Fox News CEO Accused of Sexual Harassment and Retaliation -- Gretchen Carlson v. Roger Ailes

 Fox News host Gretchen Carlson has filed a  lawsuit in New Jersey Superior Court against  the network's CEO, Roger Ailes.  The unusual thing about the lawsuit is that it is brought  solely against Roger Ailes in his individual capacity rather than against Fox News as her employer.

The gist of the complaint is that Carlson's contract was not renewed in June 2016 as retaliation for complaints she made about the conduct of her male co-host, Steve Doocy, in September of  2009.  The objectionable conduct was that: 

12.  Doocy engaged in a pattern and practice of severe and pervasive sexual harassment of Carlson, including, but not limited to, mocking her during commercial breaks, shunning her off air, refusing to engage with her on air, belittling her contributions to the show, and generally attempting to put her in her place by refusing to accept and treat her as an intelligent and insightful female journalist rather than a blond female prop.

Carlson alleges that as retaliation for her complaining about Doocy Ailes proceeded to sabotage her career over the next seven years and that "In doing these things, Ailes did not act in the interests of Fox News, but instead pursued a highly personal agenda."  

Carlson does not allege that the 76-year old Ailes ever actually propositioned her.  However, in a September 2015 meeting he allegedly told her that "I think you and I should have had a sexual relationship a long time ago."

 

 

  

New Rule: California Appellate Opinions are Now Citable Pending Supreme Court Review

When the United States Supreme Court takes up a case the published Circuit Court opinion from which it arose remains on the books as binding authority unless, and until, it is reversed.

By contrast, under the traditional rule in California a previously published appellate decision was effectively de-published for good once the California Supreme Court elected to take the matter under review.  

Beginning on July 1, 2016, however, California Rules of Court, Rule 8.115 has been modified so that published appellate decisions will now remain citable after review is granted.  

While such opinions are under review, they will remain citable only as persuasive, but not binding authority.  Once the California Supreme Court has completed its review and issued its own opinion, the appellate decision will become binding again as to any point on which it was not overruled or rejected.

Finally, at any time after granting review the California Supreme Court can issue an order directing that some or all points of the appellate decision are binding, while others are not.

It will be especially interesting to see how this last part of the rule is implemented in practice.  It is conceivable that the Supreme Court will use this new authority as a convenient means to partially depublish and thus, in effect, selectively rewrite  lower appellate decisions.  

 

  

Seventh Circuit Holds that Class Action Waivers are Unenforceable under the NLRA -- Lewis v. Epic Systems Corporation

In Lewis v. Epic Systems Corp., the Seventh Circuit held that arbitration agreements that prohibit class or collective actions by employees are illegal and unenforceable under the National Labor Relations Act ("NLRA").  In particular, the May 26, 2016 decision explained that class lawsuits are a form of "protected concerted" activity under NLRA Sections 7 and 8.  Thus, the court reasoned that any purported contractual waiver of these statutorily protected rights is unenforceable:

The [class waiver] provision prohibits any collective, representative, or class legal proceeding. Section 7 provides that “[e]mployees shall have the right to ... engage in ... concerted activities for the purpose of collective bargaining or other mutual aid or protection.”  A collective, representative, or class legal proceeding is just such a “concerted activit[y.”  Under Section 8, any employer action that “interfere[s] with, restrain[s], or coerce[s] employees in the exercise of the rights guaranteed in [Section 7]” constitutes an “unfair labor practice.”  Contracts that stipulate away employees’ Section 7 rights or otherwise require actions unlawful under the NLRA are unenforceable.

(Internal Citations omitted).

The Lewis Court further held that this result is not at odds with the Federal Arbitration Act ("FAA"), as the FAA's "savings clause" only requires enforcement of arbitration agreements which are lawful and otherwise enforceable according to general contract law.

As a general matter, there is no doubt that illegal promises will not be enforced in cases controlled by the federal law.  The FAA incorporates that principle through its saving clause: it confirms that agreements to arbitrate “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. Illegality is one of those grounds. The NLRA prohibits the enforcement of contract provisions like Epic’s, which strip away employees’ rights to engage in “concerted activities.” Because the provision at issue is unlawful under Section 7 of the NLRA, it is illegal, and meets the criteria of the FAA’s saving clause for nonenforcement. Here, the NLRA and FAA work hand in glove.

(Internal punctuation and citations omitted).

In striking down class action waiver agreements Lewis joins with the reasoning adopted by the NLRB itself.  However, it splits with the Fifth and Tenth Circuits, which have held that the pro-arbitration policy of the FAA takes precedence over the right to engage in "protected concerted" activity.  

Unless Lewis is overruled following a grant of en banc review, the circuit split regarding the legality of class action waivers will inevitably end up before the Supreme Court.  However, the Supreme Court's prior pro-waiver decisions have been sharply divided 5-4 decisions authored by the recently departed Justice Scalia.   As a result, time may be running out on employers' most effective technique for avoiding class action liability.  

 

 

Consumer Financial Protection Bureau Issues Proposed Rule to Prohibit Class Action Waivers in Arbitration Agreements

 The federal Consumer Financial Protection Bureau (CFPB) has issued a proposed regulation, 12 C.F.R. part 1040, that would ban the enforcement of class action waivers in most consumer financial contracts.

The new regulation does not apply to employment contracts.  Moreover, the new regulation will only apply prospectively to arbitration agreements formed more than 180 days after the regulation becomes effective.  However, it will inevitably stir up some interesting legal and political issues surrounding the enforcement of class action waivers.  

The new rule amounts to a regulatory reversal of the landmark 2011 U.S. Supreme Court decision in AT&T v. Concepcion, which held that the Federal Arbitration Act ("FAA"), requires states to enforce class action waivers even if they would be illegal under state law.  Indeed, the new regulation would prohibit states from enforcing class action waivers even if they would be legal under state law.

The elephant in the room, however, is whether the CFPB actually has the authority to do any of this.  Section 128(b) of the Dodd-Frank Act purportedly gives the CFPB authority to prohibit arbitration agreements containing class action waivers.  However, the FAA already contains a statutory mandate that private arbitration agreements are to be deemed “valid, irrevocable, and enforceable," and are to be enforced "according to their terms."  

Denying enforcement of class action waiver provisions is arguably a partial repeal of the FAA, at least as it was interpreted in AT&T v. Concepcion.   It is therefore dubious that Congress can constitutionally delegate this legislative function to an administrative agency.   

 

 

  

 

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.