Workers Comp. Injuries May Support Civil Lawsuits -- Prue v. Brady Company, Inc.

Most employers and workers recognize that the "workers comp." system is entirely separate from the civil law courts, with its own special remedies and procedures.   Employers also generally understand that such workers comp. benefits are supposed to be the "exclusive remedy" for any workplace injury.  

But the recent case of Prue v. Brady Company, Inc., offers a timely reminder that an exception to this "exclusivity" doctrine may apply whenever a workplace injury also results in a "disability" covered by the California Fair Employment and Housing Act ("FEHA").  Indeed, most medical conditions that substantially limit an employee's ability to work -- such as the need to recuperate or take leave due to an injury -- will also qualify as a covered "disability."  This, in turn, triggers a number of statutory obligations including: the duty to engage in an "interactive process;" the duty to "reasonably accommodate" the employee's condition; and the duty to prevent any retaliation or discrimination.  

For example, in Prue v. Brady, the employee alleged that his supervisor terminated him rather than allow him to return to work with restrictions after he suffered a hernia at work.  The lower court had granted summary judgment based on the employer's argument that this was really a glorified workers comp claim for which no additional remedy should be allowed.  

The Appellate Court reversed, explaining that the legal duties imposed by the FEHA would support not only a statutory claim under that law itself, but also a common law claim for "termination in violation of public policy."  

This is a cautionary tale for employers who may have a tendency to be complacent about workers comp. claims.  Likewise, workers should be aware that the FEHA's reinstatement and non-retaliation rights are also likely to protect their right to return to employment following a workplace accident or injury.   

 

Requiring Employees to Pay Back Training Costs May be Illegal Under California Law -- In Re Acknowledgement Cases

Employers obviously benefit from a well-trained workforce.  On the other hand, why invest in training when an employee can just quit (or be fired) and take his improved skills elsewhere.  To avoid this scenario, many companies have instituted policies that require employees to pay back the cost of their training if their employment terminates.

The problem, however, is that such training pay-back programs may be illegal under California Labor Code Section 2802, which generally prohibits employers from passing on the costs of their business operations to employees.      

For example, in In re Acknowledgement Cases, the plaintiffs challenged a Los Angeles Police Department (LAPD) policy that required new recruits to agree that if they left employment within 60 months of graduating from the Police Academy they would pay back a corresponding portion of their training costs. 

As a matter of first impression, the Second District Court of Appeal held that Section 2802 requires that employers must remain financially responsible for all training costs, except for those costs incurred by the employee to obtain a legally required license. 

 [T]he broad purpose of Labor Code section 2802 is to require an employer to bear all of the costs inherent in conducting its business and to indemnify employees from costs incurred in the discharge of their duties for the employer’s benefit.  It is consistent with this purpose to require that where an individual must, as a matter of law, have a license to carry out the duties of his or her employment, the employee must bear the cost of obtaining the license. It is also consistent with this purpose to require an employer to bear the cost of training which is not required to obtain the license but is intended solely to enable the employee to discharge his or her duties.

The record below established that the LAPD required 644 hours of training directly related to meeting statutory licensing requirements, as well as an additional 420 hours of non-statutory "department required" training.  

The Court declined to decide whether, in such a hybrid program, it would be permissible to apportion the training costs between the employer and employee.   

Rather, the case below had been tried by the parties under an "all-or-nothing" theory in which the pay-back policy would either be fully enforceable or entirely void.  Any equitable apportionment defense had therefore been waived.  And because the program purported to require employees to repay some training costs in violation of Labor Code Section 2802, the entire repayment program was therefore properly found to be unenforceable as "null and void."

 

California Minimum Wage Rate Increase to $10.00 Per Hour Also Impacts Overtime Exemptions

Beginning on January 1, 2016, California's minimum wage increased from $9.00 to $10.00 per hour.

Whenever the baseline minimum wage is increased, however, it is also important to remember that it creates a "ripple effect" on various minimum compensation thresholds pegged to the minimum hourly rate.  These include:

  • The minimum salary for exempt executive, professional, and administrative employees.  To remain exempt from overtime, such "white collar" employees must be paid a salary equal to twice the minimum wage based on a 40-hour work week.   As of January 1, this minimum exempt salary level therefore increased from $720 to $800 per week.
  • The minimum weekly compensation for exempt inside "commissioned sales" employees.  To remain exempt from overtime, an employee who regularly earns over half his income in commissions must also be paid no less than 1.5 times the minimum wage in each exempt pay period.   As of January 1, this minimum threshold (assuming a 40 hour workweek), therefore increased from $540 to $600 per week.
  • The minimum hourly rate for exempt employees covered by a CBA.  To remain exempt from statutory overtime, an employee covered by a CBA which contains its own alternative overtime premium provision must be guaranteed a minimum regular rate of pay that is at least 30% over the statutory minimum.  As of January 1, this minimum hourly wage due under a CBA therefore increased from $11.70 to $13.00 per hour.

