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.

Whistleblower Victory Means Public Entities are Subject to PAGA - Sargent v. Board of Trustees

The Court of Appeal today certified for partial publication (hopefully soon to be full publication) Sargent v. Board of Trustees of CSU, a case led by Collier Law Firm (Bryan Schwartz Law's co-counsel) with amicus support from Bryan Schwartz Law writing on behalf of the California Employment Lawyers Association.

In Sargent, the Court of Appeal held unequivocally that aggrieved public employees can bring some PAGA claims against their employers - in particular, PAGA claims derived from Labor Code sections that provide for civil penalties (i.e., as opposed to those where only PAGA default penalties would be implicated). Government entities have argued that PAGA categorically does not apply to them - with some success at the the trial court level - but this decision should put that argument to rest. The Court relied on Kim v. Reins' holding that an employee has standing to bring PAGA claims when he/she was aggrieved by at least one claim personally - even if he/she did not personally experience all the violations.

  

Plaintiff Sargent blew the whistle on health/safety violations at the CSU, involving asbestos and other hazardous materials. He promptly received six written reprimands and ultimately was constructively discharged. The jury found cat's paw liability, under Reeves v. Safeway (CACI 2511), after the trial court sustained some of plaintiff's important evidentiary objections - which the Court of Appeal upheld. 

The Collier Law Firm fought thousands of hours in the trenches to prevail in the underlying jury verdict (the docket ran 167 pages, as the Court of Appeal pointed out). Though the plaintiff's underlying award will be modest, the Court of Appeal upheld a $7.8M fee award resulting from Defendant's scorched-earth litigation tactics, plus a well-deserved 2.0 lodestar fee multiplier. The Court rejected apportionment between successful/unsuccessful claims, and held that fees were supported under public-benefit theory, CCP 1021.5 (and did not reverse the trial court's finding that they were appropriate also under catalyst theory).  Importantly, the Court of Appeal rejected CSU's argument that CSU should not have to pay such a fee multiplier because the defendant is a public entity.

Sargent serves as a cautionary tale to defendants who fight with scorched-earth litigation tactics. The Court of Appeal cited defense counsel's billed hours and number of attorneys staffed on the file, as evidence that plaintiffs' counsel's billing was not excessive and that plaintiff's fees were reasonable. The Court upheld the award even though it reversed all the PAGA penalties that were awarded to the plaintiff (because they were not based upon PAGA penalties for Labor Code violations of sections with their own penalty provisions).

Bryan Schwartz Law congratulates the Collier Law Firm and all those who worked to win the important Sargent precedent.

What happens to workers, workers’ rights, and their advocates in a pandemic?

A look at both old and new laws that will help us protect workers’ rights in the age of COVID-19

(This article was first published in Plaintiff magazine, May 2020 edition)

By Bryan Schwartz and Jinny Kim

Maybe we never expected to be helping clients from our living room recliners, between organizing videoconferences for our kindergartners and answering questions on mobile technology and “what’s for dinner?” from our middle and high schoolers. But, few of us expected a lot of things that are happening now. Though our work lives have been impacted, many of our clients’ lives have been upended far more dramatically. Their challenges keep us fighting, even as new hurdles are placed in our paths.

In this article, we discuss the contours of Pandemic World for plaintiffs’ employment lawyers – how our practices have been affected by COVID-19, and then how our clients’ rights are developing.

Practicing in unpracticed ways

In practicing law, the wise know the precedents – knowing what happened years ago helps us decide what to do now, on this case. Yet, suddenly how we practice law is new for many of us. This must have been what the old guard felt like when Westlaw, Lexis, and other types of online legal research became available and bookcases of yellow books with yellowing pages became more ornamental than fundamental to our law practices.

We have to look forward, rather than looking back – the remote practice of law might become an additional arrow in our quiver, rather than an inconvenience. Could we hire more lawyers and support staff, with less office space and travel costs in the future? For now, everything is Zoom and Hangouts and GoToMeeting and we feel like we are all getting to know each others’ living rooms and pets and kids and sweatshirt collections.

Beyond the obvious differences – that we are all communicating remotely with our colleagues using a host of new technologies – our law practices have been affected by court closures, stalled discovery, defendants becoming insolvent, changes in how we conduct depositions and mediations, frozen hiring of new lawyers and law clerks, and in myriad other ways. The question is how to keep up the pressure on defendants and their counsel – plaintiffs’ attorneys’ number one job – when so many of our usual weapons are holstered.

Keep pressing

Some defendants have had operations overwhelmed by COVID-19 – health care providers, for example – and one can readily sympathize with a need for a time out. Other defendants, however, seem cynically to be commandeering the coronavirus “opportunity” to delay what previously they could not stall. Your blessed motion to compel hearing date would finally be arriving, after 20 meet-and-confers, an informal discovery dispute process, several flimsy supplemental productions by defendant trying to derail your motion, hundreds of pages of briefing and separate statements and attachments and exhibits. And now? Off-calendar, with no court date in sight. Defendant rides hard the newest excuse in the playbook – that the virus is inhibiting its ability to do what it was already avoiding for many months before the virus. What can we do?

Never stop. Call and email every day, cell and office numbers and addresses, maybe twice a day. Keep the guns blazing, secure in the knowledge that all over, plaintiffs’ attorneys are hearing the same thing. While being empathetic to legitimate health and safety concerns, we call foul on this like we do with other nefarious employer practices. If the court is accepting filings (even if it is not processing them speedily), then keep filing. Meanwhile, keep taking new cases – as we discuss below, there are as many (or more) violations now than in pre-Pandemic World.

