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. 

Judge Orders Uber and Lyft to Treat Drivers as Employees

On August 10, a California judge issued a remarkable order blocking Uber and Lyft from continuing to misclassify their drivers as independent contractors rather than employees. This preliminary injunction from Judge  Ethan P. Schulman of San Francisco Superior Court  comes as part of the litigation brought by the State of California against Uber and Lyft because of the ride-hailing companies’ flagrant disregard for their duties under Assembly Bill 5 (A.B. 5). 

A.B. 5 codified the Supreme Court of California’s decision in Dynamex Operations W. v. Superior Court (2018) 4 Cal.5th 903, and was signed into law in September of 2019. Under A.B. 5 and Dynamex, drivers for Uber and Lyft should be considered employees, not independent contractors. Despite this, Uber and Lyft have continued to misclassify their drivers as independent contractors. Hopefully, the August 10 injunction forces the companies to finally change course.

 

The court highlighted that when companies like Uber and Lyft misclassify their employees as independent contractors, they deprive them of access to basic workers’ rights and protections including minimum wage, overtime pay, meal and rest breaks, workers’ compensation, unemployment insurance, health insurance, paid sick leave, and paid family leave. These worker protections are extremely important to working families and the economy as a whole, especially in the face of the challenges posed by a pandemic. 

 

The court explains that in order to grant a preliminary injunction of Uber and Lyft’s violations of A.B. 5, the government must demonstrate that it had a reasonable probability of prevailing, with a presumption that the nonissuance of an injunction would be harmful to the public. This is different than in an ordinary case with private parties, where the party seeking the injunction faces a higher burden. This is because by enacting a statute, the legislature has already determined that a violation goes against the public interest.

 

In this case, the court opined that the government demonstrated an “overwhelming likelihood” of prevailing and that “substantial public harm” will result without an injunction. According to the court, Uber and Lyft’s violations of A.B. 5 pose, “real harms to real working people.” Under A.B. 5’s “ABC” test, a person is properly classified as an independent contractor if: (A) The person is free from the control and direction of the hiring entity in connection with the performance of the work; (B) The person performs work that is outside the usual course of the hiring entity’s business; and (C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

 

The judge in this decision primarily examined element B, which requires that the work performed be “outside the usual course of the hiring entity’s business.” Uber argued, as it has before, that it is a technology company, rather than a company that provides car rides, and that its “actual employees” work in engineering, development, marketing, and operations. Driving, the company insists, is not part of Uber’s usual course of business. The court rejected this argument, instead insisting that Uber could not survive without its drivers. Because drivers are central to Uber and Lyft's business models, they should be classified as employees. 

 

Since the August 10 order, Uber and Lyft have threatened to halt operations in California, and Judge Schulman has denied the companies’ request for an extension of the deadline to appeal. Uber and Lyft have been attempting to delay their compliance with A.B. 5 because the companies are funding a ballot measure, Proposition 22, which would re-classify drivers as independent contractors. In issuing the injunction, however, the judge explained that he could not excuse the companies from compliance with A.B. 5 simply because they are waiting to see if Proposition 22 passes in November.

 

Bryan Schwartz Law has written about A.B. 5 and Dynamex here, here, here, and here. If you believe you have been misclassified as an independent contractor, please contact Bryan Schwartz Law.

Rights and Resources for Workers in the Era of COVID-19

Bryan Schwartz Law wants workers to know their rights and what resources are available to them during the coronavirus pandemic.

• The California Employment Lawyers Association (CELA) has put out a newsletter in English, Chinese, and Spanish with resources and guidance on the rights of California workers.

• CELA has also put out a guide for pregnant and parenting workers.

•  Legal Aid at Work, Centro Legal de La Raza, and Bet Tzedek have released a resource guide in both English and Spanish.

•  Legal Aid at Work has also prepared an FAQ on coronavirus and the workplace in English, Spanish, and Chinese.

• Legal Aid at Work is conducting clinics virtually for workers throughout the state.

• Bet Tzedek’s Employment Rights Team will be holding weekly virtual clinics each Wednesday from 5-7pm PST. Those interested in making an appointment should call Bet Tzedek’s main line at 323-939-0506 extension 415.

