Friday, July 01, 2016

Don't Wait for the $15 Minimum Wage - San Francisco's Goes Up to $13 Today!

If you know someone doing business in San Francisco, remember to let that special person know that the minimum wage goes up to $13.00 per hour effective today.  The SF minimum wage web page with access to the poster etc. is here.

As of today, you can hire someone in LA for just $10.50 per hour. (here).  But LA is going to increase that wage to $15.00 within the next few years.  And LA just doubled the statewide paid sick leave entitlement!

Happy July 4 everyone.

Monday, June 20, 2016

Happy 10th Anniversary Shaw Valenza LLP

Yep, lil ol' Shaw Valenza LLP is now officially lil' AND 10 years old as of 6/19.

The blog is turning 10 in a week or so too. And that means it's time to thank you once again for reading and passing along to your colleagues and such.  Thank you!

Jennifer and Greg

Thursday, June 02, 2016

Ninth Circuit: Pay In Lieu of Benefits Is Included in the Regular Rate of Pay

for Overtime Purposes, Even.

Yes, this is what they call a "case of first impression." That means no court has decided the issue before.  The issue the Ninth Circuit Court of Appeals decided is this:

Although the value of benefits are obviously not included in the overtime calculation, the cash equivalents that employers sometimes pay "in lieu" of benefits count as wages that would be included.  This decision will apply in California because federal law applies everywhere.

So, let's back up. The City of San Gabriel had in place a "Flexible Benefits Plan" under which it allowed employees to take cash in lieu of certain health care benefits under certain circumstances, explained here:

The City provides a Flexible Benefits Plan to its employees under which the City furnishes a designated monetary amount to each employee for the purchase of medical, vision, and dental benefits. All employees are required to use a portion of these funds to purchase vision and dental benefits. An employee may decline to use the remainder of these funds to purchase medical benefits only upon proof that the employee has alternate medical coverage, such as through a spouse. If an employee elects to forgo medical benefits because she has alternate coverage, she may receive the unused portion of her benefits allotment as a cash payment added to her regular paycheck. 
The city designated these cash payments "benefits" and did not include them in the regular rate of pay for overtime purposes.

The city argued that these payments were excluded from overtime calculations and the regular rate under the Fair Labor Standards Act's section 207(e)(2), which excludes:

payments made for occasional periods when no work is performed due to vacation, holiday, illness, failure of the employer to provide sufficient work, or other similar cause; reasonable payments for traveling expenses, or other expenses, incurred by an employee in the furtherance of his employer’s interests and properly reimbursable by the employer; and other similar payments to an employee which are not made as compensation for his hours of employment.
The Ninth Circuit panel was concerned with the phrase "other similar payments to an employee which are not made as compensation for his hours of employment."  The court decided that the DOL's regulations and court's precedents did not include these payments in lieu of benefits.  Because pay in lieu of benefits did not fall within "other similar payments" they would be part of the regular rate.  

The court also noted that section 207(e)(4) expressly excludes the value of the benefits themselves from the regular rate. However, rather than treating the cash in lieu as a benefit equivalent, the court said that the payment "in lieu" meant that the cash was not a benefit at all.  Of note, the court found that the cash payments were made directly to the employees, whereas section 207(e)(4) requires payment of the benefit premiums to a third party such as a benefits trust. The regulation interpreting section 207(e)(4) actually permits payment of cash in lieu of benefits, but caps the amount at 20%.  The city's payment was more.

To add insult to injury, the court also found that the city's violation of the FLSA here was "willful" resulting in a 3-year statute of limitation and the availability of "liquidated" or double damages for the violation. The court believed the city did not do enough to research the law in the area, even though there was no case law on the subject (!).  This holding drew comment by two of the three judges that the court should re-examine its standards for finding "willfulness."

Cute disclaimer: I'm not an ERISA lawyer and I did not stay in a Holiday Inn Express last night. (No cookies).  Also, employers may or may not have discontinued these plans under the Affordable Care Act.  And the case might have come out differently if the pay-in-lieu were administered through a third party trust or administrator because it might have fallen within the section 207(e)(4) exemption. So don't panic until you check with qualified benefits counsel. 

However, this case is important if employers continue to offer pay in lieu of benefits, or if it did so within the past three years.  It also is important because it underscores the need for employers to consider whether payments to employees are properly included or excluded from overtime, and how overtime is calculated.  Again, although this is an FLSA case, it will have an impact in California. So heads up.