The good news – cases are settling

Unlike many of our clients whose employers are shuttered and who are laid off indefinitely, we attorneys can do this work remotely with the new technologies.

Top mediators are reporting great success rates at Zoom mediations. Said one, “I have settled every one I’ve done in the past three weeks, many by 3:00 p.m. or 4:00 p.m. Ironically, it seems like people are more invested in getting serious earlier and getting it done as soon as possible; maybe because they have childcare issues at home, smell dinner cooking in the background, want to get to their Covidtini – whatever it is, it seems to be working.”

The lesson: keep scheduling mediations, especially with mediators you know and trust. While it may be harder to develop trust relationships with unknown quantities, you can still get cases settled with your go-to mediators.

Court reporting services have pivoted to remote depositions. Keep scheduling them – especially for witnesses who are not the core wrongdoers. There seems to be no downside to defending plaintiffs and our witnesses remotely (apart from the inability to kick your client under the table). Some defendants will not agree to remote depositions – perhaps soon the courts will require parties to comply with remote depositions, like the courts have recently forced employers’ hands with electronic service (https://newsroom.courts.ca.gov/news/judicial-council-mandates-electronic-service-of-documents-in-most-civil-cases).

The bad news – employers in financial trouble

A typical message some plaintiffs’ lawyers are receiving is this recent one: “I have not been able to discuss this with my client. Moreover, one key issue is that I am unsure about the continued viability of an offer including reinstatement given the [employer’s] developing financial condition. I will follow up as soon as I have some more information.” Another defendant said, “who knows where the employer will be in three months with COVID - they could be out of business.”

While many of us are accustomed to poverty pleas from defendants even in the best of times, now unquestionably these are a common feature of our landscape. Though many businesses are currently avoiding bankruptcy with the government’s massive cash infusion into the economy, soon, we will start to see a wave of failing businesses. Line up your bankruptcy lawyers now because they will be busy later in the year! Many businesses will fail and not have bankruptcy filings, trying to come out on the other side of this pandemic, but many others will try to pull through. Even now, bankruptcy courts are conducting hearings, remotely.

Generally, confusion abounds about which courts are accepting which types of filings, and details on courts’ different Pandemic World approaches are beyond the scope of this article. (In any event, such information would be outdated by the time you read this!) Check each court’s website for this week’s latest updates. Plaintiffs’ attorneys should continue to seek tolling agreements, though certainly with courts closed, it is likely that many exhaustion deadlines are continued. The smart play is – as usual – exhaust and file as early as you can, wherever you can, rather than letting the clock run.

We are all being forced to make some hard decisions. With trial dates far in the distance, and many businesses in treacherous financial waters, the smart play in many cases may be to get the sure money for your client today where you can, instead of holding out for the best-day outcome. Many of our clients need the money, now.

The bad news is far worse for our clients who are out of work and whose rights have been violated, than it is for us. Following are some of the protections and claims we are discussing with them every day.

Sick leave

With the closing of offices, schools and childcare centers around the country, many workers are suddenly juggling work and family obligations – in the home – while focusing on staying healthy and safe. The COVID-19 crisis highlights and supplements the complex and confusing patchwork of programs and laws that protect workers’ jobs and income when they cannot work because they are sick, caring for family members who are sick or caring for children whose schools and childcare centers are now closed.

Existing California law can be used by sick workers, workers who need preventative care relating to COVID-19 or are caring for sick family members, including when public authorities recommend quarantine or self-isolation.

California law requires that all workers have access to at least three paid sick days each year. Local laws provide more paid sick days including for those workers in Berkeley, Emeryville, Los Angeles, Oakland, San Diego, San Francisco and Santa Monica.

Qualified California workers also have access to an existing State Disability Insurance and Paid Family Leave program that allows workers who are unable to work because of their own disability or because they are caring for a family member who has a serious health condition to receive wage replacement benefits. This program is entirely employee funded and provides wage replacement benefits at 60 or 70 percent of a worker’s normal pay.

Many employees can access twelve weeks of job-protected unpaid leave under the Family Medical Leave Act (FMLA)/California Family Rights Act (CFRA) for an employee’s serious health condition, such as COVID-19, or to care for a family member with a serious health condition. To qualify for coverage, an employee must work for an employer with at least 50 employees within 75 miles of their worksite; have worked there for at least one year; and have worked for a minimum of 1,250 hours in the year prior to taking time off. Because of these stringent requirements, 40% of workers – primarily low-wage earners – are not covered.

For employees who do not meet the requirements of the FMLA/CFRA and have a qualifying disability or medical condition, a leave of absence may be a reasonable accommodation under the Americans with Disabilities Act (ADA) or California’s Fair Employment and Housing Act (FEHA).

Families First Coronavirus Response Act

Through the end of the year, employees who work for employers with fewer than 500 employees, are entitled to two weeks (up to 80 hours) of paid sick days paid directly by their employer but reimbursed by the Federal government through the Families First Coronavirus Response Act (FFCRA). These paid sick days are available to current (not furloughed or laid off) employees who have been told to self-isolate, quarantine, or are seeking medical attention because of COVID-19-related symptoms or to employees who are caring for a family member based on these same reasons.

Employees can also use these paid sick days if they cannot work due to caring for a child whose school or place of care has closed down. Employees who use paid sick days to care for themselves will receive full pay of up to $511 per day. Employees who use paid sick days to care for a family member or a child whose school or childcare is unavailable will receive 2/3 of their pay of up to $200 per day.

FFCRA also narrowly expands the FMLA by providing up to an additional 10 weeks of paid leave only for employees who need to take care of children who cannot go to school or daycare. This narrow expansion of the FMLA does not cover employees who actually have COVID-19 or to care for family members who have COVID-19.

