Important California Case on Arbitration

2016 saw a couple of important cases come out of the California Supreme Court, including one on arbitration clauses.

In Baltazar v. Forever 21, Inc. (2016) 62 Cal. 4th 1237, the California Supreme Court addressed and resolved some procedural issues frequently faced in the enforcement of arbitration clauses. 

In that case, the Plaintiff, Maribel Baltazar, had submitted a job application that included a mandatory arbitration agreement that required the parties to arbitrate all claims arising from her employment. She later sued Forever 21 alleging constructive discharge and that she was subject to discrimination and harassment based on race and sex. Forever 21 moved to compel arbitration under the agreement signed when she submitted her job application. Baltazar sought to invalidate the arbitration provision as "unconscionable" because: (1) it did not include copy of the arbitration rules that applied to the arbitration proceedings; (2) the injunctive relief provision favored the employer; (3) it only pertained to employee claims; and (4) required her to do anything the employer demanded to protect its proprietary and confidential information. 

The trial court agreed with Baltazar, finding that the agreement was procedurally and substantively unconscionable, and denied Forever 21’s motion to compel arbitration. The Court of Appeal reversed, rejecting Baltazar’s argument (and the trial court's rationale) that the clause permitting the parties to seek provisional relief in superior court was “substantively unconscionable because such relief serves the interests of employers than employees.”

The Supreme Court, in a decision authored by Justice Kruger, noted that Baltazar's argument of procedural unconscionability failed because she merely attacked the fact that she was not provided with the arbitration rules rather than challenging the rules themselves. More importantly, the Court held that that even if employers would be more likely to seek injunctive relief, the clause “merely confirms, rather than expands” rights already provided under Code of Civil Procedure § 1281.8(b), which expressly permits parties to an arbitration to seek preliminary injunctive relief during the pendency of an arbitration. The Supreme Court explained that it is not substantively unconscionable to simply confirm a statutory right.

The Baltazar decision is an important one for employers seeking to enforce mandatory arbitration clauses.

We're Back...

Okay, I admit it; I have been remiss in my blogging duties. Sometimes the actual practice of law gets in the way of talking (blogging) about it. In this instance, I have been "lawyering" rather than blogging for quite some time. I hope to change all that moving forward. So, I look forward to providing employment law related content on this blog much more frequently, and hope that you will follow along with me.

A New Wrinkle on Arbitration Clauses in Retainer Agreements

Many lawyers nowadays have arbitration clauses in their retainer agreements, whereby the Clients agree that any dispute that may arise out of the lawyers' representation of the clients shall be submitted to arbitration.  However, a recent case from the 4th District Court of Appeal puts a new wrinkle on the enforceability of such clauses.  Depending on the circumstances, the lawyer seeking to compel arbitration may have to pay the arbitration costs to enforce that provision.

In Roldan v. Callahan & Blaine (4^th Dist. 2013) 219 Cal. App. 4th 87, 161 Cal.Rptr. 3d 493, the Plaintiffs (former clients) filed suit against their former lawyers based upon a claim that the settlement they reluctantly agreed to in the underlying action was inadequate. The lawyers successfully moved to compel arbitration based upon an arbitration clause in the attorney retainer agreement. The plaintiffs then filed a motion in the trial court seeking an order compelling the lawyers to advance the entire upfront cost of the arbitration, which the trial court denied. 

The appellate court reversed and remanded for the trial court to do the following: (1) calculate the reasonable cost of the arbitration previously ordered; (2) determine whether the plaintiffs are financially able to pay their share of the anticipated costs; and (3) if any of the plaintiffs are unable to pay, issue an order specifying that the lawyers have the option of either paying or else waiving their right to arbitrate.  Thus, the Appellate Court basically said that if the Court determines that clients cannot afford the costs of the arbitration, the attorneys' option is to pay "full freight" or waive the right to arbitration and proceed to trial in court.

(It should be noted that the Appellate Court in Roldan had a number of criticisms of the particular retainer agreement involved, including the observation that the plaintiffs had been required to initial all pages of the retainer agreement except for the page including the arbitration clause, and that their signatures on the agreement were on a different page from the arbitration provision.  This may have factored into the Court's ultimate conclusion.)  

This case is significant because the court invoked a "public policy" exception to compelling indigent clients to arbitrate.  Despite a recent spate of cases from the US Supreme Court holding that Courts should "rigorously enforce" arbitration agreements, this California case seems to impose limits on the enforceability of arbitration provisions, similar to the holding in Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 6 P.3d 669, 99 Cal.Rptr.2d 745, in the employment agreement context.

SCOTUS Rules in Title VII Cases

In two 5-4 decisions, the Supreme Court appears to have made it harder for employees to sue and prevail against their employees under Title VII of the Civil Rights Act.

In Vance v. Ball State, the Court limited who may be deemed a "supervisor" to those who have power to “take tangible employment actions” against a victim of harassment.  Some background: In the late 1990s, the Court held in two cases that an employer is automatically liable under Title VII of the 1964 Civil Rights Act for discrimination by an employer who is a “supervisor.”  On the other hand, if a co-worker discriminates, the company is liable only if the victim complains to her employer and the employer is negligent in responding to the complaint.  The question in this case was who counts as a “supervisor” for purposes of this rule. 

In an opinion from Justice Alioto, the Court held that that for purposes of this Title VII rule, to be a “supervisor,” a person must have the power to take a “tangible employment action” against the victim.  That is, he must be able to “effect a ‘significant change in employment status, such as hiring, firing, failing to promote, reassignment with significantly different responsibilities, or a decision causing a significant change in benefits.’”

In University of Texas Southwestern Medical Center v. Nassar, the Court ruled that under the retaliation provision of Title VII, a plaintiff must prove that retaliation was the “but-for” reason for an action against an employee (the decisive reason, rather than just one motivating factor).  Justice Anthony Kennedy writing for the majority, held that retaliation claims under Title VII of the Civil Rights Act of 1964 must be proven under traditional “but for” causation principles.