• The Center for Workers' Rights is operating a Coronavirus Job Protection Helpline to help answer questions about workplace rights. Call 916-905-1625 from 9 am - 5:30 pm M-F. If you are in the Sacramento area, you can reach the line by dialing 211.

• The California Employment Development Department has issued guidance for both workers and employers on issues such as filing for unemployment and business closures.

• A Better Balance has resources for various states, including California.

•  If you are undocumented:

o    Here is a list of California relief funds in English and Spanish for those who have lost their jobs due to coronavirus.

o    The California Immigrant Youth Justice Alliance has put together resources in various languages, including English, Spanish, and Portuguese.

This is not a comprehensive list, but we hope that it can help workers feel more protected during this difficult time. We encourage folks to follow the organizations mentioned above on social media for real-time information.

We are lucky in California to have so many organizations that are dedicated to protecting workers’ rights and strong laws protecting workers. We’re in this together. If you feel like your rights are being violated in the workplace, contact Bryan Schwartz Law today.

On-Call Scheduling Practice Ruled a Violation of Employees’ Rights

On February 4, 2019, the Court of Appeals for California’s Second District ruled in favor of retail employees in an important decision about on-call work time in Ward v. Tilly’s, Inc., Case No. B280151. This decision is a major victory for on-call employees who have to set aside time for shifts they might not get to work. You can find the opinion here.

The employer, Tilly’s, a clothing and accessories retailer, required their employees to call two hours ahead of some shifts to find out if they were actually needed. These on-call shifts had concrete start and end times, and Tilly’s instructed its employees to plan as if they were definitely going to work the shifts. Some on-call shifts were scheduled immediately after an employee’s regular shift, in which case the employee would learn whether she was needed during her regular shift. Although Tilly’s could reprimand or even fire employees for failing to call in before their on-call shifts, they were not paid for any on-call shifts they did not work, nor were they paid for the two hours between calling in and the start of the on-call shift.

A scheduling scheme like Tilly’s puts workers, especially low-wage workers, in a tough spot. An employee scheduled for a potential shift has to plan her day as if she will work the shift, despite not having the guarantee of compensation. This stressful arrangement means setting up child care or care for aging relatives, pursuing additional employment, rearranging health care appointments and education schedules, or foregoing sleep, personal hygiene, or leisure, even though an employee may not know whether she will be called in to work until just two hours before her potential shift. In essence, Tilly’s required their employees to block out their time for work without the assurance of being paid.

The plaintiff filed a putative class action suit against Tilly’s, challenging this scheduling practice. Tilly’s argued that the lawsuit did not state a cause of action—that everything the employee said Tilly’s did, in Tilly’s view, was legal. The Superior Court in Los Angeles agreed and threw out the case.

The Court of Appeals reversed, ruling that Tilly’s on-call scheduling scheme violated the law, specifically Wage Order 7 (Spanish) (Chinese). The Industrial Welfare Commission has issued 17 Wage Orders, including Wage Order 7, to regulate wages and work conditions for California workers. Wage Order 7 requires employers to pay employees for “[e]ach workday an employee is required to report for work, but is not put to work . . . .” Wage Order 7-2001 (8 Cal. Code Regs § 11070). Tilly’s argued that the phrase “report to work” requires an employee’s physical presence at the workplace when a shift starts.

Not so, said the Court of Appeals. The Court of Appeals drew attention to the unbalanced burdens that Tilly’s on-call scheduling scheme placed on its workers. The scheme benefited Tilly’s immensely: “This permits employers to keep their labors costs low when business is slow, while having workers at the ready when business picks up. It thus creates no incentive for employers to competently anticipate their labor needs and to schedule accordingly.” Ward, Case No. B280151, at *22. In contrast, the scheme “impose[d] tremendous costs on employees. . . . [O]n-call shifts significantly limit employees’ ability to earn income, pursue an education, care for dependent family members, and enjoy recreation time.” Id. at *22. These burdens affect employees not just during their on-call potential shifts, but for the two hours between the phone call and the shift itself. Id. at 22-23. The Court of Appeals held that Wage Order 7 was designed to prevent unfair scheduling practices such as this, and determined that the phrase “report for work” included the act of calling in. Id. at 23, 25. The wage orders covering workers in other industries use the phrase “report to work” in the same way as Wage Order 7.