These compensation thresholds are bright-line rules.  The employer either pays the minimum, or it doesn't.  And there is no "close enough" or "excusable negligence" defense.  Thus, an employer who fail to maintain these minimum  thresholds will be unable to claim the exemption and will be liable for all overtime hours worked by the under-compensated employees. 

 

When Is Doing Your Job also a Form of Protected "Complaint"? -- Rosenfield v. GlobalTranz Enterprises, Inc.

 A variety of statutes prohibit retaliation against employees for reporting conduct that they reasonably believe to be illegal -- e.g., potential safety violations, discrimination, underpayment of wages, etc.  But what if the employee is a  manager whose job it is to ensure compliance with these same statutes?  Are such compliance officers legally protected even if the employer believes they are merely being overzealous, inflexible, or otherwise unsatisfactory in how they handle their reporting duties?

In Rosenfield v. GlobalTranz Enterprises, Inc., the Ninth Circuit held that managers may state a claim for retaliation even if making such reports was part of his or her job duties.  In particular, Rosenfield was the defendant's HR Director, who was terminated after she "advocated consistently and vigorously on behalf of ... GlobalTranz’s employees whose FLSA rights Plaintiff thought were being violated.”  But the lower court nevertheless dismissed her retaliation action on the ground that, due to the nature of her position, her conduct did not constitute a protected "complaint."

The Ninth Circuit reversed.  It found that she could state a retaliation claim regardless of her job duties so long as the employer had "fair notice" that she was "making a complaint that could subject [it] to a later claim of retaliation."  This standard requires that the employer must be able to "understand it, in light of both content and context, as an assertion of rights protected by the statute and a call for their protection."

In this regard, the court explained how the relationship created by the employee's particular job duties could affect how such an internal "complaint" is interpreted.

If an entry-level employee reported that someone is underpaid in violation of the FLSA and requested that the employee be compensated in compliance with the Act, a reasonable employer almost certainly would understand that report as a “complaint” (depending, of course, on all the circumstances). But if the identical report were made by a manager tasked with ensuring the company’s compliance with the FLSA, a reasonable employer almost certainly would not understand that report as a “complaint” (again, depending on all the circumstances). Rather, the employer naturally would understand the manager’s report as carrying out his or her duties. In short, when determining whether an employee has “filed any complaint,” the employee’s role as a manager often is an important contextual element.

Applying this standard, the Ninth Circuit found that the HR Director's reports of wage violations had to be construed as protected as it was her boss who "considered himself solely responsible for FLSA compliance” and he “did not understand, appreciate, or welcome [Plaintiff’s] bringing to his attention the FLSA violations.”

Beyond the scope of the manager's responsibility, however, the Court declined to specify the dividing line between normal job duties and protected conduct, saying merely that the question would have to be decided  "case-by-case."  

Under GlobalTranz, a manager who really wishes to make a stand in an area under her responsibility should probably eschew any attempt at diplomacy and just  come right out with a documented complaint to the effect that "I am hereby giving 'Fair Notice' that I am asserting rights protected by statute."  Her boss may not be thrilled, but at least the protections of the anti-retaliations laws will be clearly triggered.      

 

 

So Much to Do, So Little Time -- Court Approved "Overwork" Theory in Alberts v. Aurora Behavioral Health Care

Obtaining class certification in wage and hour cases typically requires a showing that the employer has engaged in a systemic policy that violates the law.  Maintaining scheduled hours, expecting employees to meet minimum production requirements, and requiring advance approval to work overtime are not illegal practices.  In combination, however, these policies can result in an environment that systemically pressures employees to work unreported hours beyond their scheduled shifts and to skip breaks in order to complete their assigned tasks in the time allotted.   