The issue presented in Nassar was whether the retaliation provision of Title VII [42 U.S.C. § 2000e-3(a)], and similarly worded statutes require a plaintiff to prove but-for causation (i.e., that an employer would not have taken an adverse employment action “but for” an improper motive), or instead require only proof that the employer had a mixed motive (i.e., that an improper motive was one of multiple reasons for the employment action). Prior decisions had determined that an individual would win a racial discrimination case if that person could show that the “motivating factor” in not hiring was racial.

What this means is that, effectively, a plaintiff must prove that the employer would not have taken action if an EEOC complaint had not been filed by the employee.

Price is Right Model-Suit Update

We previously reported about the $7.7 Million verdict won by former "Price is Right" Model, Brandi Cochran, in her pregnancy discrimination lawsuit.  (See http://themploymentlaw.blogspot.com/2012/12/price-is-right-model-wins-77-mil-in.html) However, according to the Hollywood Reporter (see link below), that $7.7 Million verdict in favor of Ms. Cochran, has been set aside, and a new trial ordered.

After Cochran won her trial, the California Supreme Court made a decision about jury instructions in a mixed motive discrimination case. In Harris v. City of Santa Monica, No. S181004 (Cal. Feb. 7, 2013), the Supreme Court held that to establish liability in “mixed motive” employment discrimination cases under the California Fair Employment and Housing Act (FEHA), the employee must show that unlawful discrimination was a substantial factor motivating the adverse employment decision. Thus, per Harris, Judges need to instruct the jury that discrimination is not just a "motivating factor/reason" for termination but a "substantial motivation factor/reason." 

In the Cochran case, Judge Kevin Brazile failed to issue this "substantial" guidance despite a request from the defendants. Judge Brazile was then asked by the defense to set aside the verdict and dismiss the case.  Judge Brazile rejected this argument, noting that  "the evidence established that Defendants discriminated against Plaintiff, terminating her on the grounds of her prior pregnancy and complications ... the evidence is sufficient to support the verdict." However, given the decision in Harris, Judge Brazile said the "instruction error cannot be considered harmless," and was compelled to grant a new trial. 

[Hollywood Reporter link: http://www.hollywoodreporter.com/thr-esq/price-is-right-models-77-428148]

New (Required) I-9 Forms for New Employees

On March 8, 2013, the U.S. Citizenship and Immigration Services (USCIS) published a revised Form I-9, which employers should begin using for all new hires (and those being "re-verified").  Under the new rules,  after May 7, 2013, employers must only use the revised Form I-9 dated 03/08/13 for all new hires and reverifications.  Employers are not required to complete the new Form I-9 for current employees if a properly completed Form I-9 is already on file, and employers may continue to use previously accepted revisions (I-9 Forms dated 02/02/09 and 08/07/09) until May 7, 2013. 

The revised Form I-9 includes new fields in Section 1 for employees to provide their email address, telephone number.  It also includes new sections for aliens, requesting additional information about their work status. 

The revised Form I-9 also contains six pages of instructions rather than three, which the USCIS hopes will provide clearer directions to both the employee and the employer about how to complete the Form I-9.

To get the new form, you can click on the following link: http://www.uscis.gov/files/form/i-9.pdf 

New Laws Affecting Employers/Employees for 2013

Every year the California legislature adds a few wrinkles to the practice of employment law.  This year is no different.  While there are many others, the following are 3 new laws that affect areas that I deal with quite often.

     Mistakes on Wage Statements (SB 1255/Labor Code § 226):

It has been the law for some time that employers are required to provide nine categories of information on an employee's wage statement.  However, this new law makes clear that if an employer fails to provide that information, employees are deemed to suffer an "injury" for the purpose of recovering a penalty: $50 for the initial pay period; $100 for each subsequent pay period, with a maximum penalty of $4,000, as well as attorneys' fees.  To avoid costly mistakes, employers should ensure that the following nine pieces of information appear on each employee's wage statement:

1.    Name and address of the legal entity who is the employer; and

2.    Gross wages earned;

3.    Total hours worked (except for exempt employees);

4.    Piece rate units or piece rates (if applicable);

5.    All deductions;

6.    Net wages earned;

7.    The inclusive dates of the period for which the employee is paid;

8.    Employee name and last four digits of the social security number or employee ID;

9.    All applicable hourly rates in effect during the pay period and corresponding number of hours worked.

Employers Barred From Requesting Social Media Information. (AB 1844/Labor Code § 980): 

This new law increases privacy protections for social media users in the state by prohibiting employers from asking employees or job applicants to disclose any information related to their personal social media accounts, which includes an employee's e-mail account and text messages.  This protection includes demanding usernames, passwords, and information related to social media accounts from employees and job applicants. The law also prohibits employers from retaliating against anyone who refuses to provide such information.

However, the law provides an exception where the employer reasonably believes that the employee has engaged in misconduct or has violated the law, and the social media information is used solely for the purpose of an investigation.  Further, nothing in this section precludes an employer from requiring or requesting an employee to disclose a username, password, or other method for the purpose of accessing an employer-issued electronic device.

Current and Former Employees Get Greater Access to their "Personnel Files." 

A new bit of legislation (AB 2674 ) modifies Labor Code §§ 226 and 1198.5.  Under these revised sections, Employers are required to provide current and former employees with access to and copies of their personnel records "relating to the employee's performance or to any grievance concerning the employee" within 30 days of the request.  (The law previously required only that they be made “available for inspection.”)