This case is Flores v. City of San Gabriel and the opinion is here. 

Monday, May 30, 2016

Arbitration Class Action Waivers - Trouble Brewing?

There are pros and cons associated with mandatory arbitration agreements.  Yes, everybody knows that.  One of the biggest "pros" is that an employer can insist that employees arbitrate only individual claims, not class claims.  Or can it?  That's what may be under re-consideration...

The U.S. Supreme Court supposedly settled this issue some years ago in AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 333, 131 S. Ct. 1740, 1742 (2011).  There, the Court, in a nutshell, held:
the overarching purpose of the FAA, evident in the text of §§ 2, 3, and 4, is to ensure the enforcement of arbitration agreements according to their terms so as to facilitate streamlined proceedings. Requiring the availability of classwide arbitration interferes with fundamental attributes of arbitration and thus creates a scheme inconsistent with the FAA.
The Supreme Court in Concepcion expressly invalidated a line of California precedent, in which the California courts had held that class action waivers in arbitration agreements were unconscionable and void against public policy.

The California Supreme Court recognized Concepcion's rule in its landmark Iskanian ruling:
Concepcion held that the FAA does prevent states from mandating or promoting procedures incompatible with arbitration. The Gentry rule runs afoul of this latter principle. We thus conclude in light of Concepcion that the FAA preempts the Gentry rule.
Iskanian v. CLS Transp. L.A., LLC, 59 Cal. 4th 348, 366, 173 Cal. Rptr. 3d 289, 299, 327 P.3d 129, 137 (2014)

Why are we walking down memory lane?  Hang in there...

Because the National Labor Relations Board waded into this issue and decided in a case called D.R. Horton, 357 N.L.R.B. 2277 (2012), that class action waivers are unlawful under the National Labor Relations Act, even if the Federal Arbitration Act preempts state laws prohibiting them.  The Federal Arbitration Act, a federal law, does not preempt the National Labor Relations Act, a federal law.  The NLRB's rationale is that a class action is a form of "protected concerted activity" and that requiring employees to waive the right to sue as a class is an unlawful waiver.  

The Court of Appeals for the Fifth Circuit disagreed with the Board and did not enforce its opinion in D.R. Horton. That means the decision was not binding and could not be used as precedent.  The California Supreme Court also rejected the Board's rationale in Iskanian
We thus conclude, in light of the FAA's “‘liberal federal policy favoring arbitration’” (Concepcion, supra, 563 U.S. at p.___ [131 S. Ct. at p. 1745]), that sections 7 and 8 of the NLRA do not represent “ ‘a contrary congressional command’ ” overriding the FAA's mandate (CompuCredit Corp. v. Greenwood, supra, 565 U.S. at p. ___ [132 S. Ct. at p. 669]). This conclusion is consistent with the judgment of all the federal circuit courts and most of the federal district courts that have considered the issue.
So, the NLRB thing was a big yawn, and no one cares because everybody is non-union, right?  Well, no. The NLRB's rules apply to non-union employers too, but D.R. Horton wasn't getting a lot of play.  Until now.

The Seventh Circuit has just come down in favor of the NLRB's position, in a case involving a non-union employer's motion to compel arbitration in federal court.  In Lewis v. Epic Sys. Corp., No. 15-2997, 2016 U.S. App. LEXIS 9638, at *1 (7th Cir. May 26, 2016), the court of appeals refused to enforce Epic Systems's arbitration agreement because it contained a class action waiver.  

The court held that the waiver violated the National Labor Relations Act:
Epic's clause runs straight into the teeth of Section 7. The provision prohibits any collective, representative, [12] or class legal proceeding. Section 7 rovides that "[e]mployees shall have the right to ... engage in ... concerted activities for the purpose of collective bargaining or other mutual aid or protection." 29 U.S.C. § 157. A collective, representative, or class legal proceeding is just such a "concerted activit[y]." See Eastex, 437 U.S. at 566; Brady, 644 F.3d at 673; D. R. Horton, 357 N.L.R.B. 2277, at 2278. Under Section 8, any employer action that "interfere[s] with, restrain[s], or coerce[s] employees in the exercise of the rights guaranteed in [Section 7]" constitutes an "unfair labor practice." 29 U.S.C. § 158(a)(1). Contracts that stipulate away employees' Section 7 rights or otherwise require actions unlawful under the NRLA are unenforceable.
Lewis v. Epic Sys. Corp., No. 15-2997, 2016 U.S. App. LEXIS 9638, at *11-12 (7th Cir. May 26, 2016)