For example, in Alberts v. Aurora Behavioral Health Care, 241 Cal.App.4th 388 (2015), the Second District Court of Appeal held that the lower court had erred in refusing to certify a class of registered nurses based on the following allegations:

Hospital policy requires overtime be approved in advance, and failure to seek approval for overtime may subject an employee to discipline. Plaintiffs assert that the Hospital actively discouraged nursing staff from requesting overtime by criticizing and threatening to discipline employees who worked too much overtime, criticizing and intimidating employees who requested overtime and repeatedly denying legitimate overtime requests. At the same time, employees—especially RN’s, who were required to complete charts and other mandatory paperwork—were placed under pressure to ensure that all their work was completed each shift. . . .  As a result, employees were routinely forced to clock out after their shifts, then return to work to complete paperwork.

The lower court had articulated a number of rationales for rejecting certification based on such evidence, including its view that there would be no liability if the decision to work off-the-clock was a personal choice made by individual workers.  The appellate court rejected this reasoning, noting that:

[E]ven if we assume there is evidence some members of the nursing staff voluntarily worked uncompensated overtime, such a "choice" is impermissible under California law. A nonexempt employee (such as the putative class members here) may not lawfully volunteer to work off-the-clock without compensation.

Alberts v. Aurora thus reinforces several important lessons.  Employers need to be aware that their policies need not be illegal on their face to trigger class-wide liability -- it may be sufficient that their cumulative effect communicates an implied expectation for employees to under-report their work time.    Employees on the other hand should recognize that they are still entitled to additional compensation even if they "voluntarily" agreed to work off-the-clock.

 

 

 

 

 

New York Times Article: Arbitration Everywhere, Stacking the Deck of Justice -- Is Mainstream Media Finally Recognizing Class Action Waivers as a Political Issue?

As every lawyer practicing in the field has known since at least 2011, the U.S. Supreme Court's approval of mandatory class action waivers in AT&T v. Concepcion has reshaped the entire field of consumer and employment law.  

The odd thing is that this momentous legal development has flown entirely under the radar of the media.  I am sure it's hard for journalist to make the technicalities of Federal Arbitration Act preemption seem "sexy."  But that's still a pretty lame excuse for totally ignoring one of the most important legal story of the decade.  

It was therefore surprising and interesting to see that the nation's "paper of record" is finally on the class-waiver beat.  In an October 31, 2015 New York Times feature article:  Beware the Fine Print: Arbitration Everywhere, Stacking the Deck of Justice, the authors correctly identify the importance of the issue:

By banning class actions, companies have essentially disabled consumer challenges to practices like predatory lending, wage theft and discrimination, court records show.

“This is among the most profound shifts in our legal history,” William G. Young, a federal judge in Boston who was appointed by President Ronald Reagan, said in an interview. “Ominously, business has a good chance of opting out of the legal system altogether and misbehaving without reproach.”
 

However, the authors also go a little overboard in blaming the Supreme Court's rulings on a shady cabal of corporate conspirators. 

More than a decade in the making, the move to block class actions was engineered by a Wall Street-led coalition of credit card companies and retailers, according to interviews with coalition members and court records. Strategizing from law offices on Park Avenue and in Washington, members of the group came up with a plan to insulate themselves from the costly lawsuits.

(But like I said, it must be hard to make arbitration "sexy" without a secret conspiracy of evil-doers).

To the extent the class action ban is bad law or bad policy the only people really responsible are the five Supreme Court Justices who created the rule.  Indeed, one interesting revelation is that when Chief Justice Roberts was a private attorney working for Discover Bank, he argued for overturning the California Supreme Court decision that held such class action bans to be unenforceable.  As Chief Justice he was able to implement his own arguments by providing the fifth vote in AT&T v. Conception, which struck down the same California "Discover Bank" rule that he had advocated against as a lawyer.  

When the court ruled 5-4 in favor of AT&T, it largely skipped over Mr. Pincus’s central argument [of states' rights].

“Requiring the availability of classwide arbitration,” Justice Scalia wrote for the majority, “interferes with fundamental attributes of arbitration.” The main purpose of the Federal Arbitration Act, he wrote, “is to ensure the enforcement of arbitration agreements according to their terms.”

It was essentially the same argument Mr. Roberts had made as a lawyer in the Discover case.

 Perhaps the Times' article will start a long-overdue trend of more media attention and political discourse on the subject of class action waivers.  Or, more likely, the issue will hing on the next appointment to the Court which may result in a new 5-vote coalition to re-examine the rule.   

Side Note:  I couldn't help looking up the NYT subscriber agreement to see if it has a class action waiver clause. It doesn't.   But the WSJ has one.  

 

 

 

 

 

 

 

Has California Just Enacted the "Comparable Worth" Doctrine?

California and federal law both currently require equal pay for "equal work." 