Exemptions from FFCRA

Employers with fewer than 50 employees can seek an exemption from the paid sick days provision of the FFCRA if it “would jeopardize the viability of the business as a going concern.” Health care workers (which is very broadly defined) and first responders may also be exempt from both the paid sick days and the expanded FMLA provisions of the FFCRA. The Department of Labor itself estimates that 9 million health care workers, 4.4 million first responders and 96% of firms are exempt from coverage. (https://www.federalregister.gov/documents/2020/04/06/2020-07237/paid-leave-under-the-families-first-coronavirus-response-act#p-187)

Enforcement of the FFCRA will depend on what part of the FFCRA you want to challenge. An employer violating the FFCRA’s paid sick leave requirements is considered to have failed to pay the minimum wage under the Fair Labor Standards Act. An employer who violates the FFCRA’s expanded FMLA provision can be sued under the FMLA itself for failure to provide leave, failure to reinstate, discrimination, or retaliation. However, employees may have no private right of action for the FFCRA’s expanded FMLA provision if the employer was not already subject to the FMLA (e.g., employers with fewer than 50 employees).

While the FFCRA will provide a crucial lifeline for those who qualify, a huge percentage of the workforce will not benefit from the legislation. Therefore, states and municipalities are filling in the gaps. To date, Emeryville, Los Angeles, San Francisco and San Jose have passed their own ordinances to offset the shortcomings of the FFCRA by mandating paid sick time for employees of large corporations (500+ employees). In addition, Governor Newsom recently issued an executive order which provides two weeks of paid time off for isolation, quarantine and other medical directives to California workers in the food industry, including farm and agricultural workers, grocery and fast food workers, and delivery workers.

Layoffs, furloughs and the WARN Act

Due to the coronavirus pandemic, millions of workers across the country are getting laid off, furloughed, or outright terminated.

While most workers in California are considered at-will, some workers have contracts with their employer which set forth termination procedures requiring notice and severance. Employers who fail to fulfill their contractual obligations could face a breach of contract action which would make them liable for lost wages, future wages, and general or special damages.

Employers must pay terminated employees with their final paycheck, accrued vacation pay and required unemployment and COBRA documentation. The failure to do so can subject an employer to waiting-time penalties (under Labor Code section 203), civil and criminal penalties, and attorneys’ fees.

On March 17, 2020, Governor Newsom issued Executive Order N-31-20 which temporarily suspends the 60-day advance notice required under the California Worker Adjustment and Retraining Notification (WARN) Act for a layoff, relocation or termination of 50+ employees, in a 30-day period at a business that employs 75 or more employees. The temporary suspension must be for COVID-19-related “business circumstances that was not reasonably foreseeable at the time that notice would have been required.” Notice is still required but only “as much notice as practicable.” Employers can owe 60 days of backpay and benefits for the period of violation as well as attorneys’ fees for failure to provide adequate notice.

Employers are also on the hook to the state for civil penalties in the amount of $500 per day of delay, as well as attorneys’ fees. Certainly, for any mass layoff, plaintiffs’ attorneys should determine if disparate impact claims can be brought on behalf of a protected class such as older workers or workers with disabilities.

A furlough is different from a layoff – an employer-initiated unpaid leave of absence. Furloughed employees must be paid for all work performed and should not be working (including checking email or voicemail) during the furlough. According to an opinion letter by the Department of Labor Standards Enforcement (the California agency charged with enforcing wage and hour law), a furlough without a definite return to work date within the shorter of 10 days or the employee’s normal pay period may be a termination requiring the payment of final wages. A furlough exceeding a de minimis amount of time could trigger WARN Act obligations. (See Int’l Brotherhood of Boilermakers, et al. v. NASSCO Holdings, Inc. (2017) 17 Cal.App.5th 1105.)

Unemployment insurance — up to $1,050 a week

According to Department of Labor data, nearly 17 million, or one in ten, American workers applied for unemployment insurance between March 15 and April 4. (https://www.dol.gov/ui/data.pdf) This does not include workers affected by the coronavirus pandemic but who may not be eligible for regular unemployment insurance, such as independent contractors and those forced to quit because of lack of childcare.

In California, under the existing unemployment insurance (UI) benefits program, qualified employees can receive between $40 and $450 per week depending on their work history and how much they are able to still earn. To qualify for UI, employees must: be out of work or underemployed through no fault of their own; have enough past wages; and be able, available, and willing to work.

On March 27, Congress passed the $250 billion Coronavirus Aid, Relief and Economic Security (CARES) Act which created three new programs:

(1) Pandemic Unemployment Assistance (PUA) which provides up to 39 weeks of emergency unemployment assistance to workers who do not qualify for regular state unemployment insurance – including self-employed workers, independent contractors, and freelancers – or who have exhausted their state UI benefits; 

(2) Pandemic Unemployment Compensation (PUC) which provides all regular UI and PUA  claimants with an additional $600 payment per week through July 2020; and 

(3) Pandemic Emergency Unemployment Compensation (PEUC) which provides an additional 13 weeks of state UI benefits until December 31, 2020, unless it is otherwise extended.

As expected, California and other states are scrambling to set up the infrastructure

to administer the federal program. The Employment Development Department will accept online applications for PUA beginning April 28. (https://edd.ca.gov/about_edd/coronavirus-2019/pandemic-unemployment-assistance.htm).