The Seventh Circuit's decision sets up a circuit split and a chance for the U.S. Supreme Court to consider whether class action waivers violate the NLRA or not.  The Seventh Circuit's decision also gives the NLRB the impetus to bring unfair labor practice charges against employers that maintain class action waivers in their arbitration agreements, which could result in invalidation of those agreements down the road. 

So, employers with class action waivers, be aware that challenges to these agreements may come as a result of the NLRB's position in D.R. Horton, especially given the Seventh Circuit's recent endorsement.  We will have to see if the Seventh Circuit's decision is taken up for review by the U.S. Supreme Court.   The court already decided not to hear it en banc.

Monday, May 23, 2016

Shaw Valenza's Employment Law Pot Pourri / Quick Takes

Here are some quick takes to catch you up on a bunch of recent developments.

Rounding Time to the Quarter Hour

The Ninth Circuit upheld a neutral policy under which an employer rounded time to the nearest quarter-hour.

The time clock system would automatically round back for 7 minutes or less of time worked in the 15-minute period, and would round ahead for 8 or more minutes.  The rounding mechanism was not allowed to be edited by managers.

On that basis, the Court held that the rounding system was neutral on its face.  And as applied to the plaintiff, he lost just $15.00 in pay over the 13 months of punches that he made.  That's how neutral rounding is supposed to pan out.

The Court found that this practice was lawful under both the federal Fair Labor Standards Act and the  California Labor Code.  The case is Corbin v. Time Warner Entertainment etc. and the opinion is here.

California Fair Employment Agency to Revise Gender Regulations

The FEHC is beginning the process of revising its regulations regarding gender identity.   You can read the proposed revisions here.  The proposed additions include a new provision on bathroom / locker facilities:
(A) Employers shall permit employees to use facilities that correspond to the employee’s gender identity or gender expression, regardless of the employee’s assigned sex at birth.

(B) To balance the privacy interests of all employees, employers shall provide alternatives if no individual facility is available, such as, locking toilet stalls, staggered schedules for showering, shower curtains, or other method of ensuring privacy. However, an employer or other covered entity may not require an employee to use a particular facility.

(C) Transitioning employees shall not be required to undergo, or provide proof of, any particular medical treatment to use facilities designated for use by a particular gender.

(D) Employers and other covered entities with single-occupancy facilities under their control shall use gender-neutral signage for those facilities, such as “Restroom,” “Unisex,” “Gender Neutral,” “All Gender Restroom,” etc.
There also is a proposed regulation regarding pronouns and names:
(h) Recording of Gender and Name

(1) It is unlawful to require an applicant or employee to state whether the individual is transgender.

(2) If a job application form requires an individual to identify as male or female, designation by the applicant of a gender that is inconsistent with the applicant’s assigned sex at birth or presumed gender shall not be considered fraudulent or a misrepresentation for the purpose of adverse action based on the applicant’s designation.

(3) If an employee requests to be identified with a preferred gender, name, and/or pronoun, an employer or other covered entity who fails to abide by the employee’s stated preference may be liable under the Act, except as noted in subdivision (4) below.

(4) An employer may use an employee’s gender or legal name as indicated in a government-issued identification document only if it is necessary to meet a legally- mandated obligation.

Here's a proposal about dress and grooming standards:

(g) Physical Appearance, Grooming, and Dress Standards. It is lawful for an employer or other covered entity to impose upon an applicant or employee physical appearance, grooming or dress standards that serve a legitimate business purpose, so long as any such standard does not discriminate based on an individual’s sex, including gender, gender identity, or gender expression.
However, if such a standard discriminates on the basis of sex and if it also significantly burdens the individual in his or her employment, it is unlawful.  It is unlawful to require individuals to dress or groom themselves in a manner inconsistent with their gender identity or gender expression.
And, finally, something about requiring proof of gender identity:

(1) It is unlawful for employers and other covered entities to inquire or require documentation or proof of an individual’s sex, gender, gender identity, or gender expression as a condition of employment, unless the employer or other covered entity meets its burden of proving a BFOQ defense, as defined above, or the employee initiates communication with the employer regarding any requested adjustment to the employee’s working conditions. 