The new law does not clearly define "personnel records" but some examples of personnel records are: handbook acknowledgment forms; signed arbitration agreements; employment applications; payroll authorization forms; warnings, discipline and/or termination notices; notices of layoff, leave of absence, or vacation; garnishment notices; training notices; performance reviews; and attendance records.  Failure to comply with this new law may subject an employer to a penalty of $750 per violation, as well as attorneys' fees. With regard to all employees, employers are also required to maintain a copy of each employee's personnel records for a period of not less than three years after termination of employment.

Federal employee receives a 5-page written warning for . . . passing gas!

Okay, so the year is winding down and we don't always want to hear/read stories that are "too legal."  So, we offer the following story from The Smoking Gun website about a Social Security Administration employee disciplined for being to gaseous.  

According to the Smoking Gun account, the federal employee was formally reprimanded this month for excessive workplace flatulence, a sanction that was delivered to him in a five-page letter that actually included a log of representative dates and times when he was recorded “releasing the awful and unpleasant odor” in his Baltimore office.  (To view the memo, click the following link http://www.thesmokinggun.com/file/gas-attack-work?page=0, provided via the Smoking Gun, which provided content for this post.) 

The reprimand, which apparently came after at least three flatulence related meetings with his supervisors, accused the employee of “conduct unbecoming a federal officer,” and he  was informed that his “uncontrollable flatulence” had created an “intolerable” and “hostile” environment for coworkers, several of whom have lodged complaints with supervisors. 

I guess this will all make us think twice about overindulging at "Taco Tuesday."  


[Substantial content for this post derived from http://www.thesmokinggun.com/documents/coworkers-attacked-by-gas-645132 ]

'Price Is Right' Model Wins $7.7 Mil In Pregnancy Discrimination Lawsuit

Brandi Cochran, a former Price is Right model, was awarded $7.7 Million (including $7 Mil. in punitive damages) against the producers of the day-time TV game show, for allegedly discriminating against her based on her pregnancy. 

Under California law, employees who have been discriminated against can recover a wide range of damages, including compensatory damages (lost wages from the date of firing up through trial, future earnings, the costs of medical care, and interest on damages), emotional distress damages and, in many cases, attorney’s fees.  In some cases, such as this Price is Right case, employers may be vulnerable to punitive damages, designed to punish the employer and deter further discriminatory acts.

Ms. Cochran had worked on the show for seven years before getting pregnant.  Cochran alleged that, shortly after she told producers that she was pregnant, her executive producer asked about how long was she planning to work, and whether she would try to work if she got "really big." Then, after gaining weight, other show employees teased her about the weight gain and called her insulting names such as "wide load."  She also claimed that the producers pressured to announce her pregnancy on the air, and when she delivered the news that she was carrying twins, she was given less work. Ms. Cochran further alleged that, after taking maternity leave in 2010, the producers refused to call her back and then fired her after four months.  She filed suit.

The LA jury agreed with Ms. Cochran and awarded the former model $7,763,440 in damages, including $776,000 in compensatory damages and a substantial $7 million in punitive damages.  

The show’s producers, FremantleMedia, have stated that they would be appealing the ruling because they claim that the court refused to allow the jury to hear evidence that the show had allowed other models to appear on the show while pregnant.  (I would also expect the punitive damages award to be challenged, based on the Supreme Court case of State Farm Mut. Auto. Ins. Co. v. Campbell (2003) 538 US 408, 133 S.Ct. 1513, which held that punitive damages awards ordinarily should not exceed compensatory damages by more than a single-digit ratio.) 

Employers' Meal/Rest Period Obligations Under Brinker

The Second District California Court of Appeal, Division Eight, ruled for the second time, in an order published Aug. 21, 2012, that a Mexican fast food chain need only provide its workers with breaks, not ensure that the employees actually take the breaks. [Rogelio Hernandez v. Chipotle Mexican Grill, Inc., No. B216004, --- Cal.Rptr.3d ----, 2012 WL 3579567 (Cal.App. 2 Dist.), 12 Cal. Daily Op. Serv. 10,126]

In so deciding, the 2d District explicitly referred to Brinker, stating that Brinker has conclusively resolved this issue, and noted:

Our Supreme Court determined that “[a]n employer's duty with respect to meal breaks under both section 512, subdivision (a) and Wage Order No. 5 is an obligation to provide a meal period to its employees. The employer satisfies this obligation if it relieves its employees of all duty, relinquishes control over their activities and permits them a reasonable opportunity to take an uninterrupted 30–minute break, and does not impede or discourage them from doing so. [¶] On the other hand, the employer is not obligated to police meal breaks and ensure no work thereafter is performed.

The "tip" for employers is to make sure that their policies correctly dictate that employees are required to take their meal and rest breaks and "relieve" them of all employment duties during such breaks.  However, as noted, the employer is not required to "police" such break taking.  

No Attorneys' Fees in Meal/Rest Break Cases in California

Coming on the heels of its decision in Brinker Restaurant Corporation v. Superior Court (2012) 53 Cal.4th 1004, 139 Cal.Rptr.3d 315, on April 30th, the California Supreme Court issued another ruling limiting the scope of recovery in lawsuits alleging failure to provide the employee meal and rest breaks required by California law. As set forth in Kirby v. Immoos Fire Protection, Inc. (2012) --- P.3d ----, 2012 WL 1470313 (Cal.) ("Kirby"), the Supreme Court held that a neither a plaintiff nor a defendant can recover attorneys’ fees as a "prevailing party" in action for an employer’s alleged failure to provide rest breaks brought under California Labor Code § 226.7.

In Kirby, the former employee plaintiffs brought an action against the employer for various labor and wage law violations. After their motion for class certification was denied, the former employees dismissed the case. The defendant employer then moved to recover attorneys' fees as the "prevailing party." The trial court granted the employer's request for attorney fees, and the employees appealed, arguing that only prevailing employees should be entitled to recoup attorneys’ fees in actions brought under Section 226.7. The employer, on the other hand, argued that because it was the prevailing party in the lawsuit, it should be allowed to recover its attorneys’ fees from the plaintiffs. The Supreme Court rejected both arguments.

