Friday, August 29, 2014

California Supreme Court: Franchisor MAY Be Liable for Franchisee's Employee's Sexual Harassment Claim*

*But not in this case.

Taylor Patterson, an employee at a Domino's franchise in southern California, sued her employer (called "Sui Juris LLC") and her former manager for sexual harassment.  She also sued Domino's Pizza,  LLC, the franchisor.  

The trial court granted Domino's' summary judgment motion, finding Domino's was not the plaintiff's employer, or that the franchisee was not Domino's' "agent."  The court of appeal, though, reversed.  

On review, the California Supreme Court agreed with the trial court, and dismissed the case against Domino's, the franchisor.  

The opinion goes into a long discussion of franchisor history and law, which I'm sparing you. Here is the money quote:
franchisees are owner-operators who hold a personal and financial stake in the business. A major incentive is the franchisee‘s right to hire the people who work for him, and to oversee their performance each day. A franchisor enters this arena, and becomes potentially liable for actions of the franchisee‘s employees, only if it has retained or assumed a general right of control over factors such as hiring, direction, supervision, discipline, discharge, and relevant day-to-day aspects of the workplace behavior of the franchisee‘s employees. Any other guiding principle would disrupt the franchise relationship.
The Fair Employment and Housing Act holds "employers" liable for workplace discrimination, harassment, and retaliation.  The franchisor, although exercising control over branding and the products and services offered, did not impose control over the day to day employment relationship.  

The Supreme Court went on to explain what the nature of an "employer" is in the context of FEHA:
There are few California cases defining an employer under the FEHA provisions invoked here. But, it appears, traditional common law principles of agency and respondeat superior supply the proper analytical framework under FEHA, as they do for franchising generally. Courts in FEHA cases have emphasized "the control exercised by the employer over the employee‘s performance of employment duties." (Bradley v. Department of Corrections & Rehabilitation (2008) 158 Cal.App.4th 1612, 1626, citing Vernon, supra, 116 Cal.App.4th 114, 124-125; accord, McCoy v. Pacific Maritime Assn. (2013) 216 Cal.App.4th 283, 301-302.) This standard requires "a comprehensive and immediate level of 'day-to-day‘ authority" over matters such as hiring, firing, direction, supervision, and discipline of the employee. (Vernon, supra, 116 Cal.App.4th at pp. 127-128.)
As discussed above, Domino‘s lacked the general control of an employer or principal over relevant day-to-day aspects of the employment and workplace behavior of Sui Juris‘s employees. Application of the FEHA test for determining an employment relationship produces no different result in this franchising case than the one we have already reached. Plaintiff is mistaken to the extent she implies that the contrary is true.
So, this case should guide franchisors, as well as affiliated companies. 

Turning to the case at bar, the Supreme Court examined a number of facts to determine Domino's did not exercise the requisite control.  These included

- the language of the franchise agreement.  Critically, the agreement provided Domino's had no say in day-to-day employment issues involving the franchisee's employees. 
- the franchisee in practice exclusively controlled hiring, firing, and other employment decisions. He did not involve Domino's in any such decisions.
- the franchisor did provide certain training to employees on methods and the like.  But the franchisee had exclusive control over sexual harassment training and "how employees treat each other" in the workplace.
- Domino's had no complaint procedure for franchisee employees to report harassment; only the franchisee had such procedures in place.

It should be noted this decision was 4-3.  Justice Baxter penned the majority opinion. He's retiring. I'm going to miss him.  CJ Cantil-Sakauye and Justices Chin and Corrigan joined the majority.

Justice Werdegar, joined by Justice Liu and Justice Chaney (sitting by designation from the court of appeal), would have held that the franchisor should be held liable.  However, even the dissenters agreed
That a franchisor is not automatically the employer of its franchisee‘s employees, irrespective of the details of the parties‘ relationship, necessarily follows. So, too, does it follow that a franchisor may under the circumstances of the parties‘ relationship in fact be an employer. The outcome depends on the factual inquiry.
Therefore, all seven justices agreed on the basic principle. The dissenters believed there was enough to hold Domino's LLC liable.  So, there is no bright line rule re franchisor liability.  There will be litigation to decide in each case whether a franchisor exercises the requisite control to qualify as an "employer."  Franchisors and franchisees will have to ensure their agreements are consistent with their intent in this area.  And franchisors seeking to avoid responsibility for employment law claims will have to cede control over day-to-day employment issues.