In conclusion, the Court of Appeals pronounced that “if the employer directs employees to present themselves for work by logging on to a computer remotely, or by appearing at a client’s job site, or by setting out on a trucking route, then the employee ‘reports for work’ by doing those things. And if . . . the employer directs employees to present themselves for work by telephoning the store two hours prior to the start of a shift, then the reporting time requirement is triggered by the telephonic contact.” Id. at 25-26. This conclusion is similar to a California Supreme Court decision that an employer cannot require its employees to keep their pagers and phones on to remain on-call during their rest breaks, which Bryan Schwartz has blogged about before. See Augustus v. ABM Sec. Servs., Inc., 2 Cal.5th 257, 269 (2017).

If your employer has asked you to call in before scheduled shifts to determine if you are needed to work, please contact Bryan Schwartz Law today. Click here for more information about Bryan Schwartz Law.

Supreme Court Favors Delegation Clauses, But Courts Retain Jurisdiction Over Formation Disputes

On January 8, 2019, the Supreme Court reversed the Fifth Circuit decision in Henry Schein, Inc. v. Archer and White Sales, Inc., Case No. 17-1272. 

The case is a business dispute in which plaintiff Archer and White seeks both money damages and injunctive relief. Defendant Schein moved to compel arbitration and Archer and White opposed, arguing that the dispute was not subject to arbitration because the complaint seeks injunctive relief, at least in part. The relevant contract provision states:

Disputes. This agreement shall be governed by the laws of the State of North Carolina. Any dispute arising under or related to this Agreement (except for actions seeking injunctive relief and disputes related to trademarks, trade secrets, or other intellectual property of [Schein]), shall be resolved by binding arbitration in accordance with the arbitration rules of the American Arbitration Association. The place of arbitration shall be in Charlotte, North Carolina.

Schein argued that because of the contract's express incorporation of the American Arbitration Association's rules, the parties agreed that questions of arbitrability, including the arbitrability issue raised by Archer and White, would be decided by an arbitrator. Archer and White responded that because they seek injunctive relief, which is excluded in the above provision, the court may resolve a threshold question of arbitrability if the argument for arbitration is "wholly groundless." The district court agreed and Schein's motion to compel was denied. The Fifth Circuit affirmed, citing its own precedent for a "wholly groundless" exception to enforcing a delegation clause. 

In his first Opinion, Justice Kavanaugh writes for a unanimous Supreme Court that when parties contract to delegate arbitrability questions to an arbitrator, a court may not override this agreement even if the court believes that arbitrability of the particular dispute is "wholly groundless." He explains that "[j]ust as a court may not decide a merits question that the parties have delegated to an arbitrator, a court may not decide an arbitrability question that the parties have delegated to an arbitrator."

However, citing First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995), and Rent-a-Center, West, Inc. v. Jackson, 561 U.S. 63 (2010), the Opinion clearly states that courts retain the power to decide whether there is "clear and unmistakable evidence" of a meeting of the minds to delegate arbitrability questions to an arbitrator. Rather than ordering the lower courts to grant Schein's motion to compel, the Court remanded to the Fifth Circuit to consider, in the first instance, the issue of whether the contract in fact delegated the arbitrability question to the arbitrator.

In employment law, workers' rights attorneys generally seek to avoid arbitration because of the ways in which arbitration agreements are being used not only to stop workers and consumers from vindicating their rights in a concerted manner, but also to exert control over the dispute resolution process, primarily by companies building repeat-customer relationships with certain preferred arbitrators.    

The Supreme Court's decision in Schein is prompting defense attorneys to advise their employer clients to review their arbitration agreements and include a clearly worded delegation clause. However, employers cannot circumnavigate the courts merely through the presence of a provision attempting to delegate questions of arbitrability to an arbitrator. Workers remain able to argue defenses to formation of such an agreement, and courts must hear these arguments. Workers, if you can argue that the defendant lacks "clear and unmistakable evidence" that the parties agreed to arbitrate, or that the parties agreed to delegate issues of arbitrability to an arbitrator, the Supreme Court has made clear, unanimously, that this argument must be heard by the court before compelling arbitration.

