Settling Plaintiff May Still Have Standing And Adequacy To Pursue Class Action and PAGA Claims

A California federal judge recently certified a class of at least 843 Cinemark workers who allege Cinemark, a movie theater chain, failed to properly list overtime rates on employee wage statements, notwithstanding the fact that the purported class representative, Silken Brown, had settled her individual claim during the pending litigation. In opposing class certification, Cinemark raised challenges to Brown’s typicality as to the class and adequacy to represent the class as a result of Brown’s individual settlement. Please find the rest of this article on our Employment Class and Collective Action Update blog here.

California: What Happens In Mediation Stays (Confidential) In Mediation

An amendment to Section 1122 of the California Evidence Code on mediation confidentiality requires attorneys representing clients in connection with mediation to provide written disclosures to their clients about mediation confidentiality beginning January 1, 2019.

California law and public policy provide that all communications that take place in anticipation of and at mediation are confidential. “To carry out the purpose of encouraging mediation by ensuring confidentiality, the statutory scheme . . . unqualifiedly bars disclosure of communications made during mediation absent an express statutory exception.” Even after mediation ends, communications and writings protected by the statutes are to remain confidential.

To further carry out the “strong legislative policy” underlying mediation confidentiality, SB 954 adds the following to the Evidence Code:

  • An attorney must provide the disclosures to clients before the client agrees to participate in mediation if the attorney represents the client at the time;
  • An attorney must provide the disclosures after being retained if the attorney is retained after the client agrees to participate in mediation;
  • The disclosure requirement does not apply in class or representative actions; and
  • The content and format of disclosures are detailed in the statute.

The client must sign the disclosure form. It is not clear if the disclosure requirement applies to cases removed to federal court.

The law does not otherwise change existing laws on mediation confidentiality or provide a specific remedy for failing to comply. The law states the failure to provide the required disclosures will not invalidate an agreement reached at mediation.

Please contact a Jackson Lewis attorney with any questions about the new law.

Protest Challenges Pay Discrimination Behind the Lens

Since the start of the “Times Up” and “Me Too” movements, the spotlight has remained on the gender-based wage disparities existing between female and male actors that work on the same cinematic productions, yet receive unequal pay. However, many in Hollywood feel that women who work behind the scenes in film production or as part of the “below the line” crew, such as in script production, make-up and costume creation, pre- or post-production film editing, and graphics and art design, should not be overlooked. Please find the rest of this article in our Pay Equity Advisor Blog here.

Evaluating and Challenging Standing in Fair Credit Reporting Act Actions

The Ninth Circuit’s recent ruling in Dutta v. State Farm Mutual Automobile Insurance Company highlights the importance of evaluating and potentially challenging a plaintiff’s standing in a Fair Credit Reporting Act (“FCRA”) action.

Dutta alleged that, in violation of § 1681b of the FCRA, State Farm failed to provide him with notice of his FCRA rights and a copy of his consumer report prior to denying his employment application on the basis of information contained in the report.  Specifically, State Farm disqualified candidates who had a charged-off debt exceeding $1,000 in the preceding 2-year period.  Dutta’s credit report, which State Farm obtained, showed that he had a charged-off debt exceeding $1,000.  As a result, State Farm informed Dutta that his employment application was denied.  State Farm did not send Dutta a pre-adverse-action notice until a few days later, after which Dutta called State Farm to challenge some other inaccuracies in the report.

The district court granted State Farm’s motion for summary judgment on the ground that Dutta failed to establish an injury-in-fact and thus lacked standing. The record of debt shown in Dutta’s credit report was accurate, and State Farm would have terminated Dutta regardless of the other alleged inaccuracies in the report.  On appeal, the Ninth Circuit affirmed the district court’s ruling, stating that Dutta failed to show how State Farm’s technical violation of the FCRA either presented a material risk of harm or caused actual harm to him.  The Ninth Circuit reiterated the standard in Robins v. Spokeo, Inc. for evaluating whether a concrete harm exists based on a procedural statutory violation: (1) whether the statutory provision at issue was established to protect the plaintiff’s concrete interests; and, if so, (2) whether the alleged specific procedural violations actually harm or present a material risk of harm to such interests.

Dutta highlights the Ninth Circuit’s position that, if an employer bases its adverse employment decision on accurate data in a credit report, a plaintiff may very well fail to establish concrete harm and therefore standing then even if there is a technical violation of FCRA.

Court Holds that Attorney is Not Bound by Confidentiality Provision

On August 13, 2018, the California Fourth District of Appeal held in Monster Energy Company v. Schechter that an attorney who signed his client’s settlement agreement under the phrase “approved as to form and content” was entitled to the granting of an anti-SLAPP motion in a case against him for breaching the confidentiality provision of the settlement, finding that he was not a party to that agreement.