Health and safety

As most Americans shelter in place, front-line workers are still providing critical care and support, risking their own health and safety and that of their loved ones. These essential workers include health care employees, grocery and pharmacy employees and employees of shipping companies. Many workers needlessly lost their lives. In order to stop tragedies from endlessly repeating, employers must take appropriate measures to provide employees with safe and healthy work environments. Thousands of employees have filed workplace safety complaints against their employers related to coronavirus, due to lack of Personal Protective Equipment (PPE) (e.g., gloves, masks and cleaning supplies), failure to follow social distancing requirements, and being forced to work alongside sick co-workers.

The CDC’s reversal of guidance for essential workers, allowing asymptomatic workers to continue working, will only expose others to coronavirus and escalate safety violations. (https://www.cdc.gov/coronavirus/2019-ncov/community/critical-workers/implementing-safety-practices.html)

Workers fear not only contagion, but retaliation for raising their concerns with their employers. Employees are being terminated for raising well-founded health and safety concerns to their employers. An employee terminated for exercising their OSHA rights has strong claims for wrongful termination in violation of public policy and Labor Code sections 1102.5 and 6310, in addition to the Labor Code Private Attorneys General Act (PAGA).

COVID-19 and Workers’ Comp

When a worker contracts COVID-19 on the job, they may be eligible for workers’ compensation benefits, including temporary disability payments and medical treatment. Illness due to the common cold or flu is not considered work related for purposes of workers’ compensation benefits, but diseases such as tuberculosis, Hepatitis A, and COVID-19 are considered work related. Employees may bring claims for negligence where a company fails to take reasonable measures to prevent the spread of COVID-19, and possibly a public nuisance claim.

In a memo to its members dated April 13, the Chamber of Commerce stated that “exposure liability” is “the largest area of concern for the overall business community.” (https://www.uschamber.com/coronavirus/implementing-national-return-to-work-plan#liability) The Chamber argues that lawsuits may send businesses and industries into bankruptcy, lobbying for blanket protections against coronavirus-related claims and procedural reforms. (Ibid.)

Instead, we should have legislation providing real protections to critical workers who remain on the job. Until that happens, workers will continue to work without access to PPE, get fired for asserting their rights, and will ultimately put their health, safety, and many lives at risk.

Disability

Employees who work for employers following the guidelines of the Centers for Disease Control (CDC) and local public health authorities are still entitled to worker protections under the ADA and FEHA, including reasonable accommodations, non-discrimination based on disability, and prohibitions against medical examinations and inquiries.

Both the Equal Employment Opportunity Commission (EEOC) and the Department of Fair Employment and Housing (DFEH) have issued coronavirus guidance: “Pandemic Preparedness in the Workplace and the Americans with Disabilities Act” (https://www.eeoc.gov/facts/pandemic_flu.html) and the “DFEH Employment Information on COVID-19.” (https://www.dfeh.ca.gov/wp-content/uploads/sites/32/2020/03/DFEH-Employment-Information-on-COVID-19-FAQ_ENG.pdf) The EEOC has also published technical assistance questions and answers entitled, “What You Should Know about COVID-19 and the ADA, Rehabilitation Act, and other EEO laws.” (https://www.eeoc.gov/eeoc/newsroom/wysk/wysk_ada_rehabilitaion_act_coronavirus.cfm) 

The EEOC and DFEH have not yet found COVID-19 to be a disability requiring reasonable 

accommodations.

Both the EEOC and DFEH guidance make clear that medical testing such as temperature checks and asking employees directly about symptoms and diagnoses are allowed. Employers may report diagnosed coronavirus cases to public health officials, while ensuring that medical privacy is maintained.

While some employers have previously been resistant to granting telework as a reasonable accommodation, asserting that physical presence is an “essential job function,” many employers will be hard-pressed in the future to argue that telework as a reasonable accommodation is an “undue burden,” since so many of us are now doing it routinely.

Discrimination claims

The COVID-19 pandemic has reportedly resulted in violent attacks, harassment, and discrimination against Asian-Americans and other people of Asian descent in workplaces across California, and litigation is commencing concerning these actionable claims.

An employer cannot exclude certain subsets of workers based upon protected classifications, due to a concern about COVID-19 transmissions. An employer can be liable for any failure to take reasonable steps to prevent and promptly correct discriminatory and harassing conduct. Discrimination based on association (including marriage or co-habitation) with someone based on race or national origin is also unlawful. (See DFEH FAQ at 2.) 

Workplace discrimination based on marital status is actionable under the FEHA. As one example, an unmarried worker’s request for scheduling accommodations due to childcare was denied while her married counterpart was granted a similar scheduling request.

As plaintiffs’ attorneys, we should also prepare for disparate treatment litigation around other protected categories including marital status, pregnancy, and age. The CDC has identified older people and pregnant workers as vulnerable populations more likely to experience severe symptoms, but employers still cannot discriminate (including terminate, furlough or withdraw a job offer) simply because a worker is pregnant or older.

Conclusion

We are all alternating between anxiety, helplessness, boredom, incredulity, and occasionally, hope. How long will Californians be sheltering in place? Are we flattening the curve of the pandemic? Will our favorite establishments still be around a few months from now? And, perhaps most importantly for our clients – how many of us will be out of work in the coming months? Our job as workers’ rights advocates is to keep up to date with rapidly changing government agency guidelines and Judicial Council updates that affect our clients. They are counting on us to jump every new hurdle as we keep prosecuting their claims.

Bryan Schwartz has an Oakland-based firm representing workers in class, collective, and individual actions in 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. He is past Chair of the 8,000+ State Bar Labor and Employment Law Section (now called California Lawyers Association), and on the Board of Directors of Legal Aid at Work, and the Foundation for Advocacy, Inclusion and Resources (FAIR), and is a former Board member of the California Employment Lawyers Association (CELA). He is a regular speaker, moderator, and conference co-chair on employment law issues, and a frequent contributor to Plaintiff magazine and other publications.