This case is Patterson v. Domino's LLC and the opinion is here.

Wednesday, August 20, 2014

CA Governor Signs Two Wage-Hour Bills

Governor Jerry Brown signed a couple of wage-hour laws, which will take effect 1/1/15.  Neither is earth-shattering, but affected employers take note:

AB 2074, text here, clarifies California law regarding the statute of limitations for "liquidated damages," available for unpaid minimum wage claims.  The statute amends Labor Code section 1194.2 (here) to say that the statute of limitations for liquidated damages will be the same as the statute of limitations applicable to the underlying wage claim.  I'm not sure, but it may be that employers argued the statute of limitations is only 1 year because liquidated damages are a form of penalty.

AB 2743, text here, expands the availability of "waiting time penalties."  Per Labor Code section 203 (here), employers face a penalty of up to 30 days' pay when they do not pay employees correctly and timely at termination of employment.  Section 201.9 of the Labor Code allowed employers in the "live theatrical or concert" industry to pay final wages in accordance with a collective bargaining agreement. AB 2743 expands the availability of waiting time penalties to situations when the employer does not pay on time under that CBA.  So, employers not in the "live theatrical or concert" business:  Nothing to see here.

Sunday, August 17, 2014

9th Circuit: Cop with ADHD Has No "Disability" Under the ADA

Here's a remainder from the Ninth Circuit that not every impairment is a "disability."   And without a "disability" within the meaning of the ADA, there is no obligation to accommodate and there is no relief available for termination of employment based on a claim of disability discrimination.

A 9th Circuit panel held, 2-1, that a police officer with ADHD did not have a legally sufficient  "disability" to justify a claim under the ADA.  That is because, the court found, his "impairment" did not "substantially limit" the major life activities of working or interacting with others.

The employee, Weaving, was diagnosed with ADHD at six years old.  At 12, he stopped taking medication, but had difficulty getting along with others during his teen and adult years.

So, Weaving becomes a police officer in Beaverton, Oregon.  He passed all the exams, physical and mental. He did not disclose his ADHD diagnosis or prior medications, believing he was no longer afflicted.  He stayed in Beaverton for about 10 years, and received much negative feedback about his personality conflicts.

He joined the Hillsboro, Oregon, police force in 2006.  He disclosed his previous ADHD diagnosis and noted some of the personality conflicts that had plagued him.  Hillsboro offered him provisional employment, subject to a medical evaluation.  Weaving passed that evaluation, as well as another one when he applied for promotion to sergeant.  His superiors noted he sometimes was perceived as arrogant or intimidating, but that he did his job well.

After a couple of incidents of conflict with his co-workers/ subordinates, the city placed Weaving on administrative leave. (Paid, natch.).  While on leave, Weaving came to the conclusion that ADHD might be the source of some of his troubles (!).  A doctor agreed that his ADHD might cause him to interact roughly with co-workers, but that he could still be an "excellent" officer.  So, weaving told the City that he should be reinstated with "all reasonable accommodations," so that he might obtain treatment and improve his communications.

But, while on administrative leave, the city conducted an investigation. The consensus was that Weaving was, in effect, a terror.  Two doctors evaluated him as medically fit for duty, too.  So, the city decided to discharge Weaving.

A jury found the city violated the ADA by firing Weaving and awarded him money damages. but not reinstatement.  The city appealed.

The court of appeals first considered whether Weaving was "substantially limited" in the major life activity of working.  The ADA Amendments Act relaxed the "substantially limited" standard. Even so, the court held there was no evidence of substantial limitation:

The record does not contain substantial evidence showing that Weaving was limited in his ability to work compared to “most people in the general population.” See 29 C.F.R. § 1630.2(j)(1)(ii). On the contrary, there is evidence showing that Weaving was in many respects a skilled police officer. ****
Weaving's supervisors recognized his knowledge and technical competence and selected him for high-level assignments. In 2007, before receiving any treatment for adult ADHD, he was promoted to sergeant. In 2009, a psychologist and a physician/psychiatrist both deemed Weaving fit for duty as a
police officer.
 * * * *
Given the absence of evidence that Weaving’s ADHD affected his ability to work, and in light of the strong evidence of Weaving’s technical competence as a police officer, a jury could not reasonably have concluded that Weaving’s ADHD substantially limited his ability to work.
Weaving also claimed substantial limitation in the major life activity of interacting with others. The Ninth Circuit recognizes that as a major life activity.  But, reviewing its own and other courts' decisions, the court said that merely failing to "get along" is not the same as interacting:

Weaving’s interpersonal problems do not amount to a substantial impairment of his ability to interact with others within the meaning of the ADA. Weaving’s ADHD may well have limited his ability to get along with others. But that is not the same as a substantial limitation on the ability to interact with others. See McAlindin, 192 F.3d at 1235; see also Jacques v. DiMarzio, Inc., 386 F.3d 192, 203 (2d Cir. 2004) (distinguishing “‘getting along with others’ (a normative or evaluative concept) and ‘interacting with others’ (which is essentially mechanical)”).
* * *
Weaving was able to engage in normal social interactions. His interpersonal problems existed almost exclusively in his interactions with his peers and subordinates. He had little, if any, difficulty comporting himself appropriately with his supervisors. A case like Weaving’s is what we described in McAlindin as not giving rise to a disability claim.

The court then further explained its ruling, removing the possibility that mere "jerks" can claim they have disabilities.
One who is able to communicate with others, though his communications may at times be offensive, “inappropriate, ineffective, or unsuccessful,” is not substantially limited in his ability to interact with others within the meaning of the ADA. Jacques, 386 F.3d at 203. To hold otherwise would be to expose to potential ADA liability employers who take adverse employment actions against ill-tempered employees who create a hostile workplace environment for their colleagues.
Right.  On the other hand, those who have a severe inability to relate to others (such as those who cannot relate to anyone, rather than co-workers) may still claim a disability under the court's previous decisions.  I would also point out that the court does not close the door on all persons claiming a disability based on ADHD.  The name of the condition does not matter. It's all about  how the condition's impairment "substantially limits" one or more major life activities.  So, it's possible that another person's ADHD could result in more profound limitations.  Remember too that the effects of medication are irrelevant under California and federal law.

In dissent, Judge Callahan assiduously argued that the majority substituted its judgment for the jury and was unfaithful to the circuit's precedent.  She claimed the majority cherry-picked evidence, rather than simply looked for substantial evidence to support the jury's conclusion.

The opinion in Weaving v. City of Hillsboro is here

Wednesday, August 13, 2014

California Court of Appeal: Employers Must Reimburse Employees for Cell Phone Use - Even if Plan is Unlimited

The Court of Appeal made an unprecedented ruling regarding the employer's obligation to reimburse employees for business use of personal items; here, a cell phone.
The threshold question in this case is this: Does an employer always have to reimburse an employee for the reasonable expense of the mandatory use of a personal cell phone, or is the reimbursement obligation limited to the situation in which the employee incurred an extra expense that he or she would not have otherwise incurred absent the job? The answer is that reimbursement is always required. Otherwise, the employer would receive a windfall because it would be passing its operating expenses onto the employee. Thus, to be in compliance with section 2802, the employer must pay some reasonable percentage of the employee’s cell phone bill. Because of the differences in cell phone plans and worked-related scenarios, the calculation of reimbursement must be left to the trial court and parties in each particular case.
To show liability under section 2802, an employee need only show that he or she was required to use a personal cell phone to make work-related calls, and he or she was not reimbursed. Damages, of course, raise issues that are more complicated. 
You can look for case law or other authority explaining how this rule is derived, but you won't find any. This Court created the rule that additional incremental expense is not required. 

It's old news that employers must reimburse employees for business use of a personal automobile.  Although the employee owns the car, there are incremental costs associated with operating the vehicle on a business trip: the tires, the oil, fuel, wear and tear.  It's not really the same thing when an employee already owns a cell phone with an unlimited data plan.  The phone exists. The phone bill is the same regardless of whether the employee uses it for business or personal calls.  

