California Workplace Law Blog : California Employment Law Attorney & Lawyer: Jackson Lewis

A new case presents a mixed bag of results for California employers. As a general matter, California employers should be careful when classifying individuals as independent contractors, rather than employees. Reversing the denial of class certification in an action for various Labor Code violations, a California Court of Appeal held that whether newspaper delivery carriers were independent contractors or employees of the newspaper was amenable to class action treatment through common proof. Ayala v. Antelope Valley Newspapers, Inc., No. B235484 (Cal. Ct. App. Oct. 17, 2012). However, the Court affirmed the denial of class certification on the carriers’ claims for unpaid overtime and meal and rest period violations because such claims would require individual factual assessments.

This case provides employers with guidance regarding defending against wage hour class actions. Significantly, the appellate court held certain issues, such as payment of overtime or provision of meal or rest periods, are highly individualized since they depend on how many hours per day and week individuals work. The Court indicated such inquiries may render class certification inappropriate. Where the Court is being asked to examine the nature of a particular job and the employer’s control, the Court noted such issues may lend themselves to class treatment. There are many more issues in this case and employers should also be weary that the case could be appealed by either or both parties.

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Employers must carefully draft arbitration agreements and ensure the agreements are regularly updated for compliance with state and federal law. A California Court of Appeal held that owner-operator truck drivers were not required to arbitrate whether they were misclassified as independent contractors where the parties’ arbitration agreements applied to any dispute that arose “with regard to its application or interpretation.” Elijahjuan v. Superior Court, No. B234794 (Cal. Ct. App. Oct. 17, 2012).  The Court found that the misclassification claims fell outside the arbitration provision because it did not concern the application or interpretation of the Agreements; rather, the drivers sought to enforce their rights under the California Labor Code.  

The Court’s decision reiterates California’s hostility toward enforcing arbitration agreements and reminds employers that they need to make clear that all claims regarding the parties’ relationship are covered by the arbitration agreement. In light of this ever-changing legal climate, employers should continue to consult with their legal counsel when reviewing the enforceability of arbitration agreements. For a detailed discussion regarding this case, please see our article by clicking here

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The California Division of Labor Standards Enforcement ("DLSE") has released the form notice that is compliant with the new California Wage Theft Prevention Act of 2011 in six (6)  languages. The notices are now available in: (1) English; (2) Vietnamese; (3) Chinese; (4) Korean; (5) Spanish; and, (6) Tagalog.

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       California-based employers who send workers from other states into California must pay the employees pursuant to California law, not the law of the state where the employees reside, according to the Ninth Circuit Court of Appeals in Sullivan v. Oracle Corp. 06-56649 (9^th Cir. Dec. 13, 2011). 

In Sullivan, Oracle hired “Instructors” to train customers to use Oracle software. Oracle classified its Instructors as “teachers,” exempt from the overtime provisions of California’s Labor Code. Plaintiff instructors filed a class action against Oracle alleging: (1) Oracle failed to pay overtime to nonresidents for work performed in CA; (2) violations of the Unfair Competition Law (“UCL”) based on alleged violations in the first claim; and, (3) a UCL claim based on violations of federal law under the FLSA. The Court overturned a district court decision granting summary judgment to Oracle on plaintiffs’ putative class action.

The Ninth Circuit sought guidance from the California Supreme Court on several state law issues, including whether the California Labor Code applies to overtime work performed in-state for a California-based employer by out-of-state plaintiffs. The California Supreme Court concluded that California’s overtime law applies to work performed in-state by these nonresident employees since their company was headquartered in California. The Ninth Circuit adopted the California Supreme Court’s answers to hold that California’s overtime provisions applied to work performed in-state by nonresident plaintiffs. The Court rejected Defendant’s argument that the application of the California Labor Code to the nonresident plaintiffs’ work violated the Due Process Clause of the Fourteenth Amendment and the Dormant Commerce Clause of the U.S. Constitution.

Employers must understand that if you are headquartered in California and have employees residing in other states, those employees must be paid pursuant to California law if they enter California for a full day or more. This decision will affect perhaps thousands of workers sent from out of state to work on assignments in California for days or weeks. The greatest impact will be on non-exempt workers who will be entitled to daily overtime, a rarity in most other states. All employers who send non-exempt, out of state employees to work in California should seek legal advice regarding the impact, if any, of this decision on the employer's procedures.  The decision also may be an ominous sign for employers with respect to how the Court may rule in the meal and rest break cases pending before the Court.

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California’s Supreme Court will issue its long-awaited decision in its Brinker Restaurant Corporation meal and rest period case within the next four months. The Court will hold oral arguments in the case on November 8, according to an announcement the Court issued on October 4. The Court granted review in the case in October 2008.

The oral argument date sets the 90-day period within which the Court must issue a decision. Under California law, Supreme Court justices will not be paid when a case has been “submitted” for more than 90 days without a ruling. A case is deemed “submitted” as of the close of oral argument – meaning a decision must issue by the end of January 2012.

The Court will decide in Brinker Restaurant Corp. the meaning and requirements of California’s rules on meal and rest periods. The eventual decision also likely will have a significant impact on class certification rules in the state.

Most California employers know they must provide meal periods for employees who will work more than five hours. Most understand California law dictates that when a meal period is required, the meal break must be at least 30 uninterrupted minutes long, with the employee relieved of all duty. And most California employers know state law also calls for them to give employees opportunities to rest during the work day.

But just when during the work day should the meal break be given? Is there any flexibility in the timing of the meal period? What if an employee prefers to take her break earlier, or later – or maybe not at all? And must the employer force employees to stop working for meal periods, even where an hourly employee prefers to work through lunch?  