Jinny Kim directs the Disability Rights Program at Legal Aid at Work, where she represents clients seeking accommodation and facing discrimination by employers, educational institutions, and public entities. She joined Legal Aid at Work as the Félix Velarde-Muñoz Fellow in 1999-2001 and litigated race, disability, national origin, and gender cases. She returned as a staff attorney in 2008 following work in Washington, D.C., and in private practice. As a Georgetown Women’s Law and Public Policy Fellow, she served as Labor Counsel to the late Sen. Edward Kennedy on the Senate’s Committee for Health, Education, Labor and Pensions. She also has held positions at Asian Pacific Islander Legal Outreach; at Schneider, Wallace, Cottrell, Brayton and Konecky; and at Goldstein, Demchak, Baller, Borgen & Dardarian. Jinny received her J.D. in 1999 from the University of California, Davis, and her B.A. in 1995 from the University of California, Berkeley.

In Kim, California Supreme Court Protects Employees' Rights to Bring PAGA Claims

Earlier this month, the Supreme Court of California ruled that an employee does not lose standing to pursue a claim under the Private Attorneys General Act of 2004, California Labor Code § 2698, et seq. (PAGA) where that employee settles and dismisses his or her individual claims. In Kim v. Reins International California, Inc. (full opinion here), the Court rejected the employer’s injury-focused argument that an employee who settles his or her individual claims is no longer a “person aggrieved” for purposes of PAGA. The result is a positive judicial step in the right direction in ensuring that PAGA will continue to be a viable tool that may be used to protect the public interest in enforcement of the State’s labor laws.

The Plaintiff in Kim brought a putative class action claiming that he had been misclassified as exempt from overtime laws. The operative complaint alleged claims for failure to pay wages and overtime (Cal. Labor Code § 1194), failure to provide meal and rest periods (Cal. Labor Code § 226.7), failure to provide accurate time statements (Cal. Labor Code § 226(a)), waiting time penalties (Cal. Labor Code § 203), and unfair competition (Cal. Bus. & Prof. Code § 17200). It also sought civil penalties under PAGA. The employer compelled Plaintiff to arbitration and the PAGA litigation - which could not be compelled to arbitration, under Iskanian v. CLS Transportation Los Angeles (as explained here) - was stayed pending arbitration. While the PAGA action was stayed, the employer made a statutory offer to settle Plaintiff’s individual claims pursuant to Cal. Code Civ. Proc. § 998. Despite the settlement encompassing only Kim's "individual claims" (as discussed in footnote 7 of the Supreme Court opinion), the company sought and the court granted summary adjudication on the PAGA claim, concluding that Plaintiff lacked standing because his rights had been completely redressed by the settlement of his individual claims. The Appellate Court affirmed, leaving the California Supreme Court to weigh in on standing in PAGA cases.

Looking to the statutory language, the Supreme Court concluded that the settlement of individual claims does not strip an individual employee of standing to bring a PAGA claim. First, the plain language of PAGA only requires that a plaintiff be an aggrieved employee – someone “who was employed by the alleged violator” and “against whom one or more of the alleged violations was committed.” In rejecting the employer’s argument that a continuing injury was required to meet this definition, the Court explained that an injury-centric focus was misplaced as PAGA standing is defined in terms of an employer’s violations rather than an employee’s injuries. PAGA does not require an employee to claim any economic injury resulted from a labor violation, only that the labor violation itself occurred. Whereas the employer’s reading would read in requirements not found in the text itself, PAGA’s language only requires that an employee have suffered “one or more of the alleged violations” committed, which permits an employee to serve as a PAGA representative for violations that the employee did not personally experience, as the Court of Appeal in Huff v. Securitas had explained (see our amicus brief here for discussion of Huff).

The Court went on to discuss that injury is not a requirement for civil penalties; damages and civil penalties serve different purposes. In the case of PAGA, the statutory purpose is to remediate present violations and deter future violations as a matter of public interest, not to redress employees injuries. The Court also distinguished PAGA actions from class actions, emphasizing that whereas in a class action the representative only possesses his or her own claim for relief, a PAGA claim is brought on behalf of all affected employees as the state’s designated proxy, as in a qui tam action.

Turning to broader policy considerations, the Court explained that a narrower interpretation of who was an aggrieved employee for purposes of PAGA would have the effect of eliminating employees that settled their claims from the group of individuals eligible to receive a share of the penalties, which in turn would mitigate or potentially completely eliminate the amount of penalties that the state could collect. The Court also reasoned that, in light of plaintiffs' recognized ability to bring stand-alone PAGA claims, standing for a PAGA claim cannot be dependent on the maintenance of an individual claim as PAGA-only cases are not cases in which individual relief has been sought. Further, as there are numerous Labor Code violations that do not have a private right of action (for example, Cal. Labor Code § 558, which we previously discussed here) but can be vindicated in a PAGA action, it would be inconsistent to require a plaintiff to have an unredressed injury to have standing. Finally, the Court rejected as unsupported the employer’s arguments that the legislative history supported its argument or that Plaintiff should be precluded from raising his claim.

Notably, the Court also described Reins's conduct as "troubling." Specifically, Reins explicitly carved out Plaintiff's PAGA claim and made its settlement offer pursuant to California Code of Civil Procedure § 998, which permits defendants to recover defense costs if a jury awards a smaller award to the plaintiff than the defendant previously offered in settlement. The Court opined that "if Reins's prior conduct did not amount to an estoppel, this turnabout was hardly fair play," and observed that reaching a contrary holding would present plaintiffs with a difficult choice: "either reject the offer and risk incurring substantial liability for costs or accept the offer and lose the ability to pursue the PAGA claim."