On October 6, Gov. Jerry Brown signed into law the "California Fair Pay Act," which changes the requirement to include equal pay for "substantially similar work."   This key phrase is not defined except to note that it should be "viewed as a composite of skill, effort and responsibility" and should generally involve work performed under "substantially similar working conditions."  

As there is no definitive weight assigned to any of these "composite" factors, judges and juries will be entering uncharted territory in considering whether any two positions are "substantially similar."  For example, does a VP of Human Resources utilize "a composite of skill, effort and responsibility" that is "substantially similar" to a VP of Finance?  Who knows.  

If two positions are found to be "substantially similar," however, under the Fair Pay Act it is the employer's burden to prove that 100% of any pay difference is based upon seniority, merit, production, or a "bona fide factor other than sex, such as education, training, or experience."

Courts may interpret the Fair Pay Act as merely extending the Equal Pay Act.  Or it may be interpreted as a wide-ranging implementation of the "comparable worth" movement of the 1980's.  

In the meantime, however, employers and workers will need to look at the compensation levels attached to various position in a whole new light -- i.e., not as not merely what the "market will bear," but what can be justified to a court or jury.     

 

   

Advertising that "Tip is Included" May Require Payment to Employees -- O'Conner v. Uber Technologies

Increases in minimum wages and other compensation laws have led many service-based businesses to dispense with tipping as a way to reduce the bottom line cost to their customers.  For example, as the New York Times recently reported "an expanding number of restaurateurs are experimenting with no-tipping policies as a way to manage rising labor costs."

If not implemented properly, however, attempting to eliminate tips may trigger liability to employees under California law. 

It is well-settled for example that employers may simply implement a “no tipping” policy.   An employer may also implement a “mandatory service charge” which it need not directly share with employees.  

However, under Labor Code § 351, to the extent any “tip” is included as part of a transaction, it is the sole property of the employee. Thus, if an employer advertises to customers that a “tip is included” in the price of a service it implies that the employer is adding a tip to the price and passing it along to the employee. If the employer doesn’t actually pay such an additional amount to the employee it may be liable for converting this advertised “tip.”

Indeed, this theory was recently endorsed in O’Conner v. Uber Technologies, 2015 WL 5138097 (N.D. Cal. 2015), in which the district court granted class certification to such a claim for tip conversion.

Plaintiffs have cited extensive evidence that Uber has consistently and uniformly advertised to customers that a tip is included in the cost of its fares (i.e., evidence that Uber “takes or receives” a gratuity). See, e.g., Docket No. 277, Ex. 12 (November 2011: “When the ride is over, Uber will automatically charge your credit card on file. No cash is necessary. Please thank your driver, but tip is already included.”) (emphasis added); Ex. 16 (November 2011: “All Uber fares include the tip ....”) (emphasis added); Ex. 13 (May 2012: “There’s no need to hand your driver any payment, and the tip is included.”) (emphasis added); Ex. 14 (January 2013: “With UberBlack, SUV, and UBERx there is no need to tip. With Uber TAXI we’ll automatically add 20% gratuity for the driver.”) (emphasis added); Ex. 15 (April 2015: “payment is automatically charged to a credit card on file, with tip included ”) (emphasis added). Uber does not even contest this fact in its papers.

Moreover, Uber has stipulated for the purposes of this litigation that, despite its representations that a “tip is included,” a “tip has never been part of the calculation of fares for either UberBlack or UberX in California.” See Docket No. 313–16 (emphasis added). That is, Uber essentially admits that despite making allegedly consistent and uniform representations to customers that a tip was included in all of its fares, Uber never actually calculated such a tip, and clearly never segregated and remitted any tip amount to drivers. Or, put differently, Uber has stipulated that it kept the entire amount of any tip that might be “included” in its fares. These facts, if proven at trial, will likely establish Uber’s uniform and classwide liability for violating California’s Tips Law. 
 

The bottom line is that a "tip" is, by definition, an amount paid by the customer and received by the server.  Thus, while employers are free to adopt no tipping policies they cannot falsely claim to customers that a "tip" has been "included" in the cost of the service when no additional amount is actually paid to the employee. 

 

 

Department of Labor Issues Aggressive Memo Going After "Misclassified" Independent Contractors -- Administrator's Interpretation No. 2015-1

On July 15, 2015, the Wage and Hour Division of the federal Department of Labor issued an "Administrator's Interpretation" that takes a very aggressive stance against the use of independent contractor status in the workplace.  The interpretation is significant as courts are directed to give deference to the DOL's interpretation of the law to the extent it is generally consistent with the FLSA and its implementing regulations.