California’s Supreme Court is set to address these questions in the Brinker Restaurant Corp. case. The court of appeal in that case vacated a trial court order certifying a class of restaurant workers who contended their employer had caused them to take meal periods too early or too late in the work day, misplaced the timing of rest breaks, and made employees work “off the clock” – working time without getting paid for it. See Jackson Lewis article describing the case and the issues entitled, Special Report: Have Your Meal and Time to Eat It, Too! California Courts and the Law on Meal and Rest Breaks: 

The Brinker Restaurant Corp. case has received considerable attention from the business community and from the labor and employment bar. Its outcome will affect every employer of workers in California, and most employees as well. Stay tuned - we will continue to provide updates regarding this important development.

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California courts continue to build on the Ninth Circuit's recent decision regarding the California Learned Professional Exemption.  A California appellate court found a law clerk as exempt from state and federal overtime provisions who had not passed the California Bar Exam but graduated from law school.  Zelasko-Barrett v. Brayton-Purcell, LLP, 2011 Cal. App. LEXIS 1080 (Cal. App. 1st Dist. Aug. 17, 2011). 

On June 15, 2011, the Ninth Circuit breathed new life into the California Learned Professional Exemption when it decided Campbell v. PricewaterhouseCoopers LLP, 9th Cir., No. 09-16370, 6/15/11. See blog entry, "The Ninth Circuit Has Revitalized The California Learned Professional Overtime Exemption and Remanded To A Jury Key Issues Under The Administrative Exemption"

Historically, overtime disputes regarding the use of the Learned Professional Exemption have centered in particular fields, such as engineering or, more recently, accounting . On August 17, 2011, the Court of Appeal for the First Appellate District considered and rejected a challenge to the application of the California Labor Code’s Learned Professional Exemption in the legal field. Zelasko-Barrett v. Brayton-Purcell, LLP, 2011 Cal. App. LEXIS 1080 (Cal. App. 1st Dist. Aug. 17, 2011).

In Zelasko, the Defendant firm utilized law students and law school graduates who had not yet passed the bar in the positions of Law Clerk I and Law Clerk II, respectively. Plaintiff held the Law Clerk II position prior to his admission to the bar for approximately 2 years, then moved on to the position of Associate Attorney. The Marin County Superior Court held that the plaintiff was properly classified as exempt when he held the position of Law Clerk II. 

Observing that the “federal regulations after which [the California learned professional exemption] was explicitly patterned . . . condition the learned professions exemption under federal law upon completion of an advanced course of education, not upon licensure,” the appellate Court ruled that possession of the degree, along with Defendant’s undisputed evidence that a Law Clerk II was required to perform all the same duties as a junior attorney, satisfied the exemption’s requirements.

Zelasko is an encouraging result for all employers since more California courts are now applying the principals set forth in the Ninth Circuit's decision in Campbell v. PricewaterhouseCoopers LLP. Employers should always ensure that employees classified as exempt are properly classified under federal and state law.

Written by Noel Tripp

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An employer who is strategic and proactive in California wage and hour compliance can avoid hundreds of thousands of dollars in potential liabilities and defense costs. For example, there is significant litigation regarding employment applications in California especially the limitations regarding criminal convictions set forth at California Labor Code Section 432.7, et seq. and Section 432.8. Look at the course of events involving an employer’s employment application which failed to properly exclude inquiries regarding certain marijuana convictions more than 2 years old.

Three individuals brought a class action against Starbucks Corporation (“Starbucks”) alleging more than $26 million in statutory penalties on behalf of an estimated 135,000 job applicants based on Starbuck’s employment application. In Starbucks Corp. v. Superior Court (2008) 168 Cal.App.4th 1436, the court held plaintiffs did not have standing to represent the proposed class because none had any marijuana convictions to disclose.

Subsequently, a court permitted plaintiffs to file a first amended complaint to include only job applicants with marijuana convictions and permitted class counsel to conduct further discovery to find a “suitable” class representative. Incredibly, Starbucks was ordered to review applications until it identified job applicants with prior marijuana convictions and then was ordered to disclose their names to class counsel. The employer appealed the discovery order. On April 25, 2011, the Fourth Appellate District Court reversed the discovery order since the order violates the “reform legislation the class action purports to enforce” - to avoid disclosure of certain marijuana convictions. See, Starbucks Corp. v. Super. Ct. (CA4/3 G043650 4/25/11)

In light of this chain of events, employers should consider being proactive and strategic by reviewing your employment application, forms and handbooks for California law.

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Governor Brown announced that Julie Su has been appointed as head of the California Division of Labor Standards Enforcement. 

Here is the text of the announcement from the Governor’s website: “Julie Su, 41, of Cerritos, has been appointed Chief of the Division of Labor Standards and Enforcement. Su has worked at the Asian Pacific Legal Center in Los Angeles since 1994, where she currently serves as Director of Litigation. Su has devoted her career to serving the public interest as a civil rights attorney, specializing in representing low-wage workers. Su earned a Bachelor of Arts degree from Stanford University and a Juris Doctor degree from Harvard University. This position requires Senate confirmation, and the compensation is $138,546. Su is a Democrat.” See link to announcement

 What does this mean for California employers and how will it affect, if at all, the California Division of Labor Standards Enforcement's administrative enforcement position on hot button wage and hour issues? At least one person Jackson Lewis spoken with at the DLSE speculated they would not be surprised if the DLSE’s meal-period enforcement position changed. It will be important to closely monitor the DLSE web site and any upcoming speeches Ms. Su may deliver for any developments. 

Jonathan Siegel

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