Ultimately, the Court’s ruling in Kim is an important step in protecting employees’ rights by upholding a system designed to ensure that California’s Labor laws are properly enforced. PAGA remains an important and efficient tool in curbing an employers’ widespread misconduct. If you are seeking to assert wage claims representing your co-workers, contact Bryan Schwartz Law.

Attorney’s Fees Awarded When Whistleblower Acted in the Public Interest

Have you ever blown the whistle on illegal activity in the workplace and then been retaliated against? Did you have trouble finding a lawyer who would represent you? California protects whistleblowers, but defendants sometimes argue that whistleblower retaliation claims under California Labor Code section 1102.5 (California’s general whistleblower statute) do not require defendant to pay the whistleblower’s attorney’s fees. Attorney’s fees awards are critical to helping whistleblowers get their day in court. Because most people can’t afford to hire an attorney on an hourly basis, laws that allow for the recovery of attorney’s fees allow attorneys to take cases on a contingency basis – the attorney only gets paid if you get paid. An award of attorney’s fees also means that the attorney’s payment doesn’t have to come out of the amount you recover. You get your recovery and the attorney gets her fees, without the attorney having to take her fees out of your recovery (typically at least 1/3 to 40% of your recovery).

Attorney’s fees awards are available under California Code of Civil Procedure section 1021.5 where the case involves the enforcement of an important right affecting the public interest if: (1) a significant benefit, monetary or non-monetary, has been conferred on the general public or a large class of persons; (2) the necessity and financial burden of private enforcement, or of enforcement by one public entity against another public entity, are such as to make the award appropriate; and (3) such fees should not in the interest of justice be paid out of any recovery (i.e., the attorneys should not be paid out of what the employee recovers). The question is, does a violation of 1102.5 warrant the recovery of attorney’s fees as outlined in 1021.5? Can whistleblowers recover their attorney’s fees?

The California Court of Appeals recently said yes.

In Hawkins v. City of Los Angeles (2019) 40 Cal.App.5th 384, two employees blew the whistle on illegal activity happening in the City of Los Angeles’ Department of Transportation. Todd Hawkins and Hyung Kim were hearing examiners who reviewed parking violations. When people challenged parking tickets, Mr. Hawkins and Mr. Kim decided whether those people had in fact violated parking laws or if the City had gotten it wrong and needed to issue a refund for the fines they had charged.

Both men complained internally that their supervisor was pressuring them to change decisions from “not liable” to “liable” – in other words, saying people had violated parking laws when they hadn’t and cheating people out of refunds for the fines they had paid. Both men were then fired for speaking up.

They sued for whistleblower retaliation under 1102.5, the California Bane Act, and other claims. They also filed claims with California’s Labor and Workforce Development Agency seeking PAGA (Private Attorneys General Act) penalties. The matter went to a jury trial, and the jury found in the employees’ favor on their 1102.5 and Bane Act claims, awarding Hawkins $238,531 and Kim $188,631 in damages. The trial court then assessed a $20,000 PAGA penalty, and subsequently awarded the employees $1,054,286.88 in attorney’s fees. The City appealed.

The Court of Appeals upheld the jury’s verdict, upholding the award of attorney’s fees for whistleblower retaliation under 1102.5. As the Court explained,

Here, the City argues that a significant benefit was not conferred on the public because all the action did was remedy retaliation for whistleblowing. However, the City ignores the trial court’s finding that the action also conferred a significant public benefit because the public is entitled to fair hearings with respect to parking citations. The Vehicle Code entitles the public to “an independent, objective, fair, and impartial review of contested parking violations.” (Veh. Code, § 40215, subd. (c)(3).) Plaintiffs’ action revealed that, for years, the City had been pressuring, sometimes successfully, hearing examiners to change decisions, usually to find that refunds were not warranted. In short, the public had been deprived of independent and impartial hearings. Instead, the City undermined the process provided by the Vehicle Code to generate revenue.

Mr. Hawkins and Mr. Kim were whistleblowers under 1102.5 who satisfied the requirements under 1021.5 of acting in the public interest, warranting their recovery of attorney’s fees.

                The Court of Appeals also upheld the award for attorney’s fees for Mr. Hawkins’ and Mr. Kim’s PAGA claim. This is a big deal: in an unpublished portion of the opinion, the Court explains that an individual whistleblower under 1102.5 can still be representative of a broader group of people, as required by PAGA, when that individual whistleblower is furthering the public interest. The Court distinguishes another case, Kahn v. Dunn-Edwards Corp. (2018) 19 Cal.App.5th 804, where the plaintiffs’ PAGA claim was denied because it wasn’t representative:

 We express no opinion as to the correctness of Kahn’s holding. Whether correct or not, we do not interpret Kahn so literally as to hold that a plaintiff whose prefiling notice uses the incorrect pronoun—I instead of we and my instead of our—fails to comply with the Labor Code’s administrative procedures. Rather, we must determine whether the prefiling notice, as a totality, gave the requisite notice. Plaintiffs’ prefiling notices are materially different than the notice in Kahn. Their notices referred to complaints that Walton-Joseph had hearing officers change written decisions from not liable to liable. Hawkins referred to Walton-Joseph’s actions “in coercing employees, including Claimant to change their decisions.” (Italics added.) Similarly, Kim referred to another hearing examiner who had complained to government officials about the conduct. Thus, the notices here expressly referred to conduct not limited to the individual complainants. They complained about conduct that impacted them and fellow hearing examiners, as well as the public. We therefore conclude that plaintiffs complied with section 2699.3 [PAGA].