In particular the memo notes that: "The FLSA’s definition of employ as 'to suffer or permit to work' and the later-developed 'economic realities' test provide a broader scope of employment than the common law control test." Thus,

In order to make the determination whether a worker is an employee or an independent contractor under the FLSA, courts use the multi-factorial “economic realities” test, which focuses on whether the worker is economically dependent on the employer or in business for him or herself.  A worker who is economically dependent on an employer is suffered or permitted to work by the employer. Thus, applying the economic realities test in view of the expansive definition of “employ” under the Act, most workers are employees under the FLSA.

In applying the economic realities factors, courts have described independent contractors as those workers with economic independence who are operating a business of their own. On the other hand, workers who are economically dependent on the employer, regardless of skill level, are employees covered by the FLSA.

The memo goes on to opines that:

The “control” factor, for example, should not be given undue weight. The factors should be considered in totality to determine whether a worker is economically dependent on the employer, and thus an employee. The factors should not be applied as a checklist, but rather the outcome must be determined by a qualitative rather than a quantitative analysis.The application of the economic realities factors is guided by the overarching principle that the FLSA should be liberally construed to provide broad coverage for workers, as evidenced by the Act’s defining “employ” as “to suffer or permit to work.”

The DOL thus seems to advocate an alternative test under which an entity is liable for the wages of any worker whose compensation ultimately derives from doing work for that entity.  

One potential flaw in the Administrator's legal analysis however is that it selectively relies on tests applicable to different issues.  For example, an employee of one company may simultaneously be a "joint employee" of another company based on the "economic realities" of the relationship between the two companies.  Likewise, a company is said to have "suffered or permitted" unrecorded work by one of its current employees if it "knew or should have known" that the work was performed.   In both cases, however, there is no dispute that the worker was an "employee" to begin with.

It thus remains to be seen if courts will accept the DOL's invitation to apply the "economic realities" and "suffer or permit" formulas as the new litmus test for independent contractor status as well.    

Class Certification Is Proper Where Employer Never Paid Meal Period Premiums -- Safeway, Inc. v. Superior Court (Esparza)

The Labor Code and Wage Orders impose two separate obligations on employers: (a) to provide uninterrupted, 30-minute off-duty meal periods at specified time intervals; and (b) to pay one hour of compensation as a "premium wage" for each time that the employee was effectively prevented from actually taking such a compliant break. 

In the aftermath of Brinker v. Superior Court, courts have found that evaluating whether an employer has implemented an affirmative policy that fully complies with the first duty is well suited to a class-wide determination of liability.  But what if the employer has a perfect policy on paper but never actually pays any premium compensation under the policy? 

In Safeway Inc. v. Superior Court (Esparza), the court explained that such a uniform record of non-payment warrants class certification, at least where it is statistically implausible that such premium payments were never earned by class members.   

In granting class certification, the trial court stated: “[Real parties] prove[] that[] before June 17, 2007, Safeway did not pay meal break premiums. . . . Safeway does not contest this fact. Safeway had thousands or tens of thousands of workers, but for years it never paid statutory meal break premiums. Why? One explanation is human perfection: Safeway never, ever erred.” This explanation is possible. But human perfection is rare. Another explanation is deep, system-wide error: that Safeway was unaware of, or for some other reason[,] violated[] its duty to pay statutory premiums when required. [¶] This situation presents the central and predominating common issue: did Safeway’s system-wide failure to pay appropriate meal break premiums make it liable to the class during this period. This dominant common issue makes certification proper . . . .

The Safeway Court went on to explain that under this theory of liability -- i.e., a uniform practice of never paying appropriate meal premium pay -- it would not be necessary for the class to prove each instance of a meal break violation, to prove that "all or virtually all" of the class were owed compensation, or to prove the precise amount of premium pay owed.  

Rather, the class could use statistical analysis of time records and other data to establish that "on a system-wide basis, petitioners denied the class members the benefits of the the compensation guarantee [of] . . . section 226.7."  In particular, the "time punch data and records identified by [Plaintiff's expert] are capable of raising a rebuttable presumption that a significant portion of the missed, shortened and delayed meal breaks reflected meal break violations under section 226.7."

The lesson of Safeway is clear: It is not sufficient for an employer to merely implement a policy that effectively provides compliant meal breaks.  The employer must also record the timing and duration of the breaks, and then implement a separate good faith mechanism for determining whether a premium wage is actually due as a result of any missed breaks.  If the employer simply assumes 100% of the time that no wage is due this practice may expose it to class-wide liability.