The U.S. Supreme Court Exploits the First Amendment to Endorse Public Union “Free Riders”

by DeCarol Davis and Eduard Meleshinsky

With its decision yesterday in Janus v. American Federation of State, County, and Municipal Employees, Council 31, No. 16-1466 (U.S. June 27, 2018), the U.S. Supreme Court marches forward in its sweeping campaign to erode workers’ rights to engage in protected concerted activity. See, e.g., Epic Systems Corp. v. Lewis, 584 U.S. ___ (2018) (holding that an arbitration agreement can bind an employee to individual arbitration and thereby prevent that worker from participating in class or collective action) (read our analysis of the decision here). In a 5-4 opinion, authored by Justice Alito, with Justice Kagan dissenting (joined by Justices Ginsburg, Breyer, and Sotomayor), the Court held that state government workers who choose not to join a union do not have to pay a share of union dues for covering the cost of negotiating and administering collective bargaining agreements. The Court’s decision overrules its long-standing precedent in Abood v. Detroit Board of Education, 431 U.S. 209 (1977), which required non-union employees to pay a portion of union dues, known as “agency fees,” to cover the out-of-pocket costs of collective bargaining and prevent “free riders” (i.e., workers who get the benefits of a union contract, like higher wages, better healthcare insurance, and competitive retirement plans without paying for it). Such mandatory agency fees do not fund any type of political campaigning by the union.

In Janus, the Supreme Court found that an Illinois law, which required public employees benefiting from union-organized collective bargaining agreements, to pay agency fees violated non-members’ free speech rights. Janus, No. 16-1466, at *1. The Court majority held that unions, in their “political and ideological projects” (including negotiating for better working conditions) may come at odds with a worker’s beliefs, and thereby violate a worker’s First Amendment rights. Id. The majority reasoned that requiring public employees to pay union dues would be “compelling” the worker to “subsidize” the speech of other private third party in violation of First Amendment. Id. at *9.

Justice Kagan, joined by the three other dissenting Justices, eloquently spoke to the majority’s radical departure from the Court’s established precedent:

There is no sugarcoating today’s opinion. The majority overthrows a decision entrenched in this Nation’s law—and in its economic life—for over 40 years. As a result, it prevents the American people, acting through their state and local officials, from making important choices about workplace governance. And it does so by weaponizing the First Amendment, in a way that unleashes judges, now and in the future, to intervene in economic and regulatory policy.

Departures from stare decisis are supposed to be “exceptional action[s]” demanding “special justification,” (citation omitted)—but the majority offers nothing like that here. In contrast to the vigor of its attack on Abood, the majority’s discussion of stare decisis barely limps to the finish line. And no wonder: The standard factors this Court considers when deciding to overrule a decision all cut one way. Abood’s legal underpinnings have not eroded over time: Abood is now, as it was when issued, consistent with this Court’s First Amendment law. Abood provided a workable standard for courts to apply. And Abood has generated enormous reliance interests. The majority has overruled Abood for no exceptional or special reason, but because it never liked the decision. It has overruled Abood because it wanted to. Id. at **26-27.

The First Amendment in 1977 was the same as it is today, and yet, the Supreme Court again tramples on long-established American public policy favoring workplace peace and shared prosperity through collective bargaining between labor and management—one of few remaining mechanisms for workers to stand toe-to-toe with employers. The Court, despite its “pull-your-boots-up” philosophy, now gives “free-riders” the right to reap the fruits of hard-fought collective bargaining without chipping in anything.

Even conservative legal experts like Eugene Volokh agree that the majority’s opinion fails to reckon with the many ways in which “the First Amendment ‘simply do[es] not guarantee that one’s hard-earned dollars will never be spent on speech one disapproves of.’” Dissent at p. 15; Eugene Volokh, Why There’s No First Amendment Problem With Compulsory Union Agency Fees, (published Jan. 29, 2018), available at: https://reason.com/volokh/2018/01/19/why-theres-no-first-amendment-problem-wi. Were it otherwise, the Court would be compelled to upend many other well-entrenched arrangements where the government requires mandatory fees to subsidize various activities it believes serve an important governmental interest but which individuals may oppose, such as mandatory bar dues for attorneys, certain administrative fees for public university students, and, more generally, taxes spent on controversial governmental activities.

