In a decision that should not go unnoticed in the wake of the California Supreme Court’s ruling in Iskanian v. CLS Transp. Los Angeles, LLC which rejected prior limitations on class action waivers but held representative actions under California’s Private Attorneys General Act cannot be waived, the California Court of Appeal in Malone v. Superior Court (California Bank & Trust), Case No. B253891 (June 17, 2014) upheld an employer’s delegation clause requiring issues relating to the enforceability of an employer’s arbitration agreement to be sent to the arbitrator for resolution. While the U.S. Supreme Court continues to uphold arbitration provisions pursuant to the Federal Arbitration Act (FAA), California courts have been reluctant to follow the Supreme Court’s clear guidance. Malone suggests the California tide is beginning to turn in favor of arbitration. Continue Reading California Tide is Turning in Favor of Arbitration

Overruling Gentry v. Superior Court, 42 Cal. 4th 443 (2007) as preempted by the Federal Arbitration Act (“FAA”), the California Supreme Court upheld the validity of class action waivers in employment arbitration agreements. Iskanian v. CLS Transportation Los Angeles, LLC, No. S204032  (Cal. Jun. 23, 2014).  Declining to follow D.R. Horton, 357 NLRB No. 184 (Jan. 3, 2012), the Court also rejected that class action waivers are unlawful under the National Labor Relations Act (“NLRA”).  However, the Court further ruled that employers could not require waivers of representative actions under the California Private Attorney General Act (“PAGA”) as contrary to public policy and unwaivable as a matter of state law and were not preempted by the FAA.  Accordingly, the Court reversed the judgment of the Court of Appeal and remanded the case for further proceedings. Continue Reading California Supreme Court Okays Class Action Waivers and Overrules Gentry v. Superior Court, but Bans Waivers of Representative Actions Under the PAGA

You’re Invited to our Silicon Valley Compliance Collaboratory Series: Everything you Need to Know About Immigration

In this session, we will discuss everything employers need to know about immigration, ranging from the recent H-1B Cap Freeze Out, the PERM Labor Certification Process and suggestions on internal policies and training programs as employers increasingly find themselves squeezed between enhanced Form I-9 compliance enforcement initiatives by Immigration and Customs Enforcement (ICE) on one side and Department of Justice hiring discrimination enforcement on the other.

Co-hosted by Juniper Networks and Jackson Lewis P.C., the Collaboratory Series offers hands-on workshops designed to highlight “real life” compliance issues and solutions. Attendees will learn how to identify and mitigate compliance risks and will also learn how governmental agencies’ cutting-edge enforcement techniques impact employers.

Questions? Please contact:

Van Nguyen  (Silicon Valley)

Rachel De Dora  (San Francisco)

 

Dates/Times:
Tuesday, July 22, 2014
Registration: 8:30 a.m.
Program: 9:00 a.m. – 12:00 p.m.Wednesday, July 23, 2014
Registration: 8:30 a.m.
Program: 9:00 a.m. – 12:00 p.m.
Locations: Juniper Networks Global Headquarters (July   22)
1133 Innovation Way, Building A
Sunnyvale, CA 94089
Click   here to registerOffices of Jackson Lewis P.C. (July   23)
50 California St. 9th Floor
San Francisco, CA 941111
Click here to register
Fee: Complimentary
Credits: Pending approval of 2.50 HRCI recertification credit hours toward PHR and SPHR recertification through the Human Resource Certification Institute.

1335488_24491270It may be time to review your company’s employment application and hiring process. The common “Have You Ever Been Convicted of a Felony?” question on employment applications will soon be a thing of the past for many California state and local agencies and private sector employers hiring or recruiting applicants to work within the City and County of San Francisco.

Effective July 1, 2014, state and local government agencies will no longer be permitted to ask a job applicant to disclose, in writing or verbally, if they have been convicted of a crime. Continue Reading New Ban the Box Restrictions Effective in San Francisco July 1, 2014 and August 13, 2014

Be cautious with the employee who “doth protest too much.”  The law protects whistleblowers. Employers must be careful to avoid retaliating against employees who report good faith concerns, even when such concerns prove meritless. But this does not leave employees free to blackmail employers by threatening to makes claims unless the employer capitulates to settlement demands. In Stenehjem v. Sareen, a California Court of Appeal allowed an employer to pursue a counter-claim for extortion where its employee allegedly sent an email threatening to report it to the U.S. Attorney and file a federal False Claims Act action unless it settled the employee’s defamation lawsuit. The Court also rejected the employee’s claim that his threat constituted protected speech under California’s anti-SLAPP statute. While Stenehjem presents a welcome development for California employers, its core allegations do not arise often. Employers should thus review situations closely with counsel before leaping to the conclusion that an employee’s “threat” to report concerns amounts to extortion.   Continue Reading Protected Speech Does Not Include Extortion, California Appellate Court Rules

Although many employers are aware of the upcoming change to the California state minimum wage, here is one last reminder. The California state minimum wage will increase to $9.00 an hour starting July 1, 2014 and up to $10.00 per hour by January 1, 2016.

In July 2014, the minimum salary test for the Executive, Administrative, and Professional overtime exemptions will increase from $33,280 to $37,440 annually. In January 2016, the minimum salary test will increase to $41,600 annually for those exemptions.

Employers with collective bargaining agreements with different overtime premiums than authorized by the Wage Orders should verify if their union employees are earning at least 30 percent more than the new California state minimum wage. Please make sure you have looked into these issues for your organization.

schoolappleVergara v. California could become one of the most important cases to ever be litigated in California. The lawsuit’s outcome stands to impact hundreds of thousands of people in the State of California and has the potential to affect millions of lives across the Country. But what is the case? It’s possible you’ve never heard of it.

No, it’s not about the constitutionality of gun control legislation, same-sex marriage, or some patent infringement case between Silicon Valley tech companies. The case is about education. Specifically, the lawsuit concerns nine California school-children who are suing California over substandard teaching at their public schools. It is the matter of Vergara, et al. v. California, Los Angeles Superior Court Case No. BC484642.

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Specifically, the lawsuit concerns nine California school-children who are suing California over substandard teaching at their public schools.
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The Case:

In Vergara, the plaintiffs challenged five California laws governing teacher tenure, layoffs and dismissals found in California’s Education Code. The students argued that said statutes violate the equal protection clause of the California Constitution. The allegedly offending statutes fell into three general categories:

  • Permanent Employment Statute (Cal. Ed. Code § 44929.21(b)): the permanent employment law requires school administrators to either grant or deny permanent/lifetime employment to teachers after an evaluation period of less than two years.
  • Dismissal Statutes (Cal. Ed. Code § 44934, 44938(b)(1) and (2) and 44944): the statutes make teacher’s positions highly protected, causing the dismissal process for ineffective teachers to be both arduous and costly…it is suggested that out of 275,000 teachers statewide, 2.2 teachers are dismissed for unsatisfactory performance per year on average.
  • “Last-In, First-Out” (“LIFO”) Layoff Statute (Cal. Ed. Code § 44955): the “LIFO” law requires school districts to base layoffs on seniority alone, with no consideration of teachers’ performance in the classroom.

The Decision:

On June 10, 2014, presiding Los Angeles Superior Court Judge Rolf Treu ruled on whether these California teacher tenure statutes are constitutional. After a long bench-trial, the Court found all five statutes to be unconstitutional. According to the ruling, California teachers receive tenure after only approximately two years, but firing a tenured teacher “could take anywhere from two to almost ten years and cost $50,000 to $450,000 or more.” The Court found that while “[t]here is no question that teachers should be afforded reasonable due process when their dismissals are sought . . . the current system required by the Dismissal Statutes is so complex, time-consuming and expensive as to make an effective, efficient yet fair dismissal of a grossly ineffective teacher illusory.”  Judge Treu exclaimed, “The evidence is compelling. Indeed, it shocks the conscience . . . There is also no dispute that there are a significant number of grossly ineffective teachers currently active in California classrooms.”

