As California employers continue to grapple with recent legislation effective January 1, California Governor Gavin Newsom is releasing his plans for even more employment legislation. Along with the Governor’s proposed budget, the Governor has announced various “trailer bills.”  Trailer bills are measures that accompany the annual state budget that theoretically are necessary to implement the budget. Yet they can also be an easy way for the Governor to get difficult legislation passed, as the trailer bills only require a simple majority to pass.

Please find the rest of this article on our Disability, Leave & Health Management Blog here.

The district court in Chamber of Commerce of the United States, et al. v. Becerra, et al., E.D. Cal. Case No. 2:19-cv-2456, granted the request for a preliminary injunction enjoining the State of California from enforcing Assembly Bill 51 (AB 51) with respect to arbitration agreements governed by the Federal Arbitration Act (FAA).

AB 51 generally prohibits conditioning employment or employment-related benefits on the signing of an arbitration agreement covering claims under the California Fair Employment and Housing Act or Labor Code. The U.S. Chamber of Commerce and other business organizations filed this lawsuit against the State of California seeking to have AB 51 declared preempted by the FAA. The preliminary injunction issued today will remain in place until the case is resolved on the merits.

In its minute order granting the preliminary injunction, the court indicated that it will issue a detailed, written order explaining its reasoning “in the coming days.”

Jackson Lewis attorneys will continue to monitor developments pertaining to AB 51. In the meantime, employers should contact a Jackson Lewis attorney if they would like to discuss the implications of the latest ruling or for assistance in drafting California-compliant employment arbitration agreements.

For more on the Chamber of Commerce case and Assembly Bill 51 see Jackson Lewis’s prior articles:

Court Hears Oral Argument on Challenges to AB 51, Orders Further Briefing, and Maintains Temporary Restraining Order

California Bar on Mandatory Arbitration Agreements in Employment Temporarily Enjoined

New California Law Attacks Mandatory Arbitration Again … But Is It More Bark Than Bite?

The California Court of Appeal, in its recent decision in Schmidt, et al. v. Superior Court, County of Ventura 2020 Cal. App. LEXIS 54 (January 22, 2020), affirmed the trial court’s ruling in favor of the employer, the Ventura County Superior Court.

Two court employees alleged that a security guard employed by a private company sexually harassed them during the courthouse entry screening process.

The Court of Appeal acknowledged in its opinion that the “slow and intrusive security process could annoy employees.” This annoyance was also noted at the trial court level, indicating that long-term employees, in particular, found the screenings frustrating and a sign of distrust.

The plaintiffs alleged that one of the security guards treated them inappropriately on a regular basis. The women testified that the guard would hold the screening wand over their breasts, pelvis, and buttocks for long periods of time, sometimes in a sexual manner, even when the metal detector did not detect anything. One of the plaintiffs claimed that the guard “dumped and searched” her bag, over-scrutinized her belongings, and refused to let her enter the courthouse with sewing scissors. The other plaintiff alleged that the guard got too close to her face and yelled a greeting to her in an intimidating way.

Both women reported these incidents to Human Resources. However, when Human Resources reviewed weeks of video footage from the relevant time period, there was no footage that matched the plaintiffs’ accounts; to the contrary, some footage directly contradicted their allegations. The women subsequently filed a lawsuit against their employer for sexual harassment and hostile work environment. The security guard was not named in the lawsuit.

Following a bench trial, the trial court found that the plaintiffs failed to prove their claim for sexual harassment, specifically stating that the video evidence “clearly refutes” the plaintiffs’ claims. The Court of Appeal agreed.

Employers do not always have the benefit of video surveillance to capture every interaction in the workplace. However, if an incident with an alleged harasser may have been videotaped or otherwise recorded, employers should act quickly and carefully to preserve the digital evidence in the event of a claim.

If you have questions about employee harassment complaints or preserving digital evidence, contact a Jackson Lewis attorney.

As previously addressed by the OSHA Law Blog, California’s Occupational Safety and Health Standards Board (“Standards Board”) considered a proposed standard that would allow employee access to their employer’s Injury and Illness Prevention Plan (“IIPP”). During its January 16th, 2020 meeting the Standards Board approved the proposed rule, which is now expected to take affect on January 1, 2021.

Please find the rest of this article on our OSHA Law Blog here.

Recently, the California Court of Appeal reviewed an appeal regarding citations issued against a sheet metal company, Nolte Sheet Metal in Nolte Sheet Metal, Inc. v. Occupational Safety and Health Appeals Board.

One of the issues presented was whether Nolte freely and voluntarily consented to a Cal/OSHA inspection. Under the California Labor Code, Cal/OSHA is permitted to investigate and inspect any workplace after presenting appropriate credentials to the employer. If an employer refuses inspection, Cal/OSHA may seek to obtain a search warrant.

