U.S. Supreme Court Addresses Pregnancy Discrimination Standards -- Young v. United Parcel Service, Inc.

Under the  federal Pregnancy Discrimination Act ("PDA"), 42 U.S.C. Sec. 2000e(k), employers are prohibited from discriminating against female employees  "because of " pregnancy.   Thus, as with other protected categories like gender or race, a pregnant employee may establish her claim by showing that she was treated less favorably than "similarly situated" non-pregnant employees.  

But the standard for establishing illegal discrimination is much less clear under the second part of the PDA, which provides that employers must treat "women affected by pregnancy ... the same for all employment-related purposes ... as other persons not so affected but similar in their ability or inability to work."   

For example, in Young v. United Parcel Service, Inc., the U.S. Supreme Court wrestled with the interpretation of this duty.  The plaintiff had requested "light duty" as an accommodation for her pregnancy-related lifting restriction of 20 lbs.   The employer denied the request however as its policy only allowed light duty for short-term disabilities which were covered by the ADA or which temporarily prevented the employee from driving.     

This naturally raised the question of which group of employees should be considered "similarly situated" to the plaintiff for comparison purposes.  In other words, should she win her case because some non-pregnant employees with the same restrictions received an accommodation that she did not?  Or, should she lose because non-pregnant employees who, like her, did not meet the criteria of the policy, were also denied leave?

The Supreme Court, in the end, rejected both of these theories.  Instead, the Court held that the real question was whether a jury could find that UPS's light duty policy was motivated by an intent to discriminate against pregnancy-related conditions.  Thus, once a plaintiff demonstrates that she was denied an accommodation that others received, it becomes the employer's burden to justify its exclusion of pregnancy as a qualifying criterion under its policy. 

  

The employer may then seek to justify its refusal to accommodate the plaintiff by relying on “legitimate, nondiscriminatory” reasons for denying accommodation. That reason normally cannot consist simply of a claim that it is more expensive or less convenient to add pregnant women to the category of those whom the employer accommodates. If the employer offers a “legitimate, nondiscriminatory” reason, the plaintiff may show that it is in fact pretextual. The plaintiff may reach a jury on this issue by providing sufficient evidence that the employer's policies impose a significant burden on pregnant workers, and that the employer's “legitimate, nondiscriminatory” reasons are not sufficiently strong to justify the burden, but rather—when considered along with the burden imposed—give rise to an inference of intentional discrimination. The plaintiff can create a genuine issue of material fact as to whether a significant burden exists by providing evidence that the employer accommodates a large percentage of nonpregnant workers while failing to accommodate a large percentage of pregnant workers.

 

 The Court has thus seemingly created hybrid test that melds the separate liability theories pertaining to unintentional disparate impact claims and intentional disparate treatment claims.  Thus, the Court has authorized a finding of liability based on a showing that a facially neutral policy of the employer has causes a disparate burden on pregnant women without a sufficiently compelling business justification. 

Under this new standard, employers would be well-advised to explicitly include pregnancy related conditions under their short term disability plans even if doing so is "more expensive or less convenient."  It they fail to do so, they could easily be found liable for intentional discrimination.  

 

During Rest Breaks Employees Can Be Required to Do "Noun" Work, But Not "Verb" Work -- Augustus v. ABM Security Services, Inc.

In Augustus v. ABM Security Services, Inc., the Second District Court of Appeal was called upon to decide whether time spent "on-call" by security guards (i.e., time spent on premises with a duty to respond to all radio calls) constituted a legitimate "rest period."  

California law requires minimum compensation for all "hours worked."  However, it also requires paid rest periods during which an employee "shall not be required to work."   And just weeks earlier the California Supreme Court held in Mendiola v. CPS Security, Inc., that this exact type of "on-call" time by security guards was compensable "work."  

So one would be excused for thinking the decision in Augustus should be an easy call.  After all, if the same time has already been held to be "work," it can't also be a period of rest which is free from "work."  Right?

Actually, wrong.  

It turns out one can never underestimate the law's ability to find a linguistic distinction -- even if it's a distinction within the same word.  Thus, the Augustus court explained that the crucial distinction for purposes of providing a rest break is whether an employee's required activities are work "as a noun" or work "as a verb." 