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After a long bench-trial, the Court found all five statutes to be unconstitutional.
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Judge Treu’s decision, however, was not just a diatribe against teachers as many critics are quick to argue. Instead, the Court took special care to argue on behalf of “effective” teachers. Indeed, the ruling can be seen as providing less-senior, but more “effective” teachers, with ammunition for better job security. “[T]he Permanent Employment Statute does not provide nearly enough time for an informed decision to be made regarding the decision of tenure . . . As a result, teachers are being re-elected who would not have been had more time been provided for the process . . . This court finds that both students and teachers are unfairly, unnecessarily and for no legally cognizable reason (let alone a compelling one), disadvantaged by the current Permanent Employment Statute.” Indeed, in finding the “last-in, first-out” statute to be unconstitutional, the Court noted that, “No matter how gifted the junior teacher, and no matter how grossly ineffective the senior teacher, the junior gifted one, who all parties agree is creating a positive atmosphere for his/her students, is separated from them and a senior grossly ineffective one who all parties agree is harming the students entrusted to her/him is left in place. The result is classroom disruption on two fronts, a lose-lose situation. Contrast this to the junior/efficient teacher remaining and a senior/incompetent teacher being removed, a win-win situation, and the point is clear.”

In reaching his decision that the California statutes were unconstitutional, the Court applied a “strict scrutiny” standard. The Court found that based upon California and Federal precedent, there is a “fundamental right to equality of education” and that “plaintiffs have proven, by a preponderance of the evidence, that the challenged statutes impose a real and appreciable impact on students’ fundamental right to equality of education and that they impose a disproportionate burden on poor and minority students.” Although not explicitly relied upon in the Court’s analysis section, Judge Treu noted at the beginning of his ruling that Brown v. Board of Education (1954) 347 U.S. 483 (along with other California cases) created this fundamental right to “equality of education.”

The Impact:

The application of a “strict scrutiny” analysis will likely be welcomed by school districts, much to the dismay of teachers and their Unions. Strict scrutiny is the most rigorous form of judicial review. Once a court determines that strict scrutiny must be applied, it is presumed that the law or policy is unconstitutional. The government has the burden of proving that its challenged policy is constitutional. To withstand strict scrutiny, the government must show that its policy is necessary to achieve a compelling state interest. If this is proved, the state must then demonstrate that the legislation is narrowly tailored to achieve the intended result. Thus, any attempt by school teachers or their Unions to introduce new tenure laws will be exceedingly difficult.

Moreover, with the Vergara decision in hand, school districts and school administrators will have a new tool in their box when dealing with unions and ineffective teachers. School districts, at least in California, could potentially use the decision as leverage during contract negotiations with teachers’ unions. School administrators looking to suspend or terminate an underperforming teacher will arguably have substantially more discretion to make these decisions as teachers and their unions will be unable to rely on the tenure statutes.

Additionally, with its allusion to the United States Supreme Court ruling in Brown v. Board of Education, Judge Treu’s ruling is expected to serve as a catalyst for similar litigation in other states. By finding that the U.S. Supreme Court decision grants a “fundamental right to equality of education,” the holding of Vergara is arguably not just limited simply to California. As such, future litigants in other states looking to attack teacher tenure laws will likely cite to the decision as support that the Federal Constitution, not just California’s, prohibits tenure laws.

It should also not go unnoticed the long history of monumental California decisions resulting impact on national attitudes. For example, shortly after California’s Supreme Court permitted same-sex marriages in 2008, national opinion (and judicial decisions in other states) soon began to accept same-sex marriage. In re Marriage Cases, 43 Cal.4th 757 (2008). Moreover, California was the first state to permit interracial marriage, which had a significant impact on the resulting national debate surrounding the issue. Perez v. Sharp, 32 Cal. 2d 711 (1948). Therefore, it is not inconceivable that – like the California decisions regarding other hot-button political topics before it – so too will Vergara spark litigation in other states hoping to establish the same constitutionally protected rights for students and effective teachers.