Now, don't get me wrong.  I see where the employer has an obligation to reimburse under different circumstances.  For example, if the use of a cell phone is integral to the job, sure.  For example in this case, it is possible that the job itself required being outside an office and available by phone.  If an employee increases his or her plan minutes because of work-related calls, naturally the employer should have to pay.  If an employee has to buy a phone or phone plan because of work, absolutely.  But if an employee already has an unlimited plan, how is he or she out money - requiring reimbursement - if he or she simply uses her phone that she already had? 

The court of appeal has an answer: it's irrelevant. Reimbursement is due.  The court was careful to say that use of the personal phone must be "mandatory."  So, occasional voluntary use may not create a reimbursement obligation.  Using your cell phone to call your voice mail when outside the office?  Could be? 

This case also could have a significant affect on the BYOD (bring your own device) plans that are popular nowadays. Employers and employees should establish in advance whether the employer requires employees to use a personal device as part of the job, and then decide how much the employer will pay for its use.   The court gave no guidance on this point other than "a reasonable percentage" of the cost of the monthly plan.

Of additional interest, does this case create new expense reimbursement obligations when the employee uses personal items for work, but does not incur an additional expense?  what about if an employer requires an employee to wear a suit or tie to work?  Must the employer pay a reasonable percentage of the cost?  Briefcase?  We shall see.

This case is Cochran v. Schwan's Home Service and the opinion is here

Saturday, August 09, 2014

Court of Appeal: Two New Arbitration Decisions Highlight Importance of Drafting Agreements Correctly

Here are two new decisions that illustrate why arbitration agreements have to be drafted properly to be enforced.

The Court of Appeal's decision in Rebolledo v. Tilly's, Inc. (opinion here)  is important for employers who issue revisions to policies and employment agreements.  Basically, Tilly's issued several versions of an arbitration agreement and did not adequately manage how the revisions' affected prior ones.  A 2001 version of the arbitration agreement excluded wage-hour claims within the jurisdiction of the Labor Commissioner.   A 2005 arbitration provision did not contain the exclusion. However, the 2001 agreement said that it required three signatures of company executives to modify it.  The 2005 provision did not include those signatures.

Upholding the trial court, the Court of Appeal held that the later arbitration agreement did not supersede the earlier one, and the earlier one did not cover Rebolledo's claims:
We agree with the trial court’s interpretation of the agreement holding arbitration would fall within the broad category of “employment policies” requiring the signature of three executives for any modification. And because the 2005 Agreement contains a material modification of the types of claims that must be arbitrated, it required the signature of three executives to be enforceable.

The employer in Galen v. Redfin Corporation (opinion here) won enforcement of its arbitration agreement, but the plaintiff challenged the arbitration agreement as limited to disputes concerning the interpretation of the arbitration agreement itself.
Paragraph 26 of the Agreement initially states: “In the event that any disputes arise regarding the interpretation or enforcement of this Agreement, such disputes shall be resolved as follows . . . .” (Italics added.) The paragraph goes on to discuss the use of good faith negotiations followed by mediation, if necessary. In the event mediation fails or is refused, the Agreement provides that all disputes “arising out of or related to this Agreement which have not been settled by mediation shall be resolved by binding arbitration within the State of Washington.” (Italics added.) 
The court ultimately determined that this language included claims concerning whether the plaintiff was an independent contractor agreement, but primarily because the arbitration provision was contained within the plaintiff's independent contractor agreement.  The plaintiff would have had a stronger argument if the arbitration agreement was "stand-alone."  So, it's important to draft the scope of the arbitration clause carefully.  A broader provision might read, for example, "any dispute regarding the [employment] [independent contractor] relationship, and the termination of that relationship or any other matter contained within this agreement."

The court's opinion in Galen is also notable because it held that a mutual attorney's fees provision and a forum selection clause did not render the agreement unconscionable.  The attorney's fees discussion did not address the other decisions that hold such agreements are unconscionable unless they explain that employers cannot recover fees under some statutory claims.  The forum selection clause discussion ostensibly authorizes employers to require arbitration outside of California if there is a logical relationship between the forum and the contract.   So, interesting decision, but one that may be at odds with others already on the books.