Richard Fournier and Wendy Crossland (the Fourniers) filed an action (the Fournier case) against Monster Energy Company (Monster) and a related defendant when their 14-year-old daughter went into cardiac arrest in 2011 after consuming two Monster brand energy drinks and died. The attorney in the case, Bruce Schechter, and his firm, the R. Rex Parris Law Firm represented the Fourniers in their lawsuit.

In 2015, Schechter negotiated a settlement for the clients, which included a confidentiality provision purporting to bind him and his firm. Schechter later gave an interview to the website Lawyersandsettlements.com, in which he mentioned that a recent case he had handled against Monster, involving a 14-year-old girl, had settled for “substantial dollars for the family.” Lawyersandsettlements.com then published an online article that included Schechter’s statements.

Monster then sued Schechter and his firm, alleging in part that they had breached the terms of the settlement agreement, asserting causes of action for: (1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing; (3) unjust enrichment; and (4) promissory estoppel.

Schechter and his firm then filed a special motion to strike under Code of Civil Procedure § 425.16 (SLAPP motion) arguing, among other things, that Monster could not show a probability of prevailing on its breach of contract claim because Schecter and his firm were not parties to the settlement agreement. In opposition, Monster argued: (1) Schechter’s statements were commercial speech and therefore unprotected; and (2) Schecter and his firm were “[c]learly” bound by the settlement agreement.

The trial court denied the motion with respect to the breach of contact cause of action but granted it with respect to the other causes of action. Schecter and his firm appealed.

On appeal, the Court of Appeals held that – when a settlement agreement provides that a plaintiff and his or her counsel agree to keep the terms of the agreement confidential – and the plaintiff’s counsel signs the agreement under the words “approved as to form and content,” the Court of Appeals held the plaintiff’s counsel could not be liable to defendant for breach of the confidentiality provision. The Court noted: “The only reasonable construction of this wording is that they were signing solely in the capacity of attorneys who had reviewed the settlement agreement and had given their clients their professional approval to sign it. In our experience, this is the wording that the legal community customarily uses for this purpose.”

Recognizing that confidentiality is often a material term of a settlement agreement, the Court noted that a way to avoid this issue is “to draft a settlement agreement that explicitly makes the attorneys parties to the agreement (even if only to the confidentiality provision) and explicitly requires them to sign as such.

In sum, although a settlement agreement may bind one or more parties to its confidentiality provision, an attorney’s signature under the words “approved as to form and content” does not impose any specific obligation on the attorney to maintain the confidentiality of the settlement. In light of this holding, employers who wish to bind opposing counsel to the confidentiality provision of a settlement agreement should specifically draft the confidentiality provision to encompass opposing counsel as well as the party represented by the opposing counsel. Moreover, the settlement agreement should include an express statement signed by opposing counsel agreeing to be bound by the settlement agreement’s confidentiality provision. Please contact your local Jackson Lewis office if you wish to receive more detailed guidance on this, or any other employment issue.

Taco Bell’s Prohibition on Employees “Heading for the Border” With Discounted Meals Does Not Violate California Meal Break Law, Ninth Circuit Rules

Affirming a district court order dismissing a putative class action, the Ninth Circuit Court of Appeals has held that Taco Bell’s policy of requiring employees to eat employer-discounted meals in the restaurant does not convert the meal period into “on duty” time such that the meal period becomes compensable under California law. Rodriguez v. Taco Bell Corporation, 2018 U.S. App. LEXIS 19825 (9th Cir. July 18, 2018). Please find the rest of this article in our Wage & Hour Blog here.

No Tax Deduction for Sexual Harassment Settlements Subject to Confidentiality Provision

Congress recently passed the 2017 Tax Cuts & Jobs Act which includes Internal Revenue Code §162(q). Specifically, § 162(q) provides:

  • No deduction is allowed for any settlement or payment related to sexual harassment or sexual abuse if the settlement or payment is subject to a nondisclosure agreement.
  • No deduction is permissible for attorneys’ fees related to a confidential sexual harassment settlement or payment.

These payments remain tax-deductible, however, if they are not subject to a nondisclosure agreement.

Section 162(q) is relevant because most, if not all, settlement agreements tend to include confidentiality or nondisclosure clauses. Ostensibly, employers confront whether to forego tax benefits in the interest of maintaining confidentiality or deduct the associated fees as business expenses. The provision appears aimed at preventing companies and their executives from avoiding public scrutiny about unlawful sexual conduct in the workplace.

There are several questions left unanswered by this new provision:

  • What happens to the tax deduction for payments that settle more than one kind of employment claim? Employers are likely to structure settlements of multiple claims with an allocation of only a small amount to the sexual harassment claim in a non-confidential settlement agreement, with the remainder allocated to other claims under a separate, confidential settlement agreement.
  • Is the non-deductibility of attorneys’ fees under § 162(q) only applicable to employers or to employees/victims as well? Whether the Legislature provides guidance regarding how to navigate this new provision remains to be seen.

Given the ambiguity that remains with respect to settlement of sexual harassment claims, employers should seek counsel in settling these claims. For more information, please contact Anna Choi, Hazel Poei or the Jackson Lewis attorney with whom you regularly work.

California Clarifies Ambiguous Language of Salary History Ban

California has enacted new legislation aimed at clarifying its law banning an employer from inquiring about a job applicant’s salary history information.

Assembly Bill 168 (codified as Labor Code Section 432.3) prohibits employers from seeking salary history of applicants for employment. Designed to eradicate the wage gap, AB 168 also requires employers to provide applicants, upon reasonable request, with the pay scale for the position. Please find the rest of this article in our Pay Equity Advisor Blog here.

Cal/OSHA Publishes a Fact Sheet and Poster Regarding California’s Hotel Housekeeping Musculoskeletal Injury Program

Cal/OSHA just published a Fact Sheet and a Poster regarding Cal/OSHA’s new requirement for covered employers to create and maintain a Hotel Housekeeping Musculoskeletal Injury Program (“MIPP”) and also train their housekeepers with respect to the MIPP. We previously discussed California’s new requirement in our blog on June 25, 2018 called, California’s Hotel Housekeeping Standard: Ready or Not, Here it Comes.

By July 1, covered employers must establish, implement, and maintain a MIPP that addresses risk factors specific to housekeepers. The written MIPP may be incorporated into a California Injury Illness or Prevention Program (“IIPP”) or kept as a separate program. In addition to the MIPP, supervisors and housekeepers must be trained in:

  • Signs and symptoms of musculoskeletal injuries;
  • The elements of the MIPP;
  • The process for reporting safety and health concerns without fear of reprisal;
  • Good body mechanics and the use of controls in the workplace;
  • The importance of reporting symptoms early; and
  • Practice of using identified controls and tools.

Training must occur when the MIPP is first established, to all new housekeepers and supervisors, to all housekeepers given new assignments for which training was not previously provided, and at least annually thereafter. To ensure compliance with the new standard, covered employers in California should develop their MIPP and train housekeepers on its contents. In addition, employers should plan to begin conducting worksite evaluations to ensure that they are completed by October 1, 2018.

If you have any questions regarding Cal/OSHA’s new requirement, please feel free to contact Bradford T. Hammock in our OSHA group or Jonathan Siegel or the attorney you normally work with at Jackson Lewis.

Governor Brown Signed Bill Amending a Key Term in the California Arbitration Act

California Assembly Bill 3247 amends the California Arbitration Act (Cal. Code Civ. Proc. § 1280 et seq.) by replacing the current term revocation with rescission. The bill removes any potential ambiguity by inserting the proper terminology.

On July 16, 2018, California Governor Jerry Brown signed into law Assembly Bill 3247 (“AB 3247”), which amends the California Arbitration Act (Cal. Code Civ. Proc. § 1280 et seq.), specifically, section 1281.2 of the California Code of Civil Procedure.  Effective January 1, 2019, section 1281.2 will now state that a court may not enforce an arbitration agreement if “grounds exist for rescission of the agreement, [emphasis added]” as opposed to the prior language which called for “grounds [to] exist for the revocation of the agreement [emphasis added].” (Assem. Bill No. 3247 (2017-2018 Reg. Sess.) The bill also makes other non-substantive changes.

Existing law currently requires a court, on petition of a party to an arbitration agreement alleging: (1) the existence of a written agreement to arbitrate a controversy and (2) that a party to the agreement refuses to arbitrate the controversy, to order the petitioner and the respondent to arbitrate the controversy if the court determines that an agreement to arbitrate exists, unless the court makes other determinations, including, among other things, that grounds exist for the revocation of the agreement. (Code Civ. Proc. § 1281.2.)

As the California Supreme Court observed in Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal. 4th 83, 98, revocation of a contract is a misnomer because only offers to create a contract can be revoked. If an offer is revoked, there is by definition no contract or agreement. Once a contract has been formed, it is only undone by rescission.  Armendariz was further cited in the Assembly Committee analysis.  (Assem. Com. on Judiciary, Analysis of Assem. Bill No. 3247 (2017-2018 Reg. Sess.) as amended April 30, 2018.) Moreover, if the current revocation language is taken literally, there may be situations where a court upholds an arbitration agreement when grounds for rescission exist (such as fraud, misrepresentation, mistake, or a lack of capacity to content), but which do not also constitute grounds for revocation. AB 3247 also resolves that potential issue.

Please contact Jessica Armijo with any questions or the Jackson Lewis attorney you work with normally.

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