Perhaps foreshadowing their conclusion, the Court noted initially that it "granted review to consider when, if ever, a party who prevails on a section 226.7 action for an alleged failure to provide rest breaks may be awarded attorney's fees." (Emphasis added)

First, the Court assessed the possible recovery of attorneys' fees under the "one-way" attorney fee shifting provisions of Labor Code § 1194, which entitles “any employee receiving less than the legal minimum wage or the legal overtime compensation ... to recover in a civil action the unpaid balance of the full amount of this minimum wage or overtime compensation ... [and] reasonable attorney's fees..." [Labor Code § 1194(a)] The Court held that this section was inapplicable, finding: "[w]e conclude that [Labor Code] section 1194 does not authorize an award of attorney's fees to employees who prevail on a section 226.7 action for the non provision of statutorily mandated rest periods."

Secondly, the Court addressed the defense argument that it was entitled to recover fees under Labor Code § 218.5, which authorizes "prevailing parties" (i.e. either the defense or the plaintiff) to receive attorneys’ fees in actions for the nonpayment of wages or fringe benefits. The question, as phrased by the Court was "whether a section 226.7 claim, which concerns an employer's alleged failure to provide statutorily mandated meal and rest periods, constitutes an 'action brought for the nonpayment of wages' within the meaning of section 218.5." The Court concluded that it does not.

The Supreme Court analyzed the potential recovery of attorneys' fees for Section 226.7 violations from the perspective of two other sections of the Labor Code dealing with attorneys' fees; one of which provides for prevailing employees to recover attorneys’ fees in actions for any unpaid legal minimum wages or legal overtime compensation (Labor Code § 1194), while the other authorizes prevailing parties to receive attorneys’ fees in actions for the nonpayment of wages or fringe benefits (Labor Code § 218.5). The Court found that neither of the attorneys' fees statutes applied to Section 226.7. ("We conclude, in light of the relevant statutory language and legislative history, that neither section 1194 nor section 218.5 authorizes an award of attorney's fees to a party that prevails on a section 226.7 claim.")

Brinker Finally Decided

The California Supreme Court finally handed down its decision in Brinker Restaurant Corporation v. Superior Court ("Brinker") on April 12, 2012. Though important in both the Class Action and "wage & hour" contexts, our focus here is on the latter.

For some background, Brinker involved a class action case where a group of hourly non-exempt employees brought a class action against the restaurant employer claiming that the employer failed to comply with meal and rest period obligations and also required employees to work off the clock. The employees specifically claimed that: 1) the employer’s practice of having employees take “early lunches” shortly after starting their shift and then requiring them to work another five to ten hours without receiving another meal period violated Labor Code section 512(a) and the wage orders; 2) they were not provided their rest periods between their second and fourth hour of work, and were not provided the rest period before the first meal period; and 3) they were required to work off the clock when they were clocked out for their meal periods.

The 4th District Court of Appeal held that "while employers cannot impede, discourage, or dissuade employees from taking" rest periods or meal breaks, "they need only provide, not ensure" that rest breaks and meal periods are taken. (Emphasis supplied.) In so holding, the Court of Appeal adopted both the legal and the policy rational of White v. Starbucks Corp., 497 F. Supp. 2d 1080 (N.D. Cal. 2007), agreeing with the principle that it would be logistically impracticable for large corporations to police whether their employees actually took the provided meal and rest breaks and that such a law would provide perverse incentives to the workforce to shorten or skip meal periods (and presumably attempt to reap the benefits of additional compensation in the form of "meal penalties").

Though Brinker is largely a decision on the propriety of class certification, the Supreme Court noted that the parties had requested guidance on the wage and hour issues and obliged them (and those of us who deal with these issues) with this decision. The Court then weighed in on "the nature of an employer's duty to provide meal periods," concluding that an "employer's obligation is to relieve its employee of all duty, with the employee thereafter at liberty to use the meal period for whatever purpose he or she desires, but the employer need not ensure that no work is done."

A particularly important passage from the decision provides:

To summarize: An employer’s duty with respect to meal breaks under both section 512, subdivision (a) and Wage Order No. 5 is an obligation to provide a meal period to its employees. The employer satisfies this obligation if it relieves its employees of all duty, relinquishes control over their activities and permits them a reasonable opportunity to take an uninterrupted 30-minute break, and does not impede or discourage them from doing so. What will suffice may vary from industry to industry, and we cannot in the context of this class certification proceeding delineate the full range of approaches that in each instance might be sufficient to satisfy the law.

On the other hand, the employer is not obligated to police meal breaks and ensure no work thereafter is performed.

(Emphasis added)

As to the timing of when those meal breaks should be taken, the Court held that: "we conclude that Wage Order No. 5 imposes no meal timing requirements beyond those in section 512. Under the wage order, as under the statute, an employer‟s obligation is to provide a first meal period after no more than five hours of work and a second meal period after no more than 10 hours of work."

While it is hard to distill a 62-page decision down into a single blog post, from a "wage and hour" perspective, we believe that the 3 most important aspects of the decision are these:

(1) Employers do NOT have a legal duty to permit their employees a rest period before any meal period;

(2) Under Wage Order No. 5 and Labor Code section 512, subdivision (a), an employer must relieve the employee of all duty for the designated period, but need not ensure that the employee does no work; and

(3) That an employer has great flexibility in scheduling the meal periods, since its obligation is simply to provide a first meal period after no more than five hours of work and a second meal period after no more than 10 hours of work.

New CA Law Affects Employers Using Credit Reports in Making Hiring Decisions

A new law, effective January 1, 2012, substantially limits when and how an employer in California can use consumer credit information in making hiring and other employment decisions.