This matter began when a Cal/OSHA safety and compliance engineer came to Nolte to conduct an inspection with an entourage of California administrative representatives in tow. The Cal/OSHA representative was accompanied by representatives from the Contractors’ State License Board, the Employment Development Department, the Department of Labor Standards Enforcement, and the California Department of Insurance. According to the testimony, the California Department of Insurance representatives carried handguns and wore bulletproof vests.

The owner of the Company’s son faced with the barrage of officials testified that while he allowed the inspection to occur, based upon the circumstances, he did not believe he could refuse.

However, the Court of Appeal agreed with the administrative decision which found that the Cal/OSHA inspector asked for permission to conduct the inspection. And though the owner’s son testified he was intimidated by the presence of armed officials this alone was not enough to show a lack of proper consent.

While employers may deny entry, Cal/OSHA may seek to obtain a search warrant.  There may be instances where it is appropriate to deny entry, instead of consenting to inspection.  Generally, however, Cal/OSHA will have administrative probable cause to obtain a warrant which could trigger a more in-depth investigation and more serious citations. Employers may attempt to limit the scope of the inspection and should accompany the inspector while the inspection is conducted.

Contact a Jackson Lewis attorney if you have questions about how to handle a Cal/OSHA inspection or how to ensure your worksite will pass an inspection.

Earlier this week, the Southern District heard arguments regarding the grant of a preliminary injunction to prevent the enforcement of Assembly Bill 5 (“AB 5”) against motor carriers operating within California.

Judge Benitez granted the preliminary injunction and concluded in his order that “there is little question that the State of California has encroached on Congress’ territory by eliminating motor carriers’ choice to use independent contractor drivers, a choice at the very heart of interstate trucking.”

The preliminary injunction will remain in effect until trial in this matter unless the 9th Circuit decides differently. The preliminary injunction allows truck drivers to continue operating as independent contractors in California.

Jackson Lewis will continue to monitor the status of the Association’s case and other cases pertaining to the application of AB 5. Please contact a Jackson Lewis attorney with any questions.

 

Northrop Grumman has agreed to pay $12,375,000 to settle a class action brought under the Employee Retirement Income Security Act (“ERISA”) by participants in its 401(k) plan. The parties reached the initial terms of this settlement last year minutes before the start of the trial.

The plaintiffs alleged in their complaint that the company’s administration of the 401(k) plan harmed the plan’s participants by using a costly management strategy for a risky investment fund and by using plan assets to overpay for administrative services.

The long legal battle began in 2006 with a related lawsuit alleging that the plan was paying excessive administrative fees. That case was settled for $16,750,000 in 2017, but it limited the damages period to May 11, 2009. The participants of the 401(k) plan alleged that they continued to be charged excessive fees after the damages period in the first lawsuit ended and the current class action was brought in 2016 on similar claims. By August 2019, the only claim that remained in the case asserted that Northrop violated its fiduciary duties by choosing an active-management style for the emerging markets fund instead of a low-cost passive-management style. Northrop switched to a passive management style in 2014.

The proposed $12,375,000 settlement fund will be used to pay participants of the 401(k) plan, $25,000 incentive payments to each of the six named plaintiffs, attorneys’ fees and costs. The court has set a preliminary approval hearing for the settlement on January 31st.

The important take-away for employers who act as fiduciaries of their benefit plans is that they are obligated to act both substantively and procedurally prudent at all times. A fiduciary can aid its defense in a future lawsuit by documenting the processes used for all decisions connected to the administration of the plan. A plan administrator does not have to be omnipotent but must be able to show the processes leading to the ultimate decisions were prudent.

If you have questions about the administration of ERISA-governed benefit plans, contact a Jackson Lewis attorney to discuss.

On the eve of the Assembly Bill 5 (“AB 5”) effective date, Judge Roger Benitez granted the California Trucking Association’s (“Association”) request for a Temporary Restraining Order to prevent enforcement of the law which the Association argued requires truckers to be classified as employees instead of independent contractors.

On January 13th, Judge Benitez heard arguments regarding the Association’s request for a preliminary injunction.  Preemption based on the Federal Aviation Administration Authorization Act (“FAAAA”) is the Association’s primary argument supporting its request for the injunction.  The Association argued that AB 5 is an all-or-nothing law, in that it requires all trucking industry carriers to classify all truck drivers as employees. Defendants, and intervenors, including the International Brotherhood of Teamsters (“Teamsters”), argued in response that application of AB 5 provides a business-to-business (“B2B”) exception. The Association’s rebuttal included that B2B does not apply to the owner-operator contractual relationships between drivers and trucking companies.