Attorney's Fees for Prevailing Employers Under Federal Anti-Discrimination Law?

The U.S. Supreme Court decided - 8-0 - that a prevailing defendant in a Title VII discrimination case (and that means ADA, ADEA and section 1988, too), may recover attorney's fees without winning "on the merits."  That means, for example, if a plaintiff insists on bringing a frivolous case that is obviously barred by the statute of limitations, the employer can apply for attorney's fees even though the statute of limitations defense is not proof of non-discrimination.  As Justice Thomas already points out, the defense already has to establish that the plaintiff's case was 'frivolous, unreasonable or groundless" because of an earlier Supreme Court case (that invented that standard).  So requiring a win "on the merits" would have been a whole new burden and the Court wasn't having it.  So, the EEOC owes CRST at least $4 million for its frivolous pursuit of CRST if that ruling holds up on remand.  Wet blanket moment: Where will the EEOC get the money to pay those fees?  Oh. Right.  Us.

That case is CRST Van Expedited, Inc. v. EEOC and the opinion is here.

Statute of Limitations for Constructive Discharge Under Federal Law

The U.S. Supreme Court in an 7-1 decision decided that a "constructive discharge" or forced resignation claim is considered timely or untimely based on the date that the employee gives notice of resignation.

The Post Office in Green v. Brennan, opinion here, argued that the limitations clock begins to run when the employer performs the "last discriminatory act."  But the Court disagreed and reversed the Tenth Circuit:

Ordinarily, a “ ‘limitations period commences when the plaintiff has a complete and present cause of action.’” Ibid. “[A] cause of action does not become ‘complete and present’ for limitations purposes until the plaintiff can file suit and obtain relief.” Bay Area Laundry and Dry Cleaning Pension Trust Fund v. Ferbar Corp. of Cal., 522 U. S. 192, 201 (1997).
 Applying this general rule to the case before it, the Court ruled:

the “matter alleged to be discriminatory” in a constructive-discharge claim necessarily includes the employee’s resignation for three reasons. First, in the context of a constructive-discharge claim, a resignation is part of the “complete and present cause of action” necessary before a limitations period ordinarily begins to run. Second, nothing in the regulation creating the limitations period here, §1614.105, clearly indicates an intent to displace this standard rule. Third, practical considerations confirm the merit of applying the standard rule here.
Of note, the Court made clear that the limitations period begins to run when the employee gives notice of the resignation, not on the date of the resignation.

Tuesday, May 17, 2016

U.S. DOL Issues New White Collar Exemption Regulations, But

The U.S. DOL is only (substantially) increasing the salary test for the time being. That's right. No changes to the duties tests for now.

Unless Congress acts (and overrides a veto I'm sure would be coming), the base salary for an exempt executive, administrative or professional employee will rise from its current $23,660 to $47,476 on December 1, 2016.    That's a federal law.  So, that means that if you have exempt manager employees who make less than $47,476 on December 1, they are non-exempt as of that date unless you give them a raise.

Now this change does not affect outside sales, or retail commission exempt employees. Only the ones who require a salary to be exempt.

In California, the minimum wage is currently $10.00  an hour. So, the minimum salary test is $20 X 2080 = $41,600.  That means that everyone in California who is exempt must be making at least $47,476 base salary on 12/1/16 or they will lose the exemption.

One issue that will help satisfy the federal test but may not help in California.  Under the new regulations, it will be OK to count bonuses, commissions, or other variable compensation towards up to 10% of the minimum salary requirement.  Only certain types of bonuses etc. apply so read the regulations. That may not work in California, where salary is supposed to be a fixed sum.  We shall see if state law follows the new rule.

And let's not forget that on 1/1/17, the California minimum wage goes up to $10.50 an hour. The California minimum exempt salary will then be $43,680.  That's still lower than the federal minimum!

Another major change affects the federal "high compensation" exemptions - which don't apply in California. These are relaxed duties tests for people who make more than $100,000 per year.  That $100,000 threshold goes up to $134,004, again on 12/1/16.

The federal salary test will increase every three years, too.  So, look for a $51,000 minimum salary in 2020.

I know this is not welcome news. But it's a whole lot better news than the proposed regulations, which were going to make it very tough to qualify people as exempt under federal law.  As it is, the DOL estimates that some 4.2 million workers will become eligible for overtime under the new regulations, (presumably unless the employers increase their salaries).

The U.S. DOL has put out some FAQs that you can review here.  

Don't blow this. Overtime liability comes with serious penalties.

Sunday, April 24, 2016

California Supreme Court Takes a Stand on Sitting Down

The California Supreme Court in Kilby v. CVS Pharmacy (opinion here)  issued a unanimous opinion interpreting California Wage Orders' (section 14(A)) requirement that employers provide
[a]ll working employees  . . . suitable seats when the nature of the work reasonably permits the use of seats.”
Also, Section 14(B) says:
When employees are not engaged in the active duties of their employment and the nature of the work requires standing, an adequate number of suitable seats shall be placed in reasonable proximity to the work area and employees shall be permitted to use such seats when it does not interfere with the performance of their duties.” 
Why is the state's highest court doing this?  In this case, the Ninth Circuit Court of Appeals asked the California Supreme Court to interpret California law, because the Ninth Circuit is trying to figure out whether certain class actions filed in federal court have merit.  No case interpreted this portion of the Wage Order before, because the class action lawyers were busy suing over rest periods, wage statements, and a host of other matters.  They finally made it down to section 14 - "suitable seating," and so here we are.  

With that background, here are the questions the California Supreme Court sought to answer:
(1) Does the phrase “nature of the work” refer to individual tasks performed throughout the workday, or to the entire range of an employee's duties performed during a given day or shift?

(2) When determining whether the nature of the work “reasonably permits” use of a seat, what factors should courts consider? Specifically, are an employer‟s business judgment, the physical layout of the workplace, and the characteristics of a specific employee relevant factors?  
(3) If an employer has not provided any seat, must a plaintiff prove a suitable seat is available in order to show the employer has violated the seating provision?.

This case involved CVS employees.  The named plaintiff, Kilby, had a customer service job that included duties such as: "operating a cash register, straightening and stocking shelves, organizing products in front of and behind the sales counter, cleaning the register, vacuuming, gathering shopping baskets, and removing trash. CVS did not provide Kilby a seat for these tasks."

This case also was consolidated with Henderson v. JP Morgan Chase Bank, which involved tellers at a bank.  They are covered by Wage Order 4 rather than 7.  The seating requirement, section 14(A), is identical in both Wage Orders.  The tellers 
had duties associated with their teller stations, including accepting deposits, cashing checks, and handling withdrawals. They also had duties away from their stations, such as escorting customers to safety deposit boxes, working at the drive-up teller window, and making sure that automatic teller machines were working properly. These duties varied depending on the shift or branch location and whether the employee was a lead or regular teller.
Against this backdrop, the Court answered the above questions.

1.   So, how does a court look at the "nature of the work" 
courts must examine subsets of an employee's total tasks and duties by location, such as those performed at a cash register or a teller window, and consider whether it is feasible for an employee to perform each set of location-specific tasks while seated. Courts should look to the actual tasks performed, or reasonably expected to be performed, not to abstract characterizations, job titles, or descriptions that may or may not reflect the actual work performed. Tasks performed with more frequency or for a longer duration would be more germane to the seating inquiry than tasks performed briefly or infrequently.
* * *
An employee may be entitled to a seat to perform tasks at a particular location even if his job duties include other standing tasks, so long as provision of a seat would not interfere with performance of standing tasks.
Mushy.  But what this means is that if a teller spends a certain period of time at a teller window, one looks at the tasks s/he performs at that location and then looks whether it's feasible to perform the tasks seated.  If not, can there be a seat available so that some tasks are performed seated.

The Court also looked at how employers  have to provide suitable seating for employees who may have to stand when they are actively working, but who may experience "lulls" in operation:
if an employee‟s actual tasks at a discrete location make seated work feasible, he is entitled to a seat under section 14(A) while working there. However, if other job duties take him to a different location where he must perform standing tasks, he would be entitled to a seat under 14(B) during “lulls in operation.” Although the seating inquiries under sections 14(A) and 14(B) are analytically different, the seat provided to an employee under section 14(A) may satisfy the requirement of section 14(B) to the extent it is within “reasonable proximity to the work area” (§14(B)) and is available when work is not required to be performed. 