Assembly Bill 22 (which can be viewed by going to http://www.leginfo.ca.gov/pub/05-06/bill/asm/ab_0001-0050/ab_22_bill_20050921_chaptered.pdf) strictly prohibits employers and prospective employers from using a consumer credit report for employment purposes, unless the position of the person for whom the report is sought meets any of the following criteria:

• A “managerial” position (AB 22 defines a “managerial position” as an employee covered by the executive exemption set forth in the Industrial Welfare Commission’s Wage Order 4, Section 1, paragraph (A)(1);8 Cal. Code Regs. § 11040.);
• A position in the state Department of Justice;
• A sworn peace officer or other law enforcement position;
• A position for which the information contained in the report is required by law
to be disclosed or obtained;
• A position involving “regular access” to (1) the bank or credit card account
information, (2) the Social Security number, and (3) the date of birth of any
one person;
• A position held by (1) a named signatory on the employer’s bank or credit
card account, (2) someone authorized to transfer money on behalf of the
employer, or (3) someone authorized to enter into financial contracts on
behalf of the employer;
• A position that involves access to "trade secrets" (For the purposes of AB 22, trade secrets are defined in the same way as in California’s Uniform Trade Secrets Act, Cal. Civ. Code § 3426 et seq.);

Employers should keep these new guidelines in mind when hiring new employees.

Wage & Hour Watch- Rest and Lunch Rules FINALLY to Get Clarified

The California Supreme Court has finally set a hearing in Brinker Restaurant Corp. v. Superior Court (Hohnbaum)(2008) 165 Cal.App.4th 25, which will be argued on Tuesday, November 8, 2011 at 9:00 a.m. in San Francisco. For employment lawyers, Brinker is one of the most eagerly-awaited cases on the California Supreme Court's docket, but has languished with the High Court for some time (the petition for review, filed more than three years ago).

The case presents issues concerning the proper interpretation of California's statutes and regulations governing an employer's duty to provide meal and rest breaks to hourly workers. In short, the issue is whether an employer need only make such breaks "available," or must the employer "ensure" that such breaks are taken. The 53 page Appellate decision, which essentially came down on the side of "make available" v. "ensure," can be summed up with the following excerpts from the opinion:

Reconsidering the matter following a transfer from the California Supreme Court and our vacating of the original opinion in this matter, we first recognize that "in light of the remedial nature of the legislative enactments authorizing the regulation of wages, hours and working conditions for the protection and benefit of employees, the statutory provisions are to be liberally construed." (Industrial Welfare Com. v. Superior Court (1980) 27 Cal.3d 690, 702.) We also recognize mandatory rest and meal breaks have "have long been viewed as part of the remedial worker protection framework" designed to protect workers' health and safety. (Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, 1105, 1113 (Murphy).) In addition, we note that in construing the applicable statutes and regulations, we look to the plain language of the laws and interpret them in a manner consistent with the Legislature's intent. (Fitch v. Select Products Co. (2005) 36 Cal.4th 812, 818.)

With these principles in mind, we conclude ... that (1) while employers cannot impede, discourage or dissuade employees from taking rest periods, they need only provide, not ensure, rest periods are taken; (2) employers need only authorize and permit rest periods every four hours or major fraction thereof and they need not, where impracticable, be in the middle of each work period; (3) employers are not required to provide a meal period for every five consecutive hours worked; (4) while employers cannot impede, discourage or dissuade employees from taking meal periods, they need only provide them and not ensure they are taken; and (5) while employers cannot coerce, require or compel employees to work off the clock, they can only be held liable for employees working off the clock if they knew or should have known they were doing so. We further conclude that because the rest and meal breaks need only be "made available" and not "ensured," individual issues predominate and, based upon the evidence presented to the trial court, they are not amenable to class treatment.

(Since this matter was/is a Class Action case, the Court also noted that "off-the-clock claims are also not amenable to class treatment as individual issues predominate on the issue of whether [the employer] forced employees to work off the clock, whether [the employer] changed time records, and whether [the employer] knew or should have known employees were working off the clock" and thus struck down class certification.)

The reason for the Supreme Court review is that there appears to be a clear "split of authority" on this issue. In Cicairos v. Summit Logistics, Inc., the California Court of Appeal stated that employers have “an affirmative obligation to ensure that workers are actually relieved of all duty.” [Cicairos v Summit Logistics, Inc. (2005) 133 Cal.App.4th 949, 962]. It has been contended that this means that employers have an affirmative obligation to force employees to take their meal periods and that employees cannot refrain or refuse to take their meal periods.

Following the Supreme Court's acceptance of Brinker for review, the DLSE issued an October 23, 2008 memo to its enforcement staff that provided that the DLSE would enforce the "available" rather than "ensure" standard, stating:

"As the federal court in Brown v. Federal Express Corporation explained:

It is an employer’s obligation to ensure that its employees are free from its control for thirty minutes, not to ensure that the employees do any particular thing during that time. (249 F.R.D. 580, 585 (C.D.Cal. 2008)).

In addition, numerous, other federal courts in California have similarly held that employers are not obligated to ensure that their employees take meal periods. They include White v. Starbucks (N.D.Cal. 2007) 497 F.Supp.2d 1080; Perez v. Safety-Kleen Systems, Inc. (N.D.Cal. July 28, 2008) 2008 WL 2949268; Kenny v. Supercuts (N.D.Cal. June 2, 2008) 2008 WL 2265194, Salazar v. Avis Budget Group (S.D.Cal, July 2, 2008) 251 F.R.D. 529; Kimoto v. McDonald’s Corp. (C.D.Cal. August 28, 2008) 2008 WL 4069611; and Gabriella v. Wells Fargo Financial, Inc. (N.D.Cal August 4, 2008) 2008 WL 3200190.

Given that the Supreme Court typically has 90 days from oral argument to issue its decision, we can probably expect a definitive resolution of this key "wage and hour" issue by January 2012.

How to Deal with "Stale" Complaints of Harassment/Discrimination

In trying to stay current on employment issues, I belong or subscribe to a number of organizations, networking groups, forums, etc. In one of those networking group discussions, the question recently posed was how to deal with "stale" claims of harassment and/or discrimination.

The specific situation at issue involved an employer that apparently had dealt with a spate of claims from former employees that were anywhere from 12-24 months old. The question then was whether the employer could "spend less resources" investigating such claims. The response from colleague Nancy Richards-Stower in New Hampshire was quite good, and applicable here in California. She suggested that investigation of "stale" claims should be no different from more current ones, noting that "showing good faith and an interest in investigating fresh complaints is a best practice."

Ms. Richards-Stower then suggested circulating a memo to employees to remind them that concerns about violations of Company anti-harassment and anti-discrimination policies require employees to report their concerns right away to a designated person (usually someone in the Human Resources office). Such a memo should also highlight that the Company's ability to respond promptly to concerns is dependent upon timely reports.

This "stale claims" memo should also include a reminder that the Company's anti-retaliation policies forbid anyone retaliating against employees for reporting harassment or discrimination experienced by the employee directly, or by others. (If an employer's personnel manual doesn't include such language, it should.) In the event of future litigation, such a reminder to employees of company policies could serve as evidence of the employer's good faith in responding to harassment and discrimination complaints.

Covered employers have the obligation to investigate all claims of harassment and discrimination under California law, and the fact that some claims are "old" or "stale" does not diminish the employer's duty to investigate. From an employer's perspective, it is best to fully document the investigation efforts, and a memo such as the one suggested above further serves that purpose.

This discussion leads to a further point that I have made repeatedly in the past; a "best practice" (whether as an employee or employer) is to document as much as possible.

If an employee is harassed, documented evidence of such harassment in the form of emails, memos, diary entries or other tangible media, are far more persuasive to a jury than simple "he said/she said" testimony. Similarly, employers defending against such claims are far more likely to sway a jury if they can show that they made tangible (read "documented") efforts to limit harassment and discrimination, or to respond effectively to such claims when they arise. Employers and employees both benefit by clearly stated and documented policies. Thus, employers are encouraged to routinely circulate memos reiterating established policies, to foster employee understanding of those policies. Employees benefit from having clear ideas of what will or will not be tolerated in the workplace.

I've found that many potential employee issues can be avoided by "managing expectations" and regular communication with employees helps significantly in that regard. In the end, we all benefit from harassment and discrimination free work environments, and these efforts move us all toward that goal.

The "Dirty Dozen" of Legal Writing

I saw an article from the June Issue of the ABA Journal called "Dirty Dozen: 12 Ways to Write a Really Bad Brief" (see the link below), describing 12 "Donts" of legal writing, and thought I'd share. Looking at this from a more "positive" standpoint, I think that if you take anything away from these 12 "Don'ts", it is the following "Dos":

(1) Be brief;
(2) Be reasonable; and
(3) Be real.

Something that we may all, from time to time, forget is the "Golden Rule" of being an effective lawyer: Avoid the temptation to "sound like a lawyer." If you're too long-winded, too much of an advocate, and use too much legalese, you lose your audience (and in the case of legal brief, you lose the judge you're trying to convince). I also find that these 3 simple rules work well in trial when talking with jurors.

http://www.abajournal.com/magazine/article/dirty_dozen/

"Stray Remarks" Doctrine Repudiated

Back in December 2009, I posted regarding Reid v. Google, Inc. (2007) 155 Cal. App. 4th 1342,66 Cal.Rptr.3d 744, review granted, 72 Cal.Rptr.3d 112. One issue addressed by Reid was whether California law should recognize the so-called "stray remarks" doctrine when ruling on summery judgment. The “stray remarks” rule set forth in the Federal Courts, allows courts to deem racist or sexist remarks insufficient to support denial of summary judgment if the remarks are considered “stray.” [see Reid v. Google, Inc., 66 Cal.Rptr.3d 744, 759]

In August 2010, the California Supreme Court issued its opinion on this issue in Reid v. Google (2010) 50 Cal. 4th 512, 113 Cal.Rptr. 3d 327. There, the Supreme Court essentially repudiated application of the "stray remarks" doctrine in California, holding that even stray remarks must be viewed in context of all the plaintiff's evidence. The Court found that it was impermissible on a motion for summary judgment to "weigh and assess the remarks in isolation, and to disregard the potentialy damaging nature of discriminatory remarks simply because they are allegedly 'stray remarks' made by 'ondecisionmakers or [made by those] unrelated to the decisional process.'" [Reid, supra, 50 Cal. 4th at 540]

The significance of this decision is that employers cannot argue that discriminatory or harassing comments made within the workplace are merely "stray remarks" as a way of avoiding liability. The Supreme Court reaffirmed the rule in California that the plaintiff's evidence in such discrimination and/or harassment cases must be decided using a "a totality of circumstances analysis." [Reid, supra, 50 Cal. 4th at 541]

Private Email Communication?

Playing off a theme from recent posts, we again address the issue of employee privacy in the workplace. A recent case out of Sacramento [Holmes v. Petrovich Development Company LLC (2011) --- Cal.Rptr.3d ----, 2011 WL 117230 ("Holmes")] essentially says that employee emails, even those to or from the employee's attorney, are subject to employer review and therefore not private. (A copy of the Court's decision can be viewed here. http://www.courtinfo.ca.gov/opinions/documents/C059133.PDF)

In Holmes, Plaintiff Gina Holmes was hired as an assistant to the CEO of Petrovich Development Co. LLC, Paul Petrovich in June 2004. At the time of her hiring, she was provided with an employee handbook, which Holmes admitted reading and signing. That handbook contained provisions clearly spelling out the policy concerning use of the company's technology resources, such as computers and e-mail accounts. The handbook directs employees that the company's technology resources should be used only for company business and that employees are prohibited from sending or receiving personal e-mails. Moreover, the handbook warns that “[e]mployees who use the Company's Technology Resources to create or maintain personal information or messages have no right of privacy with respect to that information or message.” The “Internet and Intranet Usage” policy in the handbook specifically states, “E-mail is not private communication, because others may be able to read or access the message. E-mail may best be regarded as a postcard rather than as a sealed letter....” The handbook spells out further that the company may “inspect all files or messages ... at any time for any reason at its discretion” and that it would periodically monitor its technology resources for compliance with the company's policy.

Holmes advised the CEO that she was pregnant in July 2004, which apparently caused a strain in her employment relationship with the CEO. The two exchanged emails about Holmes' leave and what the CEO would do during her pregnancy leave. Apparently concerned that Holmes would quit, Petrovich forwarded the emails to HR. Holmes, meanwhile consulted a lawyer while at work. Holmes became upset that Petrovich was forwarding her emails to others in the organization and quit, claiming, inter alia, constructive discharge, discrimination, and harassment. She filed suit in September 2005, discovery ensued, and the defense sought summary judgment ("MSJ") on her claims in November 2006.

As a result of the MSJ, most of Holmes' claims were dismissed except for the intentional infliction of emotional distress and invasion of privacy claims. At trial, Plaintiff lost on those claims. Holmes then appealed claiming that the trial court should not have allowed Petrovich to use the emails she sent to a lawyer. The 3rd District disagreed. Noting that the employer had a pretty clear company policy regarding use of electronic media, the Court stated:

Although a communication between persons in an attorney-client relationship "does not lose its privileged character for the sole reason that it is communicated by electronic means or because persons involved in the delivery, facilitation, or storage of electronic communication may have access to the content of the communication" (§ 917, subd. (b)), this does not mean that an electronic communication is privileged (1) when the electronic means used belongs to the defendant; (2) the defendant has advised the plaintiff that communications using electronic means are not private, may be monitored, and may be used only for business purposes; and (3) the plaintiff is aware of and agrees to these conditions. A communication under these circumstances is not a “„confidential communication between client and lawyer‟” within the meaning of section 952 because it is not transmitted “by a means which, so far as the client is aware, discloses the information to no third persons other than those who are present to further the interest of the client in the consultation . . . .” (Ibid.)

The Court in Holmes also noted:

When Holmes e-mailed her attorney, she did not use her home computer to which some unknown persons involved in the delivery, facilitation, or storage may have access. Had she done so, that would have been a privileged communication unless Holmes allowed others to have access to her e-mails and disclosed their content. Instead, she used defendants‟ computer, after being expressly advised this was a means that was not private and was accessible by Petrovich, the very person about whom Holmes contacted her lawyer and whom Holmes sued. This is akin to consulting her attorney in one of defendants‟ conference rooms, in a loud voice, with the door open, yet unreasonably expecting that the conversation overheard by Petrovich would be privileged.

[As an aside, we note that the Court in Holmes discussed in some length the Quon case, previously addressed in our blog. (See our June 17, 2010 blog entry.)]

The lessons to be learned here are: (1) from an employee perspective, there is little "expectation of privacy" in company emails (or other electronic communication), provided there is a clearly defined employer policy on the issue in place, and an employee should simply avoid communicating with lawyers, or others, that he or she wants to keep "private" using workplace electronic devices because such communications may not be private or privileged;(2) from an employer perspective, it is important that the Company's eletronic media policy be very clearly defined and documented-if so, such a policy will likely be upheld.

Tips for Employers in a tough economy...

I saw an interesting commentary in the OC Register over the Labor Day weekend about some of the pitfalls of getting "creative" with employee rewards in a tough economy and thought that I would share. The bottom line is that an employer must be careful in exactly how he/she tries to "reward" loyal employees by giving them newer, more important sounding, titles as a means of avoiding pay raises....

You can see the article for yourself at http://jan.ocregister.com/2010/08/30/title-instead-of-a-raise-watch-out/44309/

Supreme Court Okays Search of Employee Text Messages

In December we posted an entry regarding privacy of text messages in the employment arena, highlighting the case of Quon v. Arch Wireless Operating Co., Inc. 529 F.3d 892 (9th Cir. 2008); review granted City of Ontario, Cal. v. Quon, --- S.Ct. ----, 2009 WL 1146443, (U.S. Dec 14, 2009) (NO. 08-1332). The case centered on whether an employer has a right to review an employee's text messages. On June 17, 2010, the U.S. Supreme Court issued its ruling on that case and, in a fairly narrow opinion, held that the employer did have the right to review the text messages.

To review, in 2001, the Ontario Police Dept. ("OPD") bought and issued pagers to Jeff Quon ("Quon") and other SWAT Team members in order to help the SWAT Team mobilize and respond to emergency situations. The pagers were administered through Arch Wireless ("Arch"), who billed OPD directly for the pager service. At the time that the pagers were issued, OPD had a “Computer Usage, Internet and E-Mail Policy” (Computer Policy) that applied to all employees. The policy provided that the City “reserves the right to monitor and log all network activity including e-mail and Internet use, with or without notice. Users should have no expectation of privacy or confidentiality when using these resources.” Though the policy did not explicitly apply to text messages, the Court found that meetings were held whereby OPD warned employees that it would apply to their newly issued pagers. After issuance of the pagers, the bills for the pager usage showed "overages" above and beyond the number of characters allotted under OPD's plan. These overages were apparently overlooked by the department's supervisors, if the employee agreed to pay for the excess charges.

After several months of overages, Lloyd Scharf, the Chief for OPD, decided to audit the usage of the pagers, apparently claiming that he was "tired of being a bill collector" and to determine if the pagers were being used for actual OPD business or personal use. At the Chief's direction, OPD requested the textual content of the pages from Arch, and a review of the texts appeared to establish that Quon was using his pager predominantly for personal use. (According the Court's findings of fact, Arch supplied the actual content of the texts which appeared to show that Quon sent or received 456 messages during work hours in the month of August 2002, of which no more than 57 were work related; he sent as many as 80 messages during a single day at work; and on an average workday, Quon sent or received 28 messages, of which only 3 were related to police business.) Quon then allegedly faced discipline for violating OPD rules by pursuing personal matters while on duty.

What gives these facts the additional "sex appeal" is that on reviewing the text messages, many were salacious or sexual in nature, including texts between his ex-wife and new girlfriend and others in the department. Quon and other officers whose messages were also reviewed in the Quon inquiry sued both the department and Arch, claiming violation of their 4th Amendment rights, and violation of the Stored Communications Act ("SCA").

On competing motions for Summary Judgment, the District Court held, relying on the plurality opinion in O’Connor v. Ortega, 480 U. S. 709, that Quon had a "reasonable expectation of privacy" in the content of his messages. Whether the audit was nonetheless reasonable, the court concluded, turned on whether Chief Scharf used it for the improper purpose of determining if Quon was using his pager to waste time, or for the legitimate purpose of determining the efficacy of existing character limits to ensure that officers were not paying hidden work-related costs. “[I]f the purpose for the audit was to determine if Quon was using his pager to‘play games’ and ‘waste time,’ then the audit was not constitutionally reasonable”; but if the audit’s purpose“was to determine the efficacy of the existing character limits to ensure that officers were not paying hidden work related costs, . . . no constitutional violation occurred.” [445 F. Supp. 2d, at 1146.] The District Court then held a jury trial to determine the purpose of the audit. The jury concluded that Scharf ordered the audit to determine the efficacy of the character limits. The District Court accordingly held that petitioners did not violate the Fourth Amendment. It entered judgment in their favor. Quon appealed to the 9th Circuit.

The 9th Circuit reversed, in part. The panel agreed with the District Court that Quon had a "reasonable expectation of privacy" in his text messages but disagreed with the District Court about whether the search was reasonable. Even though the search was conducted for “a legitimate work-related rationale,” the Court of Appeals concluded, it “was not reasonable in scope.” [529 F. 3d 892, 980 (2008)] Which all leads us to the Supreme Court's finding, overruling the 9th Circuit.

Justice Kennedy, writing for the Court, held that the review of Quon’s pager transcripts was reasonable because it was motivated by a legitimate work-related purpose, and because it was not excessive in scope. Echoing the findings of the District Court and the 9th Circuit, the Court found that Quon did have an expectation of privacy, and deemed the review of his text messages to be "searches" under the 4th Amendment. However, the Court concluded that the "searches" were justified and that OPD had “reasonable grounds for [finding it] necessary for a noninvestigatory work-related purpose,” in that the Chief had ordered the audit to determine whether the City’s contractual character limit was sufficient to meet the City’s needs. The review of Quon's messages was also “reasonably related to the objectives of the search,” because both the City and OPD had a legitimate interest in ensuring that employees were not being forced to pay out of their own pockets for work-related expenses, or, on the other hand, that the City was not paying for extensive personal communications. Reviewing the transcripts was an efficient and expedient way to determine whether either of these factors caused Quon’s overages, and the review was also not “excessively intrusive.” It is clear that the Court accepted that Quon had a "reasonable expectation of privacy", but concluded that his 4th Amendment rights were not violated, and instead focused on the fact that the search was legitimately work-related and not excessively instrusive.

While this case dealt with government workers, Justice Kennedy also suggested that under the same set of facts, its ruling would apply to all workers - public or private. ("The court also concludes that the search would be regarded as reasonable and normal in the private-employer context.")

Interestingly, Justice Kennedy also cautioned employees about using employer electronics for personal use. While he noted that it is true that many employers accept or tolerate personal communications on company time and equipment, he also suggested that employees who want to avoid the potential embarrassment of having those communications revealed might "want to purchase and pay for their own" cell phones and other devices.

Concluding thoughts-

First of all, from the employee's perspective, we think that the important lesson provided here would be just what Justice Kennedy addressed, almost in passing. If you don't want your employer knowing about what you post in an email or on other electronic media, don't use the equipment provided by the employer.

From the vantage point of the employer, a "first blush" reading of this case might lead one to believe that this is a significant "employer's rights" victory. However, we would caution that this case is, in the Court's own words, to be narrowly applied in this electronic age. As noted by Justice Kennedy, the "Court must proceed with care when considering the whole concept of privacy expectations in communications made on electronic equipment owned by a government employer. The judiciary risks error by elaborating too fully on the Fourth Amendment implications of emerging technology before its role in society has become clear. See, e.g., Olmstead v. United States, 277 U. S. 438 (1928), overruled by Katz v. United States, 389 U. S. 347, 353 (1967)." He also added that "[p]rudence counsels caution before the facts in the instant case are used to establish far-reaching premises that define the existence, and extent, of privacy expectations enjoyed by employees when using employer-provided communication devices..." and that a "broad holding concerning employees’ privacy expectations vis-à-vis employer-provided technological equipment might have implications for future cases that cannot be predicted. It is preferable to dispose of this case on narrower grounds."

In short, it appears that the Court concedes it cannot keep up with the technology, saying its ruling applied to the facts of this case, and cautioned against predicting the outcome of future cases based on this one.

The key issue going forward for employer/employee policy relations is that the employer intending to review employee communication on company equipment must make that a clearly communicated policy and, to be safe, make sure that your employees acknowledge receipt of the policy.

To review the complete Supreme Court opinion, go to http://www.supremecourt.gov/opinions/09pdf/08-1332.pdf