To Be Continued:

The Court’s decision on Tuesday provided only a temporary conclusion to more than two years of litigation, which included multiple attempts by Defendants—including the state of California and two of the state’s largest teacher’s unions—to see the case dismissed. The ruling is stayed pending appeal.   However, if the decision is upheld, it will have a significant impact on California students, teachers and school districts, as well as potential national ramifications.

A copy of the Superior Court’s decision can be found by clicking here.

No employer welcomes the news that it’s just been served with a wage and hour class action. Many employers naturally desire to communicate with their employees to provide their perspective and to explain why employees may not want to participate in the class action. Before launching such employee communications, however, companies should always consult with legal counsel to review what can – and cannot – be said.

In Camp v. Alexander, a single employee brought a class action alleging unpaid overtime and other wage and hour violations against a dental practice, “Youthful Tooth,” that specializes in providing dental care to low income children. The company purportedly received several reports from employees who did not want to participate in the lawsuit. It then sent a letter to employees stating that:

  • it believed the lawsuit was “motivated by greed and other improper factors;”
  • plaintiff’s counsel was “seeking a very large sum of money by attempting to convince other employees to join the lawsuit;” and
  • defending the case threatened to “jeopardize the on-going viability of the practice,” and the “final blow could result in the closure of this long running business.”

The letter did tell employees that if they wanted to support the plaintiff they were “free to so do” without retaliation, but it added “all employees who wish to seek some money out of this will be suing us . . . .  Money may be awarded at some future point, assuming this dental practice is still in business. We are confident that this practice will not be able to survive such an event.”  The letter then stated employees were free not to participate in the case and encouraged them to complete and return a form declaring they wished to “opt out” of the class action.

Plaintiff’s counsel cried foul, and moved to stop all further communications about the case between the employer and its employees. The Court did not prohibit all future communications. However, in a well-reasoned decision, U.S. District Court Magistrate Judge Elizabeth LaPorte held that the employer’s letter went too far, specifically finding that it was one-sided, inflammatory and, if left unchecked, presented a realistic danger that it would “chill participation in the class action.” Therefore, the Court ruled that all “Opt Out” declarations received by the employer were invalid and further ordered the employer to send a curative letter to all employees informing them that any prior Opt Outs had been deemed invalid along with a neutral statement about employees’ rights to participate in the class action. Click here for the full text of the Court’s opinion. Here, the adage “an ounce of prevention is worth a pound of cure” proved almost literally true as the case reminds employers, again, that they should consult carefully with counsel before communicating with employees about class action issues.

We’ve seen the claim often in class action wage hour disputes over proper classification of workers: the plaintiff and those similarly situated could not have been exempt managers because the employer didn’t provide adequate staffing, and so plaintiff had to spend more of her time as a worker bee than as a manager because the employer wouldn’t allocate her enough staff to supervise. Now a federal district judge has found this allegation on its own is adequate to allege a willful violation of the Fair Labor Standards Act.

In Kellgren v. Petco Animal Supplies, the plaintiff for himself and other assistant store managers alleged the assistant managers had not been properly compensated for overtime work they performed. The plaintiff sought to have the FLSA limitation period extended from two to three years for a willful violation because his employer “intentionally underfunded labor budgets,” which resulted in him and his assistant manager colleagues working overtime and performing non-exempt work.

In a ruling issued June 6, Judge M. James Lorenz of the United States District Court for the Southern District of California found, taking into account the alleged facts and circumstances surrounding the violation, that this inadequate labor budget allegation alone “is sufficient to establish that Kellgren has adequately pleaded willfulness.” Slip op. at pp. 5-6.  Judge Lorenz denied Petco’s motion to dismiss the complaint’s willful violation claim because, “[c]onsidering the size and complexity of Petco’s operation, it is plausible that Petco knew the underfunded labor budgets would cause assistant store managers to perform non-exempt tasks and result in its FLSA violation.” Ibid.

