers, the California Superior Court disagreed in Castellanos. The court even found that a provision of Proposition 22 that prohibited the Legislature from passing laws allowing app-based drivers to unionize only served to “protect the economic interests of the network companies in having a divided, ununionized workforce” and was completely unrelated to the stated goal of protecting drivers. The court found that this provision was therefore outside of the “single-scope” of Proposition 22; however, because the provision was severable, this finding did not impact the rest of the proposition.

Even more striking to the court was how Proposition 22 curtailed the ability of the Legislature to provide a robust system of workers’ compensation, an essential part of our social safety net. Our Legislature’s ability to protect injured workers through an expansive workers’ compensation program is so critical that the power is enshrined in the California Constitution and completely unlimited by any other provision of the Constitution. Only a Constitutional amendment can reduce workers’ right to receive worker compensation. Proposition 22’s attempt to create a statute that reduced the number of employees eligible for workers compensation was therefore unconstitutional. Unlike the provision limiting drivers’ ability to unionize, this provision limiting workers’ compensation was not severable, so the court’s ruling that this provision was unconstitutional meant that the entirety of Proposition 22 was rejected.

Before Proposition 22 was in place, California used the ABC test that was established by the 2018 California Supreme Court decision in Dynamex, and codified by AB5, to determine whether someone is an employee or an independent contractor. Under the ABC test, a worker is an independent contractor only if: 1) the worker is not controlled or directed by their employer in how they perform their work, 2) their work is outside the scope of the employer’s usual business, and 3) the worker is working in an independently established trade or business that matches their work for their employer. The employer must prove each of these elements before it can call a worker an independent contractor. The ABC test makes it much more difficult for employers to classify workers as independent contractors, which allows many more workers to receive the benefits and protections to which they are entitled. 

The decision in Castellanos vindicates the rights of hundreds of thousands of app-based drivers throughout California. This decision will likely be appealed, but it still represents an important step towards ensuring that app-based drivers receive the respect and protections that they deserve.

 

If you believe you have been misclassified as an independent contractor, please contact Bryan Schwartz Law.

Rescission of Trump-Era Joint Employer Rule Strengthens Workers’ Rights

The federal government is scrapping a rule created under the Trump administration to narrow the protections of the Fair Labor Standards Act (“FLSA”) for workers with more than one employer. Because this Trump administration rule shrank the category of entities liable for wage violations, it made recovering earned wages more difficult for employees. Its implementation would have cost employees one billion dollars per year, according to the Economic Policy Institute. A federal court struck down a large portion of the rule last year in New York v. Scalia; now, the Department of Labor (“DOL”) has decided to rescind the rule entirely. The rescission will take effect on September 28, 2021. 

When multiple entities are considered joint employers, they can be held accountable for the same employee’s wages and other rights and benefits. For example, some workers hired through staffing agencies are jointly employed by the agency and the business at which they perform their duties. In such a case, both the agency and the other business is legally responsible for ensuring that the worker is appropriately compensated. The Trump-era “Joint Employer Status Under the Fair Labor Standards Act”' redefined the criteria for the joint employer classification, to make fewer employers liable. 

The rule broke from past DOL interpretations of the FLSA, as B
ryan Schwartz Law previously wrote. It did away with the traditional “economic dependence” analysis in favor of an employer-favorable four-factor analysis of the entity’s control over the employee. These Trump administration-preferred factors were whether an entity

(i)                Hires or fires the employee;

(ii)              Supervises and controls the employee's work schedule or conditions of employment to a substantial degree;

(iii)           Determines the employee's rate and method of payment; or

(iv)            Maintains the employee's employment records.

The court in New York v. Scalia threw out most of this rule, siding with the seventeen states and the District of Columbia that challenged it. However, the court’s decision applied only to “vertical” joint employment—when an employee obtains work with an entity through a contractor, such as a staffing agency, and in similar situations. Meanwhile, the Trump administration’s rule continued to govern “horizontal” joint employer liability, which can apply when a worker splits time between two employers. 