2.  What does "reasonably permits" mean?  

The Court then turned to an examination of what factors courts would consider to determine if the nature of the work "reasonably permits" the use of a seat.  What if the employer thinks that employees should stand as a matter of respect or service?  What if the physical layout does not accommodate seats, even if the duties of the job might?  Etc.   

You crave simplicity and bright line rules?  No such luck:
Whether an employee is entitled to a seat under section 14(A) depends on the totality of the circumstances. Analysis begins with an examination of the relevant tasks, grouped by location, and whether the tasks can be performed while seated or require standing. This task-based assessment is also balanced against considerations of feasibility. Feasibility may include, for example, an assessment of whether providing a seat would unduly interfere with other standing tasks, whether the frequency of transition from sitting to standing may interfere with the work, or whether seated work would impact the quality and effectiveness of overall job performance. This inquiry is not a rigid quantitative analysis based merely upon the counting of tasks or amount of time spent performing them. Instead, it involves a qualitative assessment of all relevant factors.
Ok but what about business judgment? Can't the employer pay the employee to stand?  Well sure:
There is no question that an employer may define the duties to be performed by an employee. As the DLSE observes, “[a]n employer's business judgment largely determines the nature of work of the employee both generally, as well as duties or tasks specifically.” Contrary to plaintiffs‟ suggestion, such duties are not limited to physical tasks. Providing a certain level of customer service is an objective job duty that an employer may reasonably expect. An employee's duty to provide a certain level of customer service should be assessed, along with other relevant tasks and obligations, in determining whether the nature of the work reasonably permits use of a seat at a particular location. Providing “customer service” is an objective job function comprised of different tasks, e.g., assisting customers with purchases, answering questions, locating inventory, creating a welcoming environment, etc.
Wait, did I say "sure"?  Hold the phone:
However, “business judgment” in this sense does not encompass an employer's mere preference that particular tasks be performed while standing. The standard is an objective one. An employer's evaluation of the quality and effectiveness of overall job performance is among the factors that can be objectively considered in light of the overall aims of the regulatory scheme, which has always been employee protection. An objective inquiry properly takes into account an employer's reasonable expectations regarding customer service and acknowledges an employer's role in setting job duties. It also takes into account any evidence submitted by the parties bearing on an employer's view that an objective job duty is best accomplished standing. It protects employees because it does not allow employers unlimited ability to arbitrarily define certain tasks as “standing” ones, undermining the protective purpose of the wage order.
So, can an employer can pay an employee to stand?  Can the boss require employees to be standing when on the clock and customers are in view, because it's "classier"?  It seems the employer can define customer service duties, which include standing tasks. But a third party - jury or judge - will decide if they are objectively reasonable.  "I, for one, welcome our new overlords," said no business owner, ever.

The Court similarly considers the physical layout of the workplace to be a relevant consideration to whether it is reasonable to have suitable seating available.  But, employers - and architects - take note:
just as an employer's mere preference for standing cannot constitute a relevant “business judgment” requiring deference, an employer may not unreasonably design a workspace to further a preference for standing or to deny a seat that might otherwise be reasonably suited for the contemplated tasks. As the DLSE observes in its amicus curiae brief, the seating requirement is “a workplace condition aimed at the welfare of employees performing work and not an „engineering‟ or technically-based standard,” and “[w]hile facts regarding technical aspects of workplace configurations or studies may be relevant to determining whether suitable seating can be provided, the application of the standard is essentially one of overall reasonableness applied to the particular facts.” As the DLSE suggests, reasonableness remains the ultimate touchstone. Evidence that seats are used to perform similar tasks under other, similar workspace conditions may be relevant to the inquiry, and to whether the physical layout may reasonably be changed to accommodate a seat. As the DLSE states, reasonableness must be based on the particular circumstances.

3. Whose Burden Is It to Prove Suitable Seating Either Is or Is Not Available?

It is the employer's burden to show that no suitable seat was available, not the employee's burden to show that there was one.   The Court spent little time on this.  However, the language of the wage order appears to place this burden on the employer.

In sum, this case will be difficult to interpret for employers looking for a bright line rule on whether seating should be provided in work situations when seating is not necessarily an obvious part of a job.  It remains to be seen whether there will be more litigation in this issue, or whether employers will reconfigure businesses to permit more seating in California to avoid these lawsuits. 

Court of Appeal Saves Electronically Signed Arbitration Agreement - Relevant to Other Electronic Acknowledgements Too

Wait, don't skip this one yet. It's not just another arbitration case. If your business uses electronic acknowledgments of policies, handbooks or employment agreements (commissions, confidentiality agreements, etc.), it's worth a read.

In this case, Doctor Espejo sued Kaiser for wrongful termination. The facts aren't important.  At the beginning of employment, Kaiser sent the doctor an email containing electronic links to his offer letter, the dispute resolution procedures (arbitration agreement), "rules and regulations," and a benefits handbook. He accepted his offer and the other materials via an electronic signature that he applied after clicking the links, signing in and following procedures.

The issue that lawyers have to deal with, dear HR and company management, is how to prove that these things happened in litigation.  And that problem came up when Kaiser tried to compel Dr. Espejo to arbitrate.

The trial court rejected Kaiser's attempt to prove that Dr. Espejo signed his arbitration agreement. But the trial court did so because it refused to rely on a declaration that Kaiser submitted after Kaiser had filed its initial Petition to Compel Arbitration.  (Kaiser submitted the additional declaration in response to a new court decision that had come down, trying to satisfy its evidentiary burden.)  The Court of Appeal decided the trial court should have accepted Kaiser's declaration.

With that out of the way, the Court of Appeal made two significant rulings. One applies in the context of compelling arbitration. But one is more generally applicable to proving that electronically signed documents are "authentic" and admissible evidence.

First, the Court of Appeal decided that a party's initial burden on a Petition to Compel arbitration does not include fully "authenticating" an arbitration agreement, unless the other side disputes the agreement is authentic in its opposition.

we conclude that defendants here met their initial burden by attaching to their petition a copy of the purported arbitration agreement bearing Espejo’s electronic signature. Once Espejo challenged the validity of that signature in his opposition, defendants were then required to establish by a preponderance of the evidence that the signature was authentic.
That's good news unless, as in this case, the employee is going to deny electronically signing the document.  Doctor Espejo recalled electronically signing his offer letter, but he did not remember authorizing his electronic signature on the other documents.  So, as it says above, Kaiser then had to prove authenticity by a preponderance of the evidence. This issue will arise a lot in other contexts, such as handbook receipts, commission plans, etc.  How does one prove to a court that an electronic acknowledgment is real?  Remember, that's the only reason employers have these sign-offs - in case of litigation.  So, it pays to have a way of proving they are valid.

The Court of Appeal reviewed the law in this area and approved the declaration that Kaiser submitted.  To prove an electronic signature is valid under Civil Code section 1633.9, subd. (a), it is necessary to prove it is the "act of the person" whom you want to establish signed the document.  The Court of Appeal reviewed Kaiser's declaration and decided it was sufficient to do so:
Tellez detailed SCPMG’s security precautions regarding transmission and use of an applicant’s unique user name and password, as well as the steps an applicant would have to take to place his or her name on the signature line of the employment agreement and the DRP. Based on this procedure, she concluded that the “name Jay Baniaga Espejo could have only been placed on the signature pages of the employment agreement and the DRP by someone using Dr. Espejo’s unique user name and password. . . . [¶] Given this process for signing documents and protecting the privacy of the information with unique and private user names and passwords, the electronic signature was made by Dr. Espejo” on the employment agreement and the DRP at the date, time, and IP address listed on the documents. These details satisfactorily meet the requirements articulated in Ruiz and establish that the electronic signature on the DRP was “the act of” Espejo (Civ. Code, § 1633.9, subd. (a)), and therefore provide the necessary factual details to properly authenticate the document.
So, to prove electronic signatures depict the acknowledgment of the person whom the company wants to say signed the document, the following is necessary:

- a company witness has to know how the electronic signature process works and has to be able to explain it in a declaration.  The vendor has to have a white paper explaining the process in plain English, and training for HR and IT;

- the electronic signature process has to have sufficient security safeguards to allow a court to find that it is more likely than not the signature of the person you want it to be.  It always helps to have an email confirmation of the signing event sent to the email user with a return receipt; and

- the lawyer has to know how to draft a proper declaration of a person who can lay foundation regarding knowledge of how the process works and how it was applied to the plaintiff.  (You're welcome).

This case is Espejo v. Southern California Permanente Medical Group and the opinion is here.