Sunday, September 14, 2014

More New California Employment Laws... Anti-Bullying Training and Unpaid Intern Harassment

The Governor has signed or is about to sign two more employment laws:

AB 1443 by Assemblymember Nancy Skinner (D-Berkeley) – This new bill amends the Fair Employment and Housing Act to prohibit harassment against unpaid interns (in case they would not quality as "employees.").

The other new law requires a longer discussion.  AB 2053 by Assemblymember Lorena Gonzalez (D-San Diego) expands California's anti-harassment training law, AB 1825.  Employers must include as part of AB 1825 training information about "abusive conduct."   So, the Fair Employment and Housing Act is where AB 1825 sits.  And AB 1825 training originally was targeted at harassment that is illegal under FEHA, although it also must include training about discrimination and retaliation too.
Under the new law, though, employers must include information about conduct that is not covered by the Fair Employment and Housing Act.  That is because that law covers conduct that is motivated by sex, race, and other protected categories.  Here's the definition:  
For purposes of this section, “abusive conduct” means conduct of an employer or employee in the workplace, with malice, that a reasonable person would find hostile, offensive, and unrelated to an employer’s legitimate business interests. Abusive conduct may include repeated infliction of verbal abuse, such as the use of derogatory remarks, insults, and epithets, verbal or physical conduct that a reasonable person would find threatening, intimidating, or humiliating, or the gratuitous sabotage or
undermining of a person’s work performance. A single act shall not constitute abusive conduct, unless especially severe and egregious.
So, no requirement of race, sex, or national origin-based hatred or bias. 

Most of the definition of abusive conduct prohibits treatment that is out of bounds, and which would be probative of a harassment claim if related to a protected status.  Training cannot hurt.  And as of now, as stated, "abusive conduct" is not prohibited by law.  

But the definition includes "derogatory remarks," that a "reasonable person" would find "humiliating."   For example, " Bob, you did a terrible job on that project.  Derogatory? Sure.  Humiliating?" Could be, right?   Perhaps the law requires repeated conduct, because it says "a single act" is not abusive conduct.  But even that proviso has a wiggle for single acts that are "especially severe and egregious."  Employers and managers will have to rely on "malice" to differentiate between harsh criticism and "abusive conduct."  Malice, though, is not defined in this statute, though it means "hatred or ill will" in other contexts.

We'll see how this shakes out. I'm sure that adding "abusive conduct" to FEHA is only one or two legislative sessions away.  Illegal harassment is not protected by the First Amendment, says the California Supreme Court. Is there a first amendment issue here?  We'll have to see that as well.   Stay tuned.  

This new law kicks in January 1, 2015.  I'm off to modify our training programs now.

Court of Appeal: Lying on Timesheets re Break Time is Misconduct: No Unemployment for You

The Court of Appeal in Irving v. California Unemployment Insurance Appeals Board reversed a trial court ruling awarding an ex-employee unemployment benefits.

The Unemployment Ins. Appeals Board had ruled against the employee.
The administrative law judge found plaintiff exceeded the break times permitted by the district and made false entries on the time records. Plaintiff’s conduct constitutes dishonesty within the meaning of California Code of Regulations, title 22, section 1256-34, subdivision (a) which states in part, ‘“Dishonesty’ includes such acts and statements as lying, theft, making false entries on records, and other actions showing a lack of truthfulness and integrity. . . .” Here, plaintiff on four occasions took excessive breaks. And then he, by his own admission and the documentary evidence, failed to correctly state on his written timesheets how long the excessive breaks lasted. Based upon the foregoing, plaintiff committed misconduct within the meaning of section 1256.

If you read the opinