While the California courts were relatively quiet during 2020, the California Supreme Court has a few heavy-hitting employment cases pending for 2021.

Here are the cases employers should be watching in the new year and why.

Donohue v. AMN Services, LLC

AMN Services (“AMN”) used a computer-based timekeeping system, which required employees such as Plaintiff to click on an icon to open the program each day and would “punch in and out” for the start of the day, meal periods, and end of the day. The timekeeping system recorded employee’s time in 10-minute increments. AMN then rounded this time to the nearest hundredth.

Plaintiff did not have predetermined meal and rest breaks, but AMN had a written policy that employees were to take meal and rest breaks under California law. The timekeeping software provided a drop-down question where employees explain why they did not record a compliant meal period, and if the employees indicated they voluntarily chose not to take a 30-minute meal period, no penalty was paid.

The trial court found there was no evidence of a uniform policy or practice to deny meal periods, and Plaintiff did not plead in the complaint that the rounding practice resulted in a meal period violation.

At the Court of Appeal level, Plaintiff argued that rounding may never be applied to meal period time punches. The Court of Appeal reasoned that the standard outlined in prior California court decisions about rounding also applies to meal periods, and the court need only consider how often a policy results in rounding up and down, not the number of meal-period violations that are assessed or avoided.

Why Employers Should Watch This Case

If the California Supreme Court agrees with the Court of Appeal it would further support that rounding policies in California are generally acceptable and could set forth better guidance on how employers can implement rounding policies, including for meal periods.

Grande v. Eisenhower Medical Center

FlexCare, LLC (“FlexCare”), a temporary staffing agency, assigned Plaintiff to work as a nurse at Eisenhower Medical Center (“Eisenhower”). According to Plaintiff, during her employment at Eisenhower, FlexCare and Eisenhower failed to ensure she received the required meal and rest periods, wages for certain periods she worked, and overtime wages.

Plaintiff filed a class-action lawsuit on behalf of FlexCare employees assigned to hospitals throughout California. Plaintiff’s claims were based solely on her work on an assignment at Eisenhower. FlexCare settled with the class, including the Plaintiff. Plaintiff executed a release of claims, and the trial court entered a judgment incorporating the settlement agreement.

About a year later, Plaintiff brought a second-class action alleging the same labor law violations, this time against Eisenhower, who was not a party to the previous lawsuit. FlexCare intervened in the action asserting Plaintiff could not bring the separate lawsuit against Eisenhower because she had settled her claims in the prior class action.

The trial court held a trial limited to questions as to the propriety of the lawsuit and ruled Eisenhower was not a released party under the settlement agreement and could not avail itself of the doctrine of res judicata because the hospital was neither a party to the prior litigation nor in privity with FlexCare.

The Court of Appeals agreed with the trial court.

Why Employers Should Watch This Case

In particular, this case would affect staffing agency employers who may want to consider how they settle claims if their “clients” are not also named to avoid duplicative litigation which they may also have to pay for through indemnity clauses.

Ferra v. Loews Hollywood

Plaintiff alleged Lowes improperly calculated her premium payment when Loews allegedly failed to provide her statutorily required meal and/or rest breaks, and underpaid Plaintiff by allegedly “shaving or rounding time from hours worked by” Plaintiff.

The parties stipulated that Plaintiff worked as a bartender, and Loews paid (and continued to pay) meal and rest period premiums at Plaintiff’s base rate of compensation (her hourly wage), without including an additional amount for incentive compensation, such as nondiscretionary bonuses.

The trial court concluded the terms “regular rate of compensation” and “regular rate of pay” are not interchangeable, and rest and meal period premiums under the California labor code need only be paid at an employee’s base hourly rate.

The Court of Appeal agreed with the trial court holding that when paying meal and rest period premiums, the employer properly calculated the regular rate of compensation as one hour at the employee’s base pay.

Why Employers Should Watch This Case

Should the Supreme Court disagree with the lower courts, the case would mean the complicated calculations required for determining the regular rate of pay for overtime would also be applied to meal and rest penalties and would increase the amount of such penalties based on other compensation, such as non-discretionary bonuses paid to employees.

Naranjo v. Spectrum Security Services

This case involves a class of security guards who alleged meal break violations and sought premium wages, waiting time penalties, inaccurate pay stub penalties, and attorney’s fees.

The Court of Appeal held that unpaid premium wages for meal period violations did not entitle employees to pay stub penalties or waiting time penalties.

Why Employers Should Watch This Case

This case will resolve a long-standing debate on whether waiting time penalties are recoverable for meal and rest period violations. If the California Supreme Court disagrees with the lower courts, it will increase potential penalties for California meal and rest period violations, as violations could be compounded by alleged pay stub penalties and waiting time penalties.

Vazquez v. Jan-Pro Franchising International

Jan-Pro International Franchising, Inc. (“Jan-Pro”) licenses a system for marketing cleaning services to “regional master franchisees,” in multiple countries, including the United States. Regional master franchisees purchase franchises for exclusive operations in a given regional area.

Regional master franchisees, in turn, are franchisors to “unit franchisees.” Jan-Pro is not a party to any contract with unit franchisees. Jan-Pro contracts with the master franchisors, who then contract with unit franchisees. Unit franchisees may hire their own employees and may act in individual or corporate capacities.

Plaintiffs are former unit franchisees who alleged Jan-Pro developed the three-tier model in order to misclassify janitors as independent contractors.

The question before the California Supreme Court is whether Dynamex v. Superior Court (Dynamex), which set forth the ABC test for classification of independent contractors, can be applied retroactively.

Why Employers Should Watch This Case

If Dynamex is found to apply retroactively, misclassification claims could potentially be reopened and reach back to before the holding of Dynamex in 2018.

Ducksworth v. Tri-Modal Distribution Services

Plaintiffs in this action were long-time customer service representatives at Tri-Modal Distribution Services (“Tri-Modal”). Neither plaintiff was promoted, though other customer service representatives were promoted. Plaintiffs alleged their lack of promotion was due to discrimination against African Americans and filed suit against Tri-Modal as well as two staffing agencies, Scotts Labor Leasing Company and Pacific Leasing for discrimination.

The staffing agencies were granted summary judgment because they were not involved in Tri-Modal’s decision making about whom to promote.

The Court of Appeal upheld summary judgment finding that the staffing agencies were entirely uninvolved with the promotion decisions, and therefore had no liability for discrimination claims for failure to promote.

Why Employers Should Watch This Case

Should the California Supreme Court disagree with the lower courts, the result could expand liability for discrimination claims. In particular, potential joint employers, such as staffing agencies, who are typically uninvolved in the day-to-day employment decisions, could encounter increased claims and alleged damages.

Jackson Lewis will continue to track these and other employment law court matters. If you have questions about how these cases may affect your business, contact a Jackson Lewis attorney to discuss.