The Biden administration’s DOL will eliminate the Trump DOL’s rule in its entirety, providing a clear set of uniform regulations. This rescission fuels advocates’ hopes that the Biden Administration will continue to reverse regressive Trump-era policies undermining workers’ rights. Bryan Schwartz Law has written about previous reversals. For instance, in May, the Biden Department of Labor prevented the Trump administration’s Independent Contractor Rule from going into effect. That rule would have made it easier for employers to misclassify workers as independent contractors, denying them the rights of employees under the FLSA. Biden also revoked a memo issued by Trump’s Justice Department attempting to limit the protections that the landmark decision Bostock v. Clayton County affords LGBTQ+ workers. 

If you have been denied wages, breaks, overtime pay, or any other workers’ rights, please contact Bryan Schwartz Law.

Employees Win Victory in California Supreme Court Ruling on Meal and Rest Break Compensation

California law provides non-exempt employees with meal and rest periods. If an employer does not provide compliant meal or rest periods, employees are entitled to “one additional hour of pay at the employee’s regular rate of compensation.” (Cal. Lab. Code Section 226.7(c).) But are forms of pay such as incentives or commissions included in this calculus, or is it limited to hourly pay? In a victory for employees, the California Supreme Court decided earlier this month that other non-discretionary pay must be included in calculating an employee’s regular rate.

The case was filed by Jessica Ferra, a former bartender at the Loews Hollywood Hotel. Ferra claimed Loews had underpaid her and a class of similarly-situated employees for non-compliant meal and rest breaks because she and the other class members’ incentive payments were excluded from the calculation of missed breaks premiums. These payments were part of the pay Ferra expected and Loews promised, so Ferra contended that they should be factored into the formula for the “regular rate of compensation” used to calculate missed break premiums. In Ferra v. Loews Hollywood Hotel, LLC (2021) No. S259172 , the California Supreme Court agreed. 

 

“Regular rate of compensation” versus “regular rate of pay”

The decision came down to whether the “regular rate of compensation” for meal and rest break premiums is calculated the same way as is the “regular rate of pay” for overtime purposes. Loews contended that the calculations were different because the legal phrases were different, arguing that when the legislature uses different terms, it intends their meaning to differ. The court was not persuaded, noting that “compensation” and “pay” are synonyms. Regardless, the key phrase was “regular rate,” which applies to the calculations for both overtime and meal and rest break premiums. The court reasoned that the “regular rate” calculation follows that of the federal Fair Labor Standards Act (“FLSA”), looking to California case law and legislative history. Therefore, the “regular rate of pay” under California law must follow the same method of calculation as the “regular rate” in the FLSA, both for overtime calculations and for meal and rest break premium calculations. The court further opined that even if “compensation” and “pay” had different meanings in a relevant way, compensation covers a broader range of employment benefits than pay, such as wages, commissions, medical benefits, and other benefits.

Retroactive application

Sweetening the victory for employees, the Court determined that its decision applies retroactively to violations that came before the July 15 decision. The Court reasoned that its ruling rested on statutory interpretation, which merely clarifies a statute’s meaning, rather than setting forth new law. The Court rejected Loews’s misguided argument that this decision would put employers on the hook for millions of dollars, pointing out that “it is not clear why we should favor the interest of employers in avoiding ‘millions’ in liability over the interest of employees in obtaining the ‘millions’ owed to them under the law.” Consequently, employees may have a legal claim for non-compliant meal and rest break premiums, even if they were denied compensation before Ferra was decided.  

If you believe you have been wrongly denied meal or rest breaks or premiums paid at the correct rate of pay, please contact Bryan Schwartz Law here.

Biden Administration Rescinds Trump-Era "Independent Contractor Rule"

It has been a rough year for workers, but recent developments in worker classification suggest better days are ahead. On May 5, 2021, the Department of Labor (“DOL”) rescinded Trump-era guidelines regarding independent contractor classification under the Fair Labor Standards Act (“FLSA”). The withdrawal came days before the Trump Administration’s “Independent Contractor Rule” would have gone into effect, essentially preserving the status quo with respect to federal independent contractor classification guidelines.