Judge Benitez asked both sides to explain the practical impact of AB 5 on the delivery of goods, including how many industry carriers will be affected in state and out-of-state. His questions seemed to emphasize the position that enforcement of AB 5 on truck drivers will directly impact the interstate delivery of goods, including potential increased costs to industry and increased prices for consumers. The Teamsters insisted Judge Benitez consider a recent decision from the Ninth Circuit Court of Appeal in response to the Judge’s question regarding direct impact.  The reference to the Ninth Circuit case failed to answer the Judge’s question.  Despite Judge Benitez’s displeasure with the timing of the Association’s holiday filing requesting the Temporary Restraining Order, his disposition seemed to suggest he would decide in favor of the Association, largely due to the impact on interstate commerce.

Jackson Lewis will continue to monitor the status of the Association’s case and other cases pertaining to the application of AB 5. Please contact a Jackson Lewis attorney with any questions.

While the trucking industry waits for the federal court to hear arguments on the California Trucking Association’s request for an injunction against application of AB5, Judge William Highberger of the Los Angeles Superior Court ruled on January 8, 2020, that AB 5 runs afoul of the Federal Aviation Administration Authorization Act of 1994 (“FAAAA”).

The case is an enforcement action brought by the Los Angeles City Attorney’s office for misclassification of truck drivers. The trucking company had asked the court to decide whether AB 5, which codified the ABC test first applied in the California Supreme Court’s Dynamex’s decision, should be applied retroactively to the claims brought by the State.

Judge Highberger stated that the “‘ABC Test’ set forth in Dynamex Operations-West v. Superior Court and the recently enacted [A.B. 5] clearly run afoul of Congress’s 1994 determination in the [FAAAA] that a uniform rule endorsing use of non-employee independent contractors (commonly known in the trucking industry as ‘owner-operators’) should apply in all 50 states to increase competition and reduce the cost of trucking services.”

“After careful consideration, the court agrees with defendants that the currently operative legal requirements for determination of employee versus independent contractor status are preempted as to certain motor carriers and their drivers by an act of Congress,” the judge added.

Los Angeles City Attorney Mike Feuer has indicated that the city will appeal the decision.

Jackson Lewis will continue to monitor the application of AB 5 and the legal developments regarding its implementation. Contact a Jackson Lewis attorney if you have questions about independent contractors, AB 5, and related cases.

Earlier today, the U.S. District Court for the Eastern District of California heard oral arguments on whether the court should enter a preliminary injunction preventing the State of California (State) from enforcing AB 51 while the court resolves the underlying challenge to the new law on the merits. See Chamber of Commerce of the United States of America, et al. v. Becerra, E.D. Cal. Case No. 2:19-cv-02456-KJM-DB. AB 51 purports to bar California employers from requiring employees to sign arbitration agreements relating to claims under the Fair Employment and Housing Act and Labor Code.  (For Jackson Lewis articles chronicling the history of the embattled bill, please see California Bar on Mandatory Arbitration Agreements in Employment Temporarily Enjoined and New California Law Attacks Mandatory Arbitration Again … But Is It More Bark Than Bite?)

The U.S. Chamber of Commerce (Chamber) took the position that the injunction should be granted because AB 51 unlawfully seeks to apply different terms of contract law to arbitration agreements and therefore violates the Federal Arbitration Act (FAA). Citing Epic Systems Corp. v. Lewis, 137 S. Ct. 809 (2017) and Kindred Nursing Centers. Ltd. Partnership v. Clark, 137 S. Ct. 1421 (2017), the Chamber stressed that the State cannot hold arbitration agreements to higher standards than other contracts, including with respect to contract formation and consent.  Finally, responding to the State’s suggestion that there was no imminent threat that criminal penalties would be imposed under AB 51, the Chamber maintained that the State then had no reason to object to entry of a preliminary injunction.

Generally, the State argued that AB 51 only governs employers’ behavior with respect to agreements with employees generally and that AB 51 does not directly target arbitration agreements, as the law could also apply to nondisclosure agreements, forum selection clauses, and other types of agreements not governed by the FAA. Accordingly, in the State’s view, AB 51 does not unfavorably target arbitration agreements and evades preemption under the FAA.  The State also questioned the Chamber’s standing to bring a challenge to AB 51.

Ultimately, the court requested supplemental briefing with respect to the State’s suggestion that the court lacks jurisdiction. By no later than January 17, 2020, the State must submit supplemental briefing raising any jurisdictional challenges (including challenges to standing), as well as the State’s position in the event the court grants the preliminary injunction in part. The Chamber’s response to the State’s submission is due by no later than January 24, 2020. In the meantime, the temporary restraining order precluding the State from enforcing AB 51 will remain in effect until January 31, 2020. The temporary restraining order has been modified to limit its application and protection to arbitration agreements covered by the FAA.

Jackson Lewis will continue to monitor developments under the law.  Please contact a Jackson Lewis attorney with any questions.