The word “work” is used as both a noun and verb in Wage Order No. 4, which defines “Hours worked” as “the time during which an employee is subject to the control of an employer, and includes all the time the employee is suffered or permitted to work, whether or not required to do so.” (Cal. Code Regs., tit. 8, § 11040, subd. 2(K).) In this definition, “work” as a noun means “employment”—time during which an employee is subject to an employer's control. “Work” as a verb means “exertion”—activities an employer may suffer or permit an employee to perform. (See Tennessee Coal, Iron & Railroad Co. v. Muscoda Local No. 123 (1944) 321 U.S. 590, 598, 64 S.Ct. 698, 88 L.Ed. 949 [work is “physical or mental exertion (whether burdensome or not) controlled or required by the employer and pursued necessarily and primarily for the benefit of the employer and his business”].) Section 226.7, which as noted provides that “[a]n employer shall not require an employee to work during a meal or rest or recovery period,” uses “work” as an infinitive verb contraposed with “rest.” It is evident, therefore, that “work” in that section means exertion on an employer's behalf.

As the court explained  "Not all employees at work actually perform work."  Employing this analysis, the court suggested there may be no need to provide distinct rest breaks to security guards as their jobs are "indistinguishable" from one long rest break anyway.  

The Augustus Court's distinction between "noun work" and "verb work" is novel and is based on little more than the court's assertion that "it is evident" that this is what the Legislature must have intended.  Moreover, it may be a problematic distinction to apply in practice as most employees inevitably have short periods during the day when they are not engaged in actual "exertion."  

For example, under Augustus a cashier who waits more than ten minutes before a new customer comes into a store has apparently had a legal rest break whether she knew it or not.  And an employer can apparently provide a legally compliant rest break by merely requiring its employees to stand motionless for 10-minutes.  I am not sure this is really what the Legislature had in mind for a bona fide rest period.  

 

Law School Enrollments Continue to Plunge

 Conventional wisdom is that legal costs are consuming an ever-greater portion of the economy each year as Americans supposedly grow more litigious over time. But that view apparently isn't shared by prospective lawyers, who are staying away from law school in droves.

Indeed, the New York Times reports that new law school enrollment in 2014 fell to the lowest level since 1973. The 2014 enrollment numbers are also down 30% from just four years ago.  The reason is simple: “employment figures are dismal.”  In 2013, the article reports for example that “fewer than two-thirds of newly minted lawyers had found jobs that required passing the bar exam.”

The various experts who opined for the article blamed factors such as software automating routine legal functions and outsourcing to India. These reasons don’t seem particularly persuasive however.
Personally, my guess is that during the recession employers realized that lawyers need some experience to really add value. As a result, an over-supply of inexperienced and underemployed lawyers has been accumulating for several years. Until this backlog is finally absorbed it may be tough for brand new graduates to compete.

When Must "On-Call" or other Employee Time Be Paid -- Mendiola v. CPS Security Solutions, Inc.

California law is very clear in requiring that "all hours worked" must be compensated at statutory minimum wage or overtime rates.  Less clear, however, is what time must be counted as "work."  In Mendiola v. CPS Security, Inc., the California Supreme Court clarified that a liberal two-pronged standard applies to this determination.

CPS Security provided on-site guards at construction sites.  As part of their duties the guards were  required to be on-call to respond to any emergencies and to sleep in trailers placed at the sites.  The Supreme Court found that the guards' on-call and sleep time both met the definition of "hours worked" under California law and therefore had to be paid.

The Mendiola Court first clarified that California has two separate and independent tests under which time may be defined as "hours worked." 

In Morillion [v. Royal Packing Co.], we explained that “the two phrases—‘time during which an employee is subject to the control of an employer’ and ‘time the employee is suffered or permitted to work, whether or not required to do so’ “ can be viewed “as independent factors, each of which defines whether certain time spent is compensable as ‘hours worked.’ Thus, an employee who is subject to an employer's control does not have to be working during that time to be compensated....

As to the "control" test, the Court found that an employee will normally satisfy the test whenever he is required to remain on the employer's premises.

When an employer directs, commands or restrains an employee from leaving the work place ... and thus prevents the employee from using the time effectively for his or her own purposes, that employee remains subject to the employer's control. According to [the definition of hours worked], that employee must be paid.

Applying this standard, the Court found that the guards were entitled to pay because they were required to stay at the job site during their on-call hours. 