The FLSA does not cover independent contractors. As a result, they are not guaranteed minimum wage, overtime pay, unemployment insurance, workers’ compensation, and other vital protections. Given its dramatic implications, worker classification remains a hot-button political issue. Courts commonly apply the “economic realities” approach to assess worker classification, a multi-factor balancing test that evaluates whether a worker depends on their employer to make a living as a matter of economic reality. If the “totality of the circumstances” indicate that more factors than not show that worker is economically dependent on their employer, several federal circuit courts nationwide held that they are classified as an employee.

The Trump Administration adopted a pro-business position on worker classification in 2017. In keeping with this position, the DOL issued a final “Independent Contractor Rule” (Rule) on January 6, 2021. Bryan Schwartz Law blogged about this Rule previously. Although the Rule purported to reaffirm the extant “economic realities” test, in practice it abandoned longstanding judicial precedent in favor of a more business-friendly standard. The new guidelines would have made it easier for employers to classify workers as independent contractors by reducing the considerations traditionally included in the analysis. Instead of the multi-factor balancing test applied by courts for decades, the Rule prioritized two main factors, the worker’s level of control and opportunity for profit, above all other considerations. If analysis of these main factors proved inconclusive, the Rule then required employers to weigh three additional factors: (1) the level of skill required for the work, (2) the permanence of the working relationship between the worker and the employer, and (3) whether the work is integral to the employer’s overall business operation. This approach ultimately would have reduced the number of workers classified as employees under the FLSA, thereby depriving them of federal protections.

After the Trump Administration’s exit, the Biden Administration instructed its DOL to withdraw the “Independent Contractor Rule.”  The DOL offered three reasons to rescind the Rule: first, that it conflicted with the text, purpose, and judicial precedent interpreting the FLSA; second, that its hierarchy of main and guiding factors contravened the balancing approach used in the economic realities test; and third, that it restricted “the totality of the circumstances” traditionally analyzed when determining worker classification.

Workers’ rights advocates hope more administrative and legislative actions will follow. As part of his 2020 presidential campaign, Biden promised aggressive FLSA enforcement to crack down on employers who misclassify their workers as independent contractors. In addition, Biden committed to designing a federal standard for worker classification modeled after the “ABC test.” California’s AB-5 legislation is one such example of this test. To qualify as an independent contractor under the ABC test, that worker must (a) be free from the control and direction of the hiring entity, (b) perform work outside the usual course of the hiring entity’s business, and (c) engage in an independently established trade, occupation, or business. That worker may be classified as an independent contractor only if they satisfy all three prongs.

If you believe you have been misclassified as an independent contractor, contact Bryan Schwartz Law. 

Juneteenth: A Celebration and a Call to Action

What is Juneteenth and why is it a national holiday?

The oldest known celebration of the end of slavery in the U.S. became a national holiday last week. President Biden signed the Juneteenth National Independence Day Act on June 17, creating the first new federal holiday since Martin Luther King Jr. Day was established in 1983.

Juneteenth originated in Texas to mark Maj. Gen. Gordon Granger’s announcement on June 19, 1865, at Galveston, that formerly enslaved people were free under the law. This day is a celebration of freedom, but it also serves as a reminder for the country that just as the Emancipation Proclamation did not actually end slavery in 1863, Black Americans’ fight against oppression did not end with freedom from slavery. Instead, these moments mark turning points in a struggle that is ongoing today.

What does the Juneteenth National Independence Day Act really do?

This law doesn’t guarantee a day off for most workers. Though most federal employees got Friday, June 18 off this year (June 19 being a Saturday), and some states (though not California) also made the day a paid holiday for state employees, private employers can choose whether or not to cancel work.

Recognition of Juneteenth as a milestone of national importance is certainly cause for celebration, though advocates recognize it is only a step toward racial justice. Opal Lee, who helped lead the movement to make Juneteenth a federal holiday and was in attendance as Biden signed the bill, said, “We've got all of these disparities that we've got to address and I mean all of them. While we've got some momentum I hope we can get some of it done.”