Wednesday, July 23, 2014

Pot Pourri of Recent Cases I missed

There have been so many recent employment law decisions that I can't long-form blog them all.  So, here's a quick roundup of three recent, significant rulings -

Don't miss Serri v. Santa Clara University opinion here.  This case is a defense lawyer's summary judgment go-to. Of note, the court handled a number of claims that are rarely seen (such as defamation by self-compelled publication, intentional interference, and the Labor Code's equal pay law. Here are some of the highlights:

- Upholds denial of extension to file opposition to motion for summary judgment.
- Affirms summary judgment against discrimination, retaliation and wrongful termination claims.  Good analysis of the employee's burden of establishing "pretextual" reason for termination.
- Upholds summary judgment on a national origin harassment claim because the alleged comments were not severe or pervasive.
- Agrees that the trial court properly adjudicated the plaintiff's claim under the state Equal Pay Act (Labor Code section 1197.5). The court held the plaintiff did not establish the proper "comparators" to establish she was paid less than someone performing substantially equal work.
- Rare bird:  Upholds summary judgment against the plaintiff's claim of breach of employment contract. The court held that the university had "good cause" to fire Serri as a matter of law.
- Affirmed summary judgment on the plaintiff's defamation claim, including "compelled self-defamation."  The court held that all statements were true or privileged.
- Affirmed summary judgment on an intentional interference with prospective economic advantage claim.
Ruiz v. Affinity Logistics, opinion here is the Ninth Circuit's second pass on an independent contractor v. employee analysis for delivery drivers. The court reversed the district court and held that  the delivery drivers were mis-classified:  "Affinity retained absolute control over drivers’ rates, payment, routes, schedules, trucks, equipment, appearance, decision to hire helpers, choice of helpers, and the right to deal with customers."  Thus, the court held, the most important factor under the Borello analysis—right to control—indicates overwhelmingly that the drivers were Affinity’s employees."  Close case, right? 
Anderson v. City and County of San Francisco, opinion here, is another unusual case, testing out a "bona fide occupational qualification" defense under Title VII of the Civil Rights Act of 1964.  San Francisco's jail implemented a policy of prohibiting male guards from supervising female inmates.  The Sheriff articulated four reasons: "(1) to protect the safety of female inmates from sexual misconduct perpetrated by male deputies, (2) to maintain the security of the jail in the face of female inmates’ ability to manipulate male deputies and of the deputies’ fear of false allegations of sexual misconduct by the inmates, (3) to protect the privacy of female inmates, and (4) to promote the successful
rehabilitation of female inmates."  Guards sued, alleging they were denied promotional opportunities, overtime, and other harms because of the restriction.  Reversing the district court, the Ninth Circuit held that the plaintiff was entitled to a jury trial on whether the policy violated Title VII.  The Court explained that a BFOQ is narrow and requires the defendant employer to prove specific issues as an affirmative defense. Because the city failed to do that, the city was not entitled to judgment as a matter of law.  The "common sense" assumption that females should be supervised by females to avoid sexual contact, invasions of privacy, etc. are not enough.


Tuesday, July 22, 2014

Court of Appeal: OK to Deduct from Exempt Employees' PTO/Vacation for Partial Day Absences of Any Length

Basic wage-hour principle: With some exceptions, an employee classified as "exempt" under the federal Fair Labor Standards Act is entitled to a full salary for any week in which she / he performs any work.  There are some exceptions allowing for salary deductions. For example, an employer can deduct from an exempt employee's salary for full-day absences for personal pursuits, or full day absences for illness if the employer has a bona fide paid sick leave plan.

The corollary of the above:  It generally is illegal to deduct from "exempt" employees' salaries for missing partial days of work, except in very limited circumstances such as partial day, federal FMLA leave.   The consequences could be invalidation of the exemption.  That statement is true under both federal law (FLSA) and California law.

When employees have vacation or PTO balances, can employers lawfully deduct from them when exempt workers are absent for partial days, and leave the salary intact?  Well, it's a definite yes under federal law. Federal law does not consider vacation / PTO to be "vested," and does not care if employers deduct from those balances for any reason.

Under California law, it's a little trickier.  That is because vacation / PTO are "vested" balances. The argument against allowing deductions is that the exempt employee can work variable hours and is entitled to the full salary. Deducting from PTO is an end-around, which reduces a vested balance of wages otherwise owed, for an absence that the employee is entitled to take without affecting his or her pay.  That's the plaintiffs' bar's argument, but it's not correct.