The Janus opinion is another example of the Roberts Court “turning the First Amendment into a sword, and using it against workaday economic and regulatory policy.” Slip. Op., Dissent at 27. Working people should remember this decision as they head to the ballot box this November.

The Supreme Court Denies Certiorari of Ninth Circuit Ruling that Mortgage Underwriters are Non-Exempt Employees

Today, the Supreme Court of the United States summarily denied certiorari to an appeal from a recent Ninth Circuit decision, McKeen-Chaplin v. Provident Savings Bank, 862 F.3d 847 (9th Cir. Jul. 5, 2017), which held that mortgage underwriters did not qualify as exempt from the overtime requirements of the Fair Labor Standards Act (FLSA).

The Ninth Circuit’s ruling in McKeen-Chaplin, clarifies the legal analysis for evaluating whether an employer has met the second prong of the administrative-exemption test. The administrative-exemption test requires administrative employees to have as their primary duty “the performance of office or non-manual work related to the management or general operations of the employer or the employer’s customers.” 29 C.F.R. § 541.200. Notably, the Ninth Circuit utilized the “administrative / production dichotomy” to determine whether the employer met the second prong of the FLSA’s administrative exemption. Under the administrative / production dichotomy framework, “whether [an employee’s] primary duty goes to the heart of internal administration—rather than marketplace offerings” is the crucial test. Thus, if an employee’s duties focus on the core business of a company, e.g., an underwriter working on a bank’s mortgage products, then the employee is not administratively exempt, and is entitled to overtime. Bryan Schwartz Law previously blogged about McKeen-Chaplin here.

In arriving at its decision, the Ninth Circuit relied heavily upon reasoning in Davis. v. J.P. Morgan Chase & Co., 587 F.3d 529 (2nd Cir. 2009) cert. denied sub nom., a Second Circuit ruling which applied the administrative-production dichotomy to find mortgage loan underwriters were production employees. Bryan Schwartz Law previously blogged about Davis, here.

Employees who produce a company’s core products or services, as opposed to performing “work related to the management or general operations of the employer,” should not be denied overtime based on the FLSA’s administrative exemption.

If you believe your employer has incorrectly classified you as an exempt administrative employee and deprived you of overtime pay even though you produce the core goods or services of your employer, then please contact Bryan Schwartz Law.

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

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

Background

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

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

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

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

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

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

Oral Argument

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

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

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

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

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

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

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

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

No Proportional Check on Corporate Wrongdoing

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

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

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

---

[1] Jessica Silver-Greenberg & Robert Gebeloff, “Arbitration Everywhere, Stacking the Deck of Justice,” N.Y. Times, Oct. 31, 2015.

[2] Erwin Chemerinsky, The Case Against the Supreme Court, § II.5 (2014).

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

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

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

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

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

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

II.             High Court Reaffirms the Broad Scope of Discovery in California.

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

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

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

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

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

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

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

IV.            Conclusion

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

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

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

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[1] Williams v. S.C. (Marshalls of CA), No. S227228, 2017 WL 2980258, slip op. at 20 (Cal. July 13, 2017) (“Williams”)

[2] Williams slip op. at 12, 14.

[3] Williams slip op. at 13.

[4] Williams slip op. 11.

[5] Williams slip op. at 20.

[6] 7 Cal. 4th 1, 35. (1994).

[7] Williams slip op. at 29.

[8] Williams slip op. at 25-29.

[9] Williams slip op. at 31 (citing Union Mut. Life Ins. Co. v. Superior Court, 80 Cal. App. 3d 1, 12 (1978)).

[10] Williams slip op. at 18 n. 6.

[11] Williams slip op. at 4.

[12] Williams slip op. at 18 n. 5.

[13] Williams slip op. at 18.

[14] Williams slip op. at 19 (citing Sinaiko Healthcare Consulting, Inc. v. Pacific Healthcare Consultants, 148 Cal. App. 4th 390, 402 (2007)).