What is the role of employment law in effecting change?

While legal action can address only a limited range of racism’s manifestations, it can serve as an important tool against certain forms of race-based harassment and discrimination that employees face at work. For example, a class represented by Bryan Schwartz Law is suing Tesla for the rampant racism its members have experienced as workers in the car manufacturer’s Fremont factory. On April 9 of this year, the court denied Tesla’s motion to end class claims, fueling hopes for the lawsuit’s future.

As an employment law firm, Bryan Schwartz Law is committed to fighting race-based discrimination and harassment in the workplace. If you are experiencing harms of these kinds and are seeking legal assistance, you can reach out to us here.

Accommodating the telework employee post-COVID: What was often thought to be an “unreasonable” accommodation request, turns out to be very reasonable after all

[This article by Bryan Schwartz and Cassidy Clark appeared first in the May 2021 edition of Plaintiff magazine.] 

Plaintiffs’ employment lawyers are wondering how our society’s response to COVID-19 will change our practice, permanently. We now know that we can take depositions, attend mediation, argue motions, and perform almost every other basic litigation activity remotely, without compromising the quality of our efforts.

These changes will also improve our clients’ footing when they seek work-from-home disability accommodations. Employers have long argued that physical attendance at work is an essential function of most jobs. Courts have frequently rejected workers’ requests for telework or work from home as reasonable accommodations for disabilities under the federal Americans with Disabilities Act (ADA) and the California Fair Employment and Housing Act (FEHA).

Courts and juries will never see telework the same again. Even as more Americans become vaccinated against COVID-19 and traditional offices resume in-person operations, plaintiffs’ attorneys will successfully argue that pre-COVID-19 precedents regarding telework are outdated, and that today, telework is a presumptively reasonable accommodation in most places of employment.

Reasonable accommodations and undue hardship 

Under the ADA and FEHA, employers must provide reasonable accommodations to qualified employees where such an accommodation does not cause the employer “undue hardship.” (42 U.S.C. § 12112(b)(5); Gov. Code § 12940, subd. (m).) The initial burden rests with the employee to show that she is a “qualified individual” under the statutes. A qualified individual is a person who has the requisite education and experience for a job, and can perform the essential functions of the job “with or without reasonable accommodation.” (42 U.S.C. § 12111(8); Gov. Code § 12940, subd. (a)(1).)

The statutes provide examples for reasonable accommodations such as “job restructuring, part-time or modified work schedules, reassignment to a vacant position, [and] acquisition or modification of equipment or devices.” (42 U.S.C. § 12111(9); Gov. Code, § 12926, subd. (p) (2).) California’s FEHA specifically lists, “Permitting an employee to work from home,” as an example of a reasonable accommodation. (Gov. Code, § 11065, subd. (p)(2)(L).) As for undue hardship, the statutes instruct courts and juries to consider the financial resources of the employer, the impact of the accommodation on the operations of the employer, and the type of work conducted by the employer. (42 U.S.C. § 12111(10)(B); Gov. Code, § 12926, subd. (u).) This minimal guidance has allowed courts to deny employees the opportunity for telework frequently.

