A good case for employers was recently issued with respect to the Personal Attendant overtime exemption. On May 14, 2012, the California Court of Appeal, Fourth Appellate District held that an individual who is exempt from overtime under the Personal Attendant overtime exemption with respect to Wage Order 15 is not disqualified from the exemption by performing routine health related tasks including, but not limited to: taking the temperature of the elderly resident; checking the pulse; assisting with an over the counter blood sugar test (applicable to diabetics); and, providing reminders and supervising the taking of medication by the elderly resident. See, Cash v. Winn (CA4/1 D0586575/14/12). The Court made clear that, as long as such duties are less than 20% of a Personal Attendant’s job functions, the individual does not lose the protections of the overtime exemption.

Wage Order 15, Section (2)(j) defines a  “Personal attendant” as “baby sitters and means any person employed by a private householder or by any third party employer recognized in the health care industry to work in a private household, to supervise, feed, or dress a child or person who by reason of advanced age, physical disability, or mental deficiency needs supervision. The status of “personal attendant” shall apply when no significant amount of work other than the foregoing is required.” The Court rejected the argument that a caretaker, who is not a licensed nurse, is disqualified from the Personal Attendant overtime exemption by performing “any form” of health care related services for an elderly client. While employers and families need to monitor if the case will be appealed by either party, it is a welcome clarification of the law for now.

In a partial victory for employers, the California Supreme Court recently held in Kirby v. Immoos Fire Protection, Inc., S185827 (Cal. Apr. 30, 2012) that employees and employers may not recover their attorney’s fees if they prevail in a lawsuit for meal or rest break payments under Labor Code § 226.7.

 

The Court analyzed the relevant statutory language and legislative history for Labor Code § 1194 and 218.5, the two statutes governing the award of attorneys fees for prevailing parties.  It noted that Labor Code § 1194 was a “one-way fee-shifting statute” authorizing an award of attorney’s fees only to employees who prevail on their minimum wage or overtime claims.  Labor Code § 218.5 is a “two-way fee-shifting statute” permitting an award of fees to either employees or employers who prevail on an action for the “nonpayment of wages.”  Notably, the Court held that a claim alleging a failure to provide meal or rest breaks merely alleged the “nonprovision of meal and rest periods” rather than the “nonpayment of wages” necessary for an award under Labor Code § 218.5.  Thus, an employer who successfully defends against a Labor Code § 226.7 claim will not be entitled to attorney’s fees.  Similarly, an employee who prevails on his/her meal and rest break claims will also be denied attorney’s fees.  It remains to be seen whether the Kirby decision will stem the wave of meal and rest break class action lawsuits filed in recent years.

At the end of 2011, the Department of Fair Employment and Housing (“DFEH”) released its Annual Report for 2010.  It identifies some statistics that may be useful for employers, comparing results in 2010 with the previous three years.  The numbers illustrate a clear effort by the DFEH to close cases as quickly and efficiently as possible.  For example, in 2007, there were approximately 17,700 complaints with just over $9 million in settlements.  In 2010, the number of complaints jumped to nearly 19,500, resulting in almost  $12 million in settlements.  At the same time, with less overall complaints, there were nearly 5,000 open cases at the end of 2007 compared to 3,805 by the end of 2010. 

Overall in 2010, the average pre-accusation case settled for over $7,000 and the average post-accusation case settled for over $40,000, which the DFEH notes is “significantly less than the average $250,000 it would have cost employers to defend such actions.”  The DFEH has also increased its media presence, now with active Twitter, Facebook and Youtube pages.  See 2010 Annual Report for further details.

While we do not have an Annual Report for 2011 just yet, the DFEH recently released its 2011 Fourth Quarter report, which outlines some of the awards issued in the agency’s favor.  For example, the Fair Employment and Housing Commission awarded $35,000 to the employee in connection with a sexual harassment accusation against an employer, along with a $10,000 administrative fine.  In a case under the California Family Rights Act, the matter resulted in settlement of $70,000 to a former employee of a supermarket.  See New Fairtimes Fourth Quarter 2011 for further details.

Reversing a $15 million judgment against an employer in a class action for alleged unpaid overtime, the California Court of Appeal, First Appellate District, has held that the trial court’s trial management plan, which used sampling evidence to prove class liability, denied the employer due process by preventing it from defending against over 90% of class claims. Duran v. U.S. Bank Nat’l Ass’n, Nos. A125557 & A126827 (Cal. Ct. App. Feb. 6, 2012). The Court found the plan “was fatally flawed” and concluded the lower court’s adherence to it denied the employer due process. The Court reversed the judgment and ordered the class to be decertified.

This is the first decision to analyze thoroughly the employer’s due process rights in a class action. It provides employers and their counsel a guide to trial procedures that raise due process red flags and may be able to provide authority for employers (and courts) when developing trial management plans in class actions. However, the case does not necessarily preclude the use of statistical sampling or representative testimony as a way to try class action litigation. Duran’s significance may depend on its probable resolution by the California Supreme Court, and its interpretation by other California courts. For a detailed analysis of the case, please review, "Due Process Concerns Sinks Overtime Class Action against Employer, California Court Rules."

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.