While attorneys cannot cite to the above portion of the Hawkins opinion, it’s worth noting the Court’s implicit suggestion to use the pronoun “we” in PAGA claims to forestall any argument from the defendant employer that the plaintiff does not have a viable PAGA claim.

Hawkins strengthens whistleblower protections, making it more likely that whistleblower cases will be brought to court – and therefore making it more likely that the harms whistleblowers uncover will be remedied. Hawkins will be a key case moving forward to combat public corruption and the silencing of those who dare to speak truth to power.

Bryan Schwartz Law has written about attorney’s fees for whistleblower retaliation and PAGA before. If you believe that you were retaliated against for exposing illegal activity at your workplace, please contact Bryan Schwartz Law today.

In ZB, California Supreme Court Chips Away at PAGA's Protections for Workers' Rights

On Thursday, the Supreme Court of California ruled that there is no Private Attorneys General Act of 2004, California Labor Code § 2698, et seq. (PAGA) claim for the penalty relating to the "amount sufficient to recover underpaid wages" in California Labor Code § 558(a)(2).  In ZB, N.A. v. Superior Court¹, the Court ostensibly teed up the question, on which there was a split of authority, of whether the rule that PAGA claims could not be compelled to arbitration applied to a PAGA penalty requiring restitution of underpaid wages, under California Labor Code § 558, to resolve a split in authority.  The result - that there is no underpaid wage PAGA penalty in the first place - is a disappointing blow to protections for workers' rights.

In reaching this decision, the Court concluded that the amount specified by the phrase "amount sufficient to recover underpaid wages" is not a "civil penalty" but is instead compensatory relief that may be recovered in addition to, and separate from, the civil penalties.  It further analogized § 558 to California Labor Code § 1197.1, which provides for the recovery of "an amount sufficient to recover underpaid wages" in addition to the section's civil penalties, and concluded that the Legislature must have intended for the civil penalties to be separate from the "amount[s] sufficient" described in each respective section.

The Court opined that its decision would "enhance and streamline enforcement of the Labor Code's overtime and workday requirements."  But it is difficult to see how removing a valuable arrow from the State's PAGA enforcement quiver can further these goals.  Less clear still is how the Court's decision can be squared with the Legislature’s clear intent to permit PAGA plaintiffs to recover the full measure of relief that would be available to the State in a public enforcement action and preserve the deterrence scheme that the Legislature envisioned.  These points are particularly salient, as this firm has previously written, because arbitration has the effect of killing statutorily-protected claims and emboldens law-violating employers by further skewing the playing field against workers.

Moving forward, the ZB decision has the impact of limiting the scope of potential PAGA recovery, although legislative amendment could restore the full measure of PAGA relief that, we believe, was originally intended.  Regardless, PAGA will continue to be an important enforcement tool for the State, aided by the workers themselves and their advocates.  Importantly, ZB did nothing to disturb the Court's prior holding in Iskanian v. CLS Transportation Los Angeles (2014) 59 Cal.4th 348, that PAGA is a qui tam statute where workers stand in the shoes of the State in prosecuting wage claims, with waivers of the State's prosecutorial authority unenforceable as a matter of state law.  Iskanian has survived repeated challenges in the Ninth Circuit Court of Appeals, and has been denied certiorari time and time again by the U.S. Supreme Court.

If you are seeking to assert wage claims representing your co-workers and are facing an employer who seeks to force you into individual arbitration, contact Bryan Schwartz Law.

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1 On August 29, 2018, Bryan Schwartz Law, on behalf of the California Employment Lawyers Association (CELA), submitted an amicus brief supporting affirmance of the Court of Appeal decision, as discussed in a prior blog post.

Lamps Plus Dims the Future of Class Arbitration.

The Supreme Court dealt another blow to employees seeking to assert their workplace rights with its decision in Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407 (2019), all but killing the possibility of concerted arbitration in most cases. Lamps Plus is centered around mandatory, pre-dispute arbitration agreements. Employees often sign mandatory arbitration agreements as a condition of their employment. When faced with unlawful conduct in the workplace, these agreements prevent employees from suing their employers in court. Instead, employees must adjudicate disputes in arbitration, which is often a process skewed toward employers. Bryan Schwartz Law has blogged about problems with arbitration several times, including here, here and here. Though the Supreme Court pretends that arbitration is a more efficient and cost-effective means of resolving a conflict, arbitration is really only more efficient and cost-effective to the extent that it kills statutorily-protected claims all together – nothing more than a windfall for law-breakers, harming workers and consumers and preventing law-abiding businesses from competing on a level playing field.

In Lamps Plus, the Court examined when arbitration claims could be brought on behalf of multiple employees in a single action. Often, employees with valid grievances cannot and would not sue their employers individually because the cost of hiring an attorney outweighs the value of their claims and litigation and arbitration are time-consuming, draining, and always raise fears of retaliation. Fortunately, employees can band together against an employer as a class or collective, allowing them to bring claims together that would be too costly and difficult to pursue as individuals.

Over the past decade, the Supreme Court has chipped away at the availability of both class actions in court and class arbitration through its interpretation of the Federal Arbitration Act (“FAA”). In 2010, the Court held that individuals cannot pursue class arbitration if it is not permitted by their arbitration agreement. Stolt-Nielsen S. A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (2010). In April of this year, the Supreme Court extended Stolt-Nielsen’s holding to include contracts that are ambiguous on the issue of class arbitration in its Lamps Plus decision. Like silent arbitration agreements, the Court held, ambiguous arbitration agreements do not provide employees the option of pursuing class arbitration.