Telework jurisprudence

In February 2019, Bloomberg Law conducted an analysis of ADA telework cases and found that employers won 70 percent of rulings over the prior two years regarding whether they could reject workers’ bids for telework as an accommodation for a disability. Many federal and California courts had adopted a “general rule – that regularly attending work on-site is essential to most jobs, especially the interactive ones.” (E.E.O.C. v. Ford Motor Co. (6th Cir. 2015) 782 F.3d 753, 761; see also EEOC v. Yellow Freight Sys., Inc. (7th Cir.2001) 253 F.3d 943, 948; Tyndall v. Nat’l Educ. Ctrs. (4th Cir. 1994) 31 F.3d 209, 213; Samper v. Providence St. Vincent Med. Ctr. (9th Cir. 2012) 675 F.3d 1233, 1237-38 (collecting cases); Mason v. Avaya Commc’ns, Inc. (10th Cir. 2004) 357 F.3d 1114, 1122-24 (same); McCormick v. Pub. Employees’ Ret. Sys. (2019) 41 Cal.App.5th 428, 441.) As a typical example, the Seventh Circuit opined that “most jobs require the kind of teamwork, personal interaction, and supervision that simply cannot be had in a home office situation.” (Rauen v. U.S. Tobacco Mfg. L.P. (7th Cir. 2003) 319 F.3d 891, 896.) One unpublished (thankfully) California Court of Appeal explained (citing federal authorities), “Except in the unusual case where an employee can perform all work-related duties at home, an employee who doesn’t come to work cannot perform any of his job functions, essential or otherwise.” (ital. in orig.) (Hernandez v. Pac. Bell Tel. Co. (Cal. Ct. App. Jan. 24, 2017) No. B260109, 2017 WL 345057, at *7 (quoting Samper v. Providence St. Vincent Med. Ctr., 675 F.3d 1233, 1239 (9th Cir. 2012).) 

On the other hand, even before COVID-19, some courts recognized remote work as a possible reasonable accommodation. (See Samper, Id. [“regular attendance is not necessary for all jobs”]; Waggoner v. Olin Corp. (7th Cir. 1999) 169 F.3d 481, 485 [“In some jobs . . . working at home for a time might be an option”]; Carr v. Reno, 23 F.3d 525, 530 (D.C. Cir. 1994) [“in appropriate cases, that section requires an agency to consider work at home, as well as reassignment in another position, as potential forms of accommodation”]; Ravel v. Hewlett-Packard Enter., Inc. (E.D. Cal. 2017) 228 F.Supp. 3d 1086, 1096 [holding “work from home” may be a reasonable accommodation under FEHA].)

An especially promising 2001 Ninth Circuit decision, Humphrey v. Memorial Hospitals Association, should guide plaintiffs’ attorneys in a post-COVID-19 landscape. (239 F.3d 1128, 1138 (9th Cir. 2001).) “Working at home is a reasonable accommodation when the essential functions of the position can be performed at home and a work-at-home arrangement would not cause undue hardship for the employer.” (Id. at 1136.) In Humphrey, the court reasoned that because other employees were allowed to work remotely for reasons other than disability, working in person may not have been an essential function of the job, and therefore, remote work should have been considered as an accommodation for the plaintiff-employee with a disability. (Id. at 1137; see also Hughes v. U.S. Foodservice, Inc. (9th Cir. 2006) 168 F. App’x 807, 808 [applying Humphrey to FEHA, finding the plaintiff “able to perform the essential functions of the new customer service position from home and that a work-at-home arrangement would not cause [defendant] undue hardship” under FEHA].)

Humphrey teaches us that in analysis of undue hardship and essential functions, courts consider whether the work has been successfully performed by other employees outside of the physical office. Now, following a year of widespread telework wherein most traditional office employers have successfully instituted some form of telework without sacrificing productivity, plaintiffs will be armed with abundant examples of successful telework arrangements. Many plaintiffs will be able to show that they themselves have successfully completed their jobs remotely.

Telework in a post-COVID-19 landscape

Workers’ advocates should start by reminding employers – and courts – that employers have the burden of establishing that the stated essential functions are, in fact, essential functions of the job. (See Bates v. United Parcel Serv., Inc. (9th Cir. 2007) 511 F.3d 974, 991 [“Although the plaintiff bears the ultimate burden of persuading the fact finder that he can perform the job’s essential functions ... an employer who disputes the plaintiff ’s claim that he can perform the essential functions must put forth evidence establishing those functions.”].) In other words, employers cannot simply state that physical attendance is an essential function of the job. Employers must offer evidence supporting their contention that physical attendance is essential. This will likely become more difficult as many employers have already instituted widespread telework accommodations for their entire workforces. 

