Recently, a California appeals court ruled that a prevailing defendant can recover fees paid to a plaintiff’s expert witness, rejecting the argument that fees may only be recovered for payments made to the employer/defendant’s own expert.  The case, Chaaban v. Wet Seal, is the first California case to expressly rule on the issue.  In Chaaban, Wet Seal made an early statutory offer of compromise (commonly referred to as a “998 offer”) to the plaintiff, who declined.  Shortly before trial, Wet Seal sought to depose the Plaintiff’s expert, Miles Locker, and was forced to pay him $2,500 for time he spent testifying at deposition.  Mr. Locker, a former senior attorney at California’s Division of Labor Standards Enforcement, is an oft-hired expert, particularly in wage/hour cases.  The jury returned a verdict for Wet Seal and the company filed a memorandum of costs for a total of $29,770.67, including the $2,500 expended on Mr. Locker, plus the cost of his deposition transcript.  The court awarded Wet Seal all of these costs. 

On appeal, the plaintiff argued Wet Seal was only entitled to recover fees it paid to its own expert, not to hers.  The appellate court disagreed, affirming the trial court’s ruling and pointing out that the language of section 998 does not limit recovery to a defendant’s own expert.  The court further emphasized that the purpose behind statutory offers of compromise is to encourage plaintiffs to settle, and allowing recovery of costs paid to a plaintiff’s expert is squarely in line with that purpose. 

 

The lesson here is this: In connection with any litigation, consider statutory offers of compromise early on, particularly when expert witnesses are likely to be called by either side.  Now that it is clear that an employer may recover hefty fees it is forced to cough up for a plaintiff’s expert, plaintiffs may be more likely to seriously consider these statutory offers (and the costs of their experts) than  in the past.    

               The U.S. Supreme Court recently declined to review a California Supreme Court ruling that the National Labor Relations Act (“NLRA”) did not preempt a Los Angeles city (“City”) ordinance. Cal. Grocers Ass’n v. Los Angeles (2011) 52 Cal. 4th 177; cert. denied Cal. Grocers Ass’n v. Los Angeles, 2012 U.S. LEXIS 1016 (U.S., Jan. 23, 2012).  In Cal. Grocers Ass’n, the City enacted the Grocery Worker Retention Ordinance regulating the ability of grocery store owners of a specific size (15,000 square feet or larger) to summarily replace the workforce after a change in ownership. Plaintiff California Grocers Association (Grocers) filed a complaint against the City to enjoin enforcement of the ordinance on the grounds it was preempted by the NLRA and federal labor laws. 

The Court analyzed federal labor laws and explained that preemption was directed at the process of organizing and bargaining, not local employment laws setting substantive minimum labor standards for all employees. Next, the Court considered whether there was evidence of a clear and manifest congressional intent to bar at any level the regulation of employee retention during ownership transitions. The Court found that the NLRA was silent as to an obligation to hire the employees of a purchased business. In addition, the Court held that the retention ordinance should not have a meaningful impact on successorship obligations i.e., if a new employer is deemed a successor of the old employer and hires a majority of its employees from the predecessor’s workforce, the new employer has a duty to recognize and bargain with the union representing the predecessor’s employees.

 

The dissent argued the ordinance impermissibly intruded on federal labor laws and the NLRA by obstructing an employer’s right to select its own workforce and “profoundly” interfering with the collective bargaining process. Further, the ordinance violates the “successorship doctrine” because it effectively binds the new employer to bargain with the union selected by the former employer’s employees. As a result, employers should consult with their legal counsel to determine what impact, if any, this ordinance has on future transactions.

On January 24, 2012, California employers received a welcome victory regarding commission plans and the commission overtime exemption under Wage Orders 4 and 7. In Muldrow v. Surrex Solutions Corp., (CA4/1 Case No. D057955 1/24/12), the Fourth Appellate District of the Court of Appeal found that employment recruiters were eligible for the California commission exemption under Wage Order 7. The Court found that the recruiters “engaged in sales” duties and otherwise qualified for the overtime exemption in Section 3(D) of Wage Order 7. The case provides a good discussion for employers regarding what constitutes “sales duties.” Section 3(D) provides an overtime exemption:

 

. . . to any employee whose earnings exceed one and one-half (1 ½) times the minimum wage if more than half of that employee’s compensation represents commissions.

 

 

In order to meet the commission exemption, the Court found an employee must: (1) be principally involved in selling a product or service, not making the product or rendering the service; and, (2) the amount of their compensation must be a percent of the price of the product or service. The Court held that the recruiters were engaged in “sales” since their primary job duty was to recruit "candidates" for employers. The Court decided that the offering of a candidate’s employment services in exchange for money satisfied the definition of the word "sell.”

 

The case is instructive for employers subject to Wage Order 4 since there is a similar commission overtime exemption in Section 3 of the Wage Order. The commission exemption from overtime does not exempt an employer from Sections 11 and 12 of the Wage Order regarding meal and rest periods. However, the Court found that the Employer “provided” employees with meal periods and, therefore, denied the plaintiff’s meal period claims. It is important to remember that the commission exemption is not contained in all 17 Wage Orders. Moreover, employers must also ensure that employees meet an overtime exemption under the Fair Labor Standards Act (“FLSA”) to avoid the payment of overtime under federal law. Employer should consult legal counsel before relying on a similar argument since such analysis is highly fact sensitive and the Muldrow v. Surrex Solutions Corp case could be subject to further legal challenge.

 

Employers are reminded that the procedure by which they enter into arbitration agreements with their employees is as important as the agreement’s language.  A provision in an employment application requiring the applicant, but not the employer, to submit all disputes to arbitration was both procedurally and substantively unconscionable, and therefore unenforceable, the California Court of Appeal, Third Appellate District, has ruled.  Wisdom v. AccentCare, Inc., No. C065744 (Cal. Ct. App. Jan. 3, 2012). 

The agreement was procedurally unconscionable, the Court said, because the trial court found the plaintiff-applicants had no opportunity to negotiate its terms, the applicable arbitration rules were not provided, and the employer did not explain the agreement’s meaning.  The agreement also was substantively unconscionable because, unlike the applicant, the employer was not bound to submit claims to arbitration.  Consequently, the appellate court affirmed the order denying arbitration. For extensive analysis of this decision, please click on the following article: Arbitration Agreement in Employment Application Unconscionable, Unenforceable, California Court Rules

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.

On December 21, 2011, a California appellate court made two important rulings regarding reporting time and split shift pay: First, non-exempt employees are not entitled to “reporting time pay” for attending scheduled meetings at work, even though no “usual” day’s work is performed, as long as the employee is paid for at least half of the time for which the meeting was scheduled. 

Second, non-exempt employees are not owed additional compensation for working “split shifts” when they earn at least minimum wage for all hours worked that workday, plus an additional one hour’s pay at the minimum wage rate. 

 

The case, Aleman v. AirTouch Cellular, is the first published California case on the two issues.  It involved former non-exempt employees of AirTouch who alleged, among other things, that the company violated two provisions of IWC Wage Order 4 (which are identical in all material respects to many of the Wage Orders), including failing to pay reporting time pay and failing to pay split shift compensation for days when employees attended a work meeting in the morning and then worked another shift later that same day. 

 

On the first issue, the Court focused on the language of the Wage Order, and in particular, the requirement that reporting time pay be paid only when the employee is required to report for work and “is not put to work or is furnished less than half said employee‘s usual or scheduled day‘s work.”   Cal. Code Regs., tit. 8, § 11040m subdv. 5(A) (emphasis added).  The Court noted that the requirement to pay reporting time pay is expressly conditioned upon the employee either not being put to work at all, OR being paid less than half his/her usual OR scheduled day’s work.  Importantly, because these meetings were actually “scheduled” in advance, and because the employees were paid for their time at the meetings, which was always at least half of the time for which the meetings were scheduled, the condition that triggers payment of reporting time pay did not occur and no reporting time pay was owed. 

 

With respect to the second issue, the Court looked to the language of the section at issue, and also to its placement within the section on  “Minimum Wage.”  Specifically, subdivision (C) of section “4. Minimum Wage.”  reads: “When an employee works a split shift, one (1) hour‘s pay at the minimum wage shall be paid in addition to the minimum wage for that workday, except when the employee resides at the place of employment. Cal. Code Regs., tit. 8, § 11040, subd. 4(C) (emphasis added). 

 

The Court held that if the employee receives at least minimum wages for all hours worked, plus an additional hour’s pay at the minimum wage rate, no additional or “split shift pay” was owed.  Thus, for example, an employee who works a split shift with total of 8 hours in the workday at $10 per hour for a total of $80 would not be owed any split shift pay because he/she received at least minimum wage for all hours of work ($8 x 8 = 64) plus an additional $8.  Had this employee been paid $8.15 per hour for a total of $65.20, he would be owed an additional $6.80 ($8 x 8 hours = $64 + $8 = $72; $72-$65.20 = $6.80) to bring him within the required amount. 

 

Although Aleman may be appealed, for now it provides employers with some valuable guidance: Schedule workplace meetings in advance, including the meeting’s likely duration, and for those employees working split shifts, no additional compensation is owed provided that the employee earns at least minimum wage for all hours worked, plus an addition one hour’s pay at the minimum wage rate.

The California Division of Labor Standards Enforcement ("DLSE") has released a Frequently Asked Questions and a form notice that is compliant with the new California Wage Theft Prevention Act of 2011.  Effective January 1, 2012, the Act requires employers to provide many new employees with written notice that details their rates of pay, employer name and address, workers’ compensation carrier, and other information specified in the Act.  Since Governor Jerry Brown signed the law in October, California employers have struggled to develop notices that are compliant.

The Act required the DLSE to develop and publish a compliant notice.  The DLSE published the notice on its website on December 29.

Form notices in Word format and PDF format

DLSE’s Frequently Asked Questions

 

       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 (9th 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.

San Francisco’s Health Care Security Ordinance has been amended to require additional obligations for covered employers with workers in the City and County of San Francisco.  The amendments will take effect January 1, 2012. The Ordinance requires many employers to spend a specified minimum amount toward certain health care expenses for their employees working in the City and County of San Francisco. See a detailed discussion regarding the changes at Employers Must Comply with Changes to San Francisco Health Care Mandate

A number of new employment laws signed by California Governor Jerry Brown have made significant changes in California labor and employment law. We suggest employers review their human resources policies and employee handbooks. The new laws are effective January 1, 2012, unless otherwise indicated. We highlight what we believe to be the most significant in California Employment Laws for 2012.