In Lamps Plus, the company was alleged to have disclosed sensitive personal information belonging to 1,300 employees, including that of the plaintiff, Frank Varela.  As a result, Mr. Varela was the victim of identity theft. Mr. Varela sued Lamps Plus on behalf of himself and the other employees affected by the security breach.

Lamps Plus moved to kick the case out of court and into arbitration based on Mr. Varela’s arbitration agreement. The District Court granted Lamps Plus’s motion. However, it rejected Lamp Plus’s request for individual arbitration and instead authorized Mr. Varela to proceed with class arbitration.

The Ninth Circuit affirmed. The court determined that the language in Mr. Varela’s arbitration agreement was ambiguous on the issue of class arbitration. In resolving the ambiguity, the court applied the California legal principle requiring ambiguous contract terms be construed against the drafter, a doctrine known as contra proferentem. All fifty states apply contra proferentem because it encourages clear contract drafting. Lamps Plus 139 S. Ct. 1407 (Kagan, J., dissenting). Here, Lamps Plus submitted that the contract only conveyed consent to individual arbitration, while Mr. Varela argued that the contract implied consent to class arbitration. The court construed the meaning of the contract against the drafter, Lamps Plus. Thus, the court disagreed with Lamps Plus’s interpretation and ruled Mr. Varela could bring a class arbitration claim.

The Supreme Court rejected the Ninth Circuit’s application of contra proferentem and held that contracts ambiguous on the issue of class arbitration do not authorize class arbitration. In its reasoning, the Court relied heavily on a false distinction between individual and class arbitration. The majority opined that class arbitration does not achieve the FAA’s goals of making litigation faster, simpler and less expensive. Lamps Plus, 139 S. Ct. at 1416. According to the current Supreme Court majority, class arbitration “makes the process slower, more costly, and more likely to generate procedural morass than final judgement.” Id. (citing AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 348 (2011)).  Therefore, the Court concluded that the term “arbitration” does not intrinsically include class arbitration. The Court’s reasoning is based on the mistaken belief that individual arbitrations are indeed faster, simpler, and less expensive. Id. This leap of reasoning is unsupported, in fact, and contrary to the experience of this firm. Hundreds of individual arbitrations are not actually faster, simpler, or less expensive than a single class case.

The Court then decided how to interpret the ambiguity in Mr. Varela’s contract. The Court conceded that, normally, courts apply state law when interpreting contracts. Id. at 1415. Here, however, the Court held that the federal FAA conflicts with the state doctrine of contra proferentem, thereby displacing it. Id. at 1417-18.

According to the Court, the two laws conflict because, under the FAA, “[a]rbitration is strictly a matter of consent.” Id. at 1415 (quoting Granite Rock Co. v. Teamsters, 561 U.S. 287, 299 (2010)).  Contra proferentem, on the other hand, provides a method of contract interpretation that disregards consent between the parties in favor of a practical solution. Id. at 1418. Considering this manufactured conflict between supposed “consent” between parties under the FAA (which, as Justice Ginsburg explained in her dissent, is a fallacy) and standard principles of contract law, the Court decided that the FAA applies instead of contra proferentem. Id. Thus, the Court held employees cannot pursue class arbitration if their contracts are ambiguous on the issue. Id. Rather, arbitration agreements only authorize class arbitration when there is clear language that shows both parties intended to provide for class arbitration. Id.

This opinion inspired a flurry of dissents. In the main dissent, Justice Kagan argued that Mr. Varela’s contract was not ambiguous in the first place – it clearly allowed for class arbitration. Id. at 1428-29. Even if the contract were ambiguous, she argued, contra proferentem should apply because it does not conflict with the FAA. Id. at 1430-35. Justice Sotomayor’s dissent rejected the notion that class arbitration is fundamentally different from individual arbitration. Id. at 1427. She argued that consent to arbitration necessarily includes the ability for complainants to proceed as a class. Id. Justice Breyer argued that the Court of Appeals lacked jurisdiction altogether. Id. at 1422-23.

Justice Ginsberg crafted the most scathing dissent. She called out the disingenuity of the majority’s central premise that arbitration “is strictly a matter of consent.” Id. at 1421. In reality, people rarely have genuine choice when signing arbitration agreements. Rather, they are often a condition of employment. Id. When Congress passed the FAA in 1925, Ginsberg noted, Congress intended arbitration to simplify dispute resolution between businesses with equal bargaining power. Id. at 1420. This is a far cry from the role of arbitration today. Now, employers can force arbitration agreements on employees to insulate themselves from the consequences of unlawful employment practices. As Ginsberg argued in her dissent, mandatory individual arbitration thwarts “effective access to justice.” Id. at 1422.  

It is the unfortunate reality that a growing number of employees must agree to mandatory, pre-dispute, individual arbitration as a condition of employment. Nevertheless, employees may overcome arbitration agreements, or make employer’s pay in arbitration – employers sometimes fail to obtain arbitration consent from all employees, or waive a right to compel arbitration by proceeding in court extensively before moving to compel arbitration. Employers do not expect massive numbers of employees to file in arbitration – they hope employees will simply abandon their claims. However, mass filing of arbitrations by aggrieved employees sends a strong message: arbitration is not meant to be a get-out-of-jail free card. In California, employees have the option of bringing a representative action under the Private Attorneys General Act of 2004 (“PAGA”), standing in the shoes of the state, which cannot be compelled involuntarily to arbitration. With our vigilance, and notwithstanding the best efforts of the present U.S. Supreme Court to abandon workers’ rights to the whims of big business, workers’ claims may yet be vindicated. If you are an employee and have questions about a supposed arbitration agreement between you and your employer, contact Bryan Schwartz Law