In 2005, the Court of Appeal decided in Conley v. Pacific Gas & Electric Co. (2005) 131 Cal.App.4th 260, that California law follows federal law in this area.  However, the PG&E policy provided that exempt employees' partial day absences were subject to a deduction from PTO, only if the absence was longer than 4 hours.  After Conley, the state Division of Labor Standards Enforcement, grudgingly, decided that Conley only authorized deductions from exempt employees' PTO when the absence was more than 4 hours.

Although Conley says nothing about a 4 hour minimum absence, employment lawyers were hesitant to advise employers to go farther than the Conley holding because of the DLSE opinion.  And for good reason....

Enter Lori Rhea, who sued her employer, General Atomics.  General Atomics had a policy allowing deductions from PTO in any amount of time that exempt employees were absent from their jobs for partial days.  Rhea challenged this policy, arguing that Conley was wrongly decided, and that Conley only allowed deductions when her time away from work exceeded 4 hours.  The trial court disagreed, granting General's motion for summary judgment.

The Court of Appeal affirmed:

We do not agree with Rhea's contention that by requiring employees to use vested Annual Leave for partial-day absences, General Atomics is requiring a forfeiture of vested Annual Leave as that term is used in California law. In Suastez and Boothby the vacation time was forfeited because the employer took away the employee's vested vacation time. Suastez and Boothby establish that if an employer provides vacation benefits, the employer "is not free to reclaim it after it has been earned." (Henry v. Amrol, Inc. (1990) 222 Cal.App.3d Supp. 1, 5, italics added.) Here, General Atomics does not take away or reclaim vested Annual Leave when an employee is absent for a partial day; it merely requires that the employee use the Annual Leave under the terms and conditions that it has created. "The law permits an employer to offer new employees no vacation time" (Owen v. Macy's, Inc. (2009) 175 Cal.App.4th 462, 464; see Henry, at p. 6), and it correspondingly also affords an employer the right to control the terms under which vacation time may be exercised by employees. (Suastez, supra, 31 Cal.3d at p. 778, fn. 7 [noting "an employer's right to control the scheduling of its employees' vacations"].) General Atomics has set rules for the exercise of Annual Leave, which it is permitted to do. It has not taken away Annual Leave that has already vested.

The court also rejected the plaintiff's premise that partial day deductions was an impermissible "substitution" of vacation wages for salary that was legally required to be paid:

Put another way, Rhea argues that General Atomics is impermissibly "substituting" the employee's Annual Leave hours for the employee's salary earned during the partial-day absence. * * * * 
[W]e conclude that Rhea's argument fails because she has not established that General Atomics fails to pay all of the wages that it is obligated to pay during an employee's partial-day absence. It is undisputed that General Atomics continues to pay an employee's full salary during a partial-day absence and that the employee fully continues to accrue Annual Leave during a partial-day absence.13 Thus, there is no shortfall in wages or compensation during a partial-day absence that General Atomics "makes up" by requiring an employee to use Annual Leave for that period. This is simply not a situation like in Armenta where employees worked for a period without receiving compensation. Here, General Atomics' employees continue to receive their full compensation even when they are absent for a partial day.

Finally, the Court held that the "four hour" minimum absence is not required under California law:

we find no basis in California law for concluding that an employer is prohibited from requiring exempt employees to use their vacation or leave time when they are absent from work for a partial day. Rhea has not identified any reason for us to distinguish between partial-day absences of different lengths. Instead, she simply points out that the employer's policy in Conley only covered absences of at least four hours. We conclude that regardless of whether the absence is at least four hours or a shorter duration, a requirement that exempt employees use Annual Leave time for a partial-day absence does not violate California law.

So, it is legal to debit an exempt employee's PTO balance for absences of any length.  However, employers must consider the employee relations aspects of doing so.  If an employee works six 12-hour days, are you going to nick that employee's PTO balance for working only 4 hours on the seventh day in the week?

Also, as the court of appeal noticed, General Atomic did not deduct negative PTO balances from final pay upon termination of employment.  You don't do that either, right?  Cuz that would be bad.

The case is Rhea v. General Atomics and the opinion is here.