Allegations that Petco also failed to maintain accurate time records and that it failed to post notices explaining the FLSA’s minimum wage and overtime pay requirements bolstered Judge Lorenz’s reasoning. Contrary to the employer’s position that failure to maintain time records was consistent with its good faith decision to classify the job as exempt, Judge Lorenz found that “Petco’s alleged violation of FLSA’s record keeping requirements may corroborate Kellgren’s claim that Petco acted willfully in violation of the FLSA.” Slip op. at p. 7.   Consequently, the court found that Kellgren’s allegations “contain sufficient factual matter, accepted as true, to state a claim [of willfulness] that is plausible on its face.”  Ibid.

Allegations of FLSA violations have not been common in California wage-hour litigation because California law generally provides much more relief when a violation is found. But overtime violations under the FLSA carry a remedy usually not available under California law: the prospect of liquidated damages, an amount equal to the unpaid wages found due. An employer who owes $250,000 in unpaid overtime under the FLSA faces the prospect of actually paying twice that amount because of the added liquidated damages, which the law says a court “must” award.

What to make of this decision? After all, they’re only allegations; they may not be the actual facts. But we shouldn’t be surprised at an uptick in discovery requests for “labor budgets” and “staffing budgets” and the like in cases alleging misclassification, both under California law and under the FLSA. And the decision shows how difficult it is to put the plaintiff’s feet to the fire at the pleading stage of a case. The court won’t look behind the allegations, but takes them at face value – and accepts them as true.

truck

J.B. Hunt Transportation, like many trucking companies, pays its drivers “a certain amount for every mile they drive, in addition to lump sums for every delivery they make.” Consequently, “drivers are not directly compensated for certain job-related activities, including loading and unloading freight, or waiting for a customer.” Relying on Armenta v. Osmose Inc., 135 Cal. App. 4th 314 (2005), a number of drivers sued J.B. Hunt, claiming that they were entitled to receive the minimum wage for those periods when they were not directly compensated. As stated in the court’s order, “Plaintiffs contend that Defendant’s [Activity-Based-Pay (“ABP”) compensation] system fails to provide at least minimum wage during portions of a driver’s day, specifically, while performing certain tasks: (a) waiting in lines at intermodal terminals for periods of less than two hours; (b) performing pre- and post-trip inspections; (c) fueling vehicles; (d) waiting for dispatch to issue assignments; and (e) hooking and unhooking trailers.”

J.B. Hunt responded, asserting that its “piece rate compensation system fully compensates drivers for [all] activities as part of a rate measured by the length of the routes driven,” but also that Plaintiffs’ claims constitute “exactly the kind of state regulatory interference in the market that Congress intended to preempt” when it enacted the Federal Aviation Administration Authorization Act (“FAAAA”).

The FAAAA expressly preempt certain state laws:  “[A] State . . . may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service of any motor carrier . . . with respect to the transportation of property.” 5 49 U.S.C. § 14501(c)(1). The Ninth Circuit has interpreted this statutory language to require an inquiry whether the state law in question “directly or indirectly, ‘binds the . . . carrier to a particular price, route or service and thereby interferes with competitive market forces within the . . . industry.’”

When analyzing Plaintiffs’ minimum wage claims in the context of FAAAA preemption, the District Court stated:

Here, California’s minimum wage laws, upon which Plaintiffs’ claims are based, are indeed “related to” Defendant’s services themselves, as well as the price of those services. As a matter of logic and basic economic principles, if Defendant were forced to change its current ABP compensation system to include hourly pay for “non-productive” activity, its labor costs would clearly be affected, and consequently so would the prices of the services it provides. Defendant provides ample evidence to support this conclusion.  But beyond mere increases to the price of Defendant’s services, altering its compensation system would also result in decreased efficiency and productivity. . . . Common sense dictates that increased efficiency and productivity enables Defendant to serve more customers at lower prices.

Accordingly, the Court determined that the record demonstrated that California’s minimum wage law, to the extent that it required a transportation company using piece rate compensation system to pay drivers for unproductive time, was preempted. Because many transportation companies in California use some form of piece rate or route compensation system, the judgment in favor a J.B. Hunt will attract significant attention.

Source: Gerardo Ortega, et al. v. J.B. Hunt Transport Inc., CV 07-08336 BRO (SHx), June 3, 2014