We can already see a shift occurring. On September 16, 2020, a Massachusetts District Court accepted evidence of an organization’s COVID-19 work-from-home arrangement to support a plaintiff-employee’s argument that they should be allowed to telework as a reasonable accommodation for their disability going forward. (See Peeples v. Clinical Support Options, Inc. (D. Mass. 2020) 487 F.Supp.3d 56, 65.) In Peeples, the employer made the same argument made successfully by so many employers before, that it needed its employees physically in the office to ensure adequate supervision and client interaction. (Ibid.) However, here, the plaintiff presented evidence that they performed the same duties on-site that they had provided remotely during the organization’s initial COVID-19 response. (Ibid.) Thus, because the plaintiff had already demonstrated that they could perform the essential functions of the job remotely, the court held that the balance of hardship weighed in the plaintiff ’s favor. (Ibid.)

Whereas prior to COVID-19, courts were not persuaded that intangibles such as “teamwork, personal interaction, and supervision” could be accomplished through telework, the past year’s experience may persuade them otherwise. Before 2020, courts frequently repeated the Samper quote, that only in the “unusual case” could an employee effectively perform work-related duties at home. Now, it is much less “unusual” for people to work entirely from home. Additionally, prior to the pandemic, much of the legal profession, including the courts, had never experienced telework. Now, attorneys and courts know that remote work arrangements can be successful. 

Further, the widespread nature of telework during COVID-19 accelerated the technology available to employers to facilitate remote work. Prior to March 2020, most of the world had never heard of Zoom and many workplaces had never had video meetings. Now, these technologies are integral aspects of office jobs that courts and juries will take into account. 

EEOC guidance

In December, the EEOC, under the prior administration, issued guidance regarding telework in a post-COVID-19 America. (What You Should Know about COVID-19 and the ADA, the Rehabilitation Act, and Other EEO Laws. EEOC (last accessed April 26, 2021).) The Guidance emphasized that even if a workplace participated in telework during the COVID-19 pandemic, the employer will not be required to approve telework as a reasonable accommodation after the pandemic concludes. (Ibid.) However, the agency noted, “the period of providing telework because of the COVID-19 pandemic could serve as a trial period that showed whether or not this employee with a disability could satisfactorily perform all essential functions while working remotely.” (Ibid.)

Although this guidance is outdated because of the new administration, the suggested framework of viewing an employee’s telework during COVID-19 as a sort of “trial period,” may inform plaintiffs’ strategy going forward. As in Peeples, plaintiffs should consider using their own successful experience working remotely as evidence that they can perform the essential functions of their jobs while working from home.

Conclusion

For far too long, courts disfavored the prospect of telework because of traditional notions of productivity and workplace comradery, even though telework provides an avenue for people with disabilities to have successful careers that otherwise may not be available to them.

One silver lining of having experienced the COVID era may be that plaintiffs’ attorneys can move courts and juries toward presumed acceptance of work-from-home disability accommodations. We now know that employers have the capacity to make big changes to keep their workforce employed,  including shifting to telework, without losing productivity. What was previously thought of often as an “unreasonable” accommodation request, turns out to be very reasonable after all.

Bryan Schwartz is an Oakland-based practitioner representing workers in class, collective, and individual actions, including discrimination, wage/hour, whistleblower, and unique federal and public employee claims. He practices in state and federal trial and appeals courts, in arbitration, and before a variety of administrative agencies. Since 2010, he has represented a certified class of Foreign Service Officer candidates denied reasonable accommodations against the U.S. Department of State. He is past Chair of the 8,000+-member State Bar Labor and Employment Law Section (now called California Lawyers Association), and on the Board of Directors of Legal Aid at Work, the Foundation for Advocacy, Inclusion and Resources (FAIR), and is a former Board member of the California Employment Lawyers Association. He is a regular speaker, moderator, and conference co-chair on employment law issues, and a frequent contributor to Plaintiff magazine and other publications. www.BryanSchwartzLaw.com.

Cassidy Clark is the Joseph V. Kaplan Workers’ Rights Fellow at Bryan Schwartz Law. She represents workers in discrimination, retaliation, whistleblower, and wage/hour claims. Ms. Clark earned her undergraduate degree at Cornell University and her Juris Doctor from UC Berkeley School of Law.