As to the "permitted to work" test, the Court found that the threshold question is whether the time is primarily for the benefit of the employer and its business."  The guards were therefore entitled to compensation under this test as well because their on-call time was directly connected to their employer's "business model" and the service being offered to its clients.

CPS's business model is based on the idea that construction sites should have an active security presence during the morning and evening hours when construction workers arrive and depart the site, but that theft and vandalism during the night and weekend hours can be deterred effectively by the mere presence of a security guard in a residential trailer.  Thus, even when not actively responding to disturbances, guards' “mere presence” was integral to CPS's business.

These clarified standards for paid "hours worked" will have far reaching effects.  Indeed, under Mendiola any activities which require attendance at a job site, effectively preclude personal activities, or directly relate to the employer's "business model," will likely require compensation.  

 

 

 

 

Sharing of Corporate Payroll and HR Functions May Result in "Joint Employment" -- Castaneda v. The Ensign Group, Inc.

Publicly traded corporations have increasingly adopted a structure in which a main corporate entity acts as a central "holding company" which conducts its operations through a series of wholly owned entities. The Corporation internally designates its workers as being "employed" by these entities.  As often as not, however, the employees have never heard of the specific entity that allegedly employs them.  Moreover, the employment policies and payroll functions for these operating entities typically emanate from a central corporate HR department and a "shared services" entity.  

In Castaneda v. The Ensign Group, Inc., the California Appellate Court held that this structure of common ownership and shared services is likely to create a "joint employment" relationship for purposes of wage and hour liability.  

An entity that controls the business enterprise may be an employer even if it did not directly hire, fire or supervise the employees.  Multiple entities may be employers where they control different aspects of the employment relationship. This occurs, for example, when one entity (such as a temporary employment agency) hires and pays a worker, and another entity supervises the work.

* * * 

Here Ensign has more than a contractual relationship with Cabrillo. Ensign owns Cabrillo. It purchased it in 2009 and it owns all of its stock. A trier of fact could infer this evidence refutes Ensign's claims of lack of control and responsibility.

(Internal citations and punctuation omitted).  Moreover, the court noted that the corporate parent could be found to be a joint employment based on evidence that its various subsidiaries shared "centralized information technology, human resources, accounting, payroll, legal, risk management, educational and other key services."  (Emphasis in original).

Thus, while it may make eminent business sense for related entities to share common HR, accounting and payroll functions, these shared functions are also likely to result in shared responsibility for wage and hour obligations.   

 

Statistical Sampling and Representative Testimony are Acceptable Ways to Determine Liability -- Jimenez v. Allstate

 In Jimenez v. Allstate, the Ninth Circuit upheld the certification of a class of claims adjusters who alleged that their employer "knew or should have known" that they commonly worked unrecorded overtime beyond their normally scheduled hours.  

In particular, the Plaintiffs' theory of recovery was that the employer had an "unofficial policy of discouraging reporting of such overtime," that it "fail[ed] to reduce class members' workload" after reclassifying the position as overtime-eligible, and "treat[ed] their pay as salaries for which overtime was an 'exception.'”  The Court explained that this was a proper basis for certification as "Proving at trial whether such informal or unofficial policies existed will drive the resolution of" liability.

Perhaps more significantly, the Court held that a lower court may avoid a defendant's due process objections by establishing liability through class-wide "statistics and sampling" while bifurcating potential defenses to individual damages.  

Since Dukes and Comcast were issued, circuit courts including this one have consistently held that statistical sampling and representative testimony are acceptable ways to determine liability so long as the use of these techniques is not expanded into the realm of damages.

* * * 

In crafting the class certification order in this case, the district court was careful to preserve All-state's opportunity to raise any individualized defense it might have at the damages phase of the proceedings. It rejected the plaintiffs' motion to use representative testimony and sampling at the damages phase, and bifurcated the proceedings. This split preserved both Allstate's due process right to present individualized defenses to damages claims and the plaintiffs' ability to pursue class certification on liability issues based on the common questions of whether Allstate's practices or informal policies violated California labor law.

Unfortunately, the Jimenez Court did not detail the specific proposed statistical method that the lower court found to be a sufficient liability model.  However, it does seem to stand for the proposition that DukesComcast and Duran are to be narrowly interpreted as rejecting certification only based on the particular flaws in the statistical models used by the Plaintiffs in those cases.     

 

 

 

 

Mandatory Paid Sick Leave Required Under Healthy Workplaces, Healthy Families Act of 2014

Under the newly signed Healthy Workplaces, Healthy Families Act of 2014, California employers will be required to provide paid sick leave to all employees.  The statute includes a quite detailed scheme with which employers will need to begin complying on July 1, 2015.

Duty to Provide Paid Leave

  • Eligible employees must work 30 days or more during the year, and may begin using accrued sick time after 90 days of employment
  • Paid sick leave accrues at the rate of one hour per every 30 hours worked for hourly-non-exempt employees.  Salaried-exempt employees will generally accrue paid sick time based on an assumed 40-hour workweek.  
  • Employers however may limit the amount of accrued sick leave to 3 days/24 hours per year (or the amount accrued by an employee working 720 or more hours).
  • Accrued but unused sick time carries over from year-to-year, but may be capped at 6 days.
  • Accrued but unused sick time need not be paid out at termination of employment, but must be reinstated if the employee is rehired within 12 months.

Using Paid Sick Leave

  • "An employee may determine how much paid sick leave he or she needs to use"
  • However, the employer may require the leave be used in minimum increments of up to two hours
  • The employee should shall provide "reasonable advance notice" if the need for the leave is forseeable.

Taking Sick Leave as a Protected Status

  •  An employer can take no adverse action against an imployee including "deny[ing] an employee the right to use accrued sick days" for the protected conduct of, inter alia, "using accrued sick days," "attempting to exercise the right to use accrued sick days," or for reporting or opposing alleged violations of the sick leave law.
  • Any adverse employment action within 30 days of reporting or opposing an alleged violation creates "a rebutable presumption of unlawful retaliation.   

Duty to Record and Report Accrued Paid Leave

  • The amount of available paid sick leave or PTO must be included on employee pay statements.
  •  The right to paid sick leave must be included in the employer's Labor Rights' poster and the disclosures of employment terms to new employees required by Labor Code section 2810.5.

Enforcement and Remedies

  • "The Labor Commissioner shall enforce this article." (However, a private enforcement action would also presumably be authorized under PAGA as well).
  • Remedies include reinstatement, back pay, and payment of withheld sick days
  • A penalty under which the dollar amount of withheld sick days shall be the greater of treble damages or $250 per day up to an aggregate amount of $4,000  

 

Employees Entitled to Compensation for Business Use of Personal Cell Phones Regardless of Plan Terms -- Cochran v. Schwan's Home Services, Inc.

California law requires that employers must reimburse workers for all "necessary expenditures" incurred in performing their jobs.  But what if the employee has already purchased an item for his own personal use and can continue using it for his employment at no extra cost.  Does the employer still have to pay for the benefit of using the employee's property?   

The Second District Court of Appeal held in Cochran v. Schwan's Home Services, Inc., that -- at least in the context of cell phone usage -- the answer is "yes."

In Cochran a group of employees claimed that they were owed reimbursement for business-related calls made on their personal cell phones.  In opposing class certification, the employer argued that “many people now have unlimited data plans for which they do not actually incur an additional expense when they use their cell phone."  As a result, the employer claimed that "determin[ing] whether an expense was incurred . . . will require an examination of each class member's cell phone plan.”  The appellate court rejected this argument.  

Instead, the court explained:

If an employee is required to make work-related calls on a personal cell phone, then he or she is incurring an expense for purposes of section 2802. It does not matter whether the phone bill is paid for by a third person, or at all. In other words, it is no concern to the employer that the employee may pass on the expense to a family member or friend, or to a carrier that has to then write off a loss. It is irrelevant whether the employee changed plans to accommodate worked-related cell phone usage. Also, the details of the employee's cell phone plan do not factor into the liability analysis. Not only does our interpretation prevent employers from passing on operating expenses, it also prevents them from digging into the private lives of their employees to unearth how they handle their finances vis-a-vis family, friends and creditors. To show liability under section 2802, an employee need only show that he or she was required to use a personal cell phone to make work-related calls, and he or she was not reimbursed. Damages, of course, raise issues that are more complicated.

Thus,

We hold that when employees must use their personal cell phones for work-related calls, Labor Code section 2802 requires the employer to reimburse them. Whether the employees have cell phone plans with unlimited minutes or limited minutes, the reimbursement owed is a reasonable percentage of their cell phone bills.

The exact calculation of reimbursement amounts was left to the trial court on remand.  But the ruling suggests that dividing the total plan cost by the proportion of minutes devoted to business use would be a proper rate of reimbursement.   

Of course, the logic of Cochran could be applied to any personal items that an employee may use for both personal and work purposes -- for example, tools, car insurance, computers, Internet access, or even a home office.  Cochran thus strongly suggests that employers may have a duty to reimburse the "reasonable percentage" of such costs which corresponds to the proportion of their use for work.    

 

 

Employees Entitled to Compensation for Business Use of Personal Cell Phones Regardless of Plan Terms -- Cochran v. Schwan's Home Services, Inc.

California law requires that employers must reimburse workers for all "necessary expenditures" incurred in performing their jobs.  But what if the employee has already purchased an item for his own personal use and can continue using it for his employment at no extra cost.  Does the employer still have to pay for the benefit of using the employee's property?   

The Second District Court of Appeal held in Cochran v. Schwan's Home Services, Inc., that -- at least in the context of cell phone usage -- the answer is "yes."

In Cochran a group of employees claimed that they were owed reimbursement for business-related calls made on their personal cell phones.  In opposing class certification, the employer argued that “many people now have unlimited data plans for which they do not actually incur an additional expense when they use their cell phone."  As a result, the employer claimed that "determin[ing] whether an expense was incurred . . . will require an examination of each class member's cell phone plan.”  The appellate court rejected this argument.  

Instead, the court explained:

If an employee is required to make work-related calls on a personal cell phone, then he or she is incurring an expense for purposes of section 2802. It does not matter whether the phone bill is paid for by a third person, or at all. In other words, it is no concern to the employer that the employee may pass on the expense to a family member or friend, or to a carrier that has to then write off a loss. It is irrelevant whether the employee changed plans to accommodate worked-related cell phone usage. Also, the details of the employee's cell phone plan do not factor into the liability analysis. Not only does our interpretation prevent employers from passing on operating expenses, it also prevents them from digging into the private lives of their employees to unearth how they handle their finances vis-a-vis family, friends and creditors. To show liability under section 2802, an employee need only show that he or she was required to use a personal cell phone to make work-related calls, and he or she was not reimbursed. Damages, of course, raise issues that are more complicated.

Thus,

We hold that when employees must use their personal cell phones for work-related calls, Labor Code section 2802 requires the employer to reimburse them. Whether the employees have cell phone plans with unlimited minutes or limited minutes, the reimbursement owed is a reasonable percentage of their cell phone bills.

The exact calculation of reimbursement amounts was left to the trial court on remand.  But the ruling suggests that dividing the total plan cost by the proportion of minutes devoted to business use would be a proper rate of reimbursement.   

Of course, the logic of Cochran could be applied to any personal items that an employee may use for both personal and work purposes -- for example, tools, car insurance, computers, Internet access, or even a home office.  Cochran thus strongly suggests that employers may have a duty to reimburse the "reasonable percentage" of such costs which corresponds to the proportion of their use for work.    

 

 

Delivery Drivers are Employees, Not Contractors -- Ruiz v. Affinity Logistics, Inc.

 In Ruiz v. Affinity Logistics Corp., ("Ruiz II"), the Ninth Circuit determined that a class of delivery drivers had been improperly classified as independent contractors.  The decision reversed the lower court's finding of employee status following a bench trial.  

The Defendant had required that its drivers form their own companies and execute contracts designating their relationship as independent contractors.  Nevertheless, the company still controlled every aspect of the drivers' operation from their rates and routes to the "color of their socks."  Based on this extensive record of control the Ninth Circuit had no trouble concluding that they were not bona fide contractors.  But the court's analysis did address several points that may be of interest in other, closer, fact patterns.

First, the Court emphasized that anytime personal services are provided an employment relationship is presumed.  Thus, while not using the precise terminology, a claim of an independent contractor relationship is effectively an affirmative defense.

Second, the Court rejected the argument that the drivers' ability to hire their own "helpers" took them outside of an employment relationship.  In particular, this fact did not support contractor status as "the drivers did not have an unrestricted right to choose these persons which is an important right that would normally inure to a self-employed contractor."  

A service provider can legitimately be an independent contractor if he has real autonomy and the opportunity to make a profit by exercising his own business judgment and discretion.  But Ruiz II illustrates that courts will generally reject any arrangement that functions merely as de facto employment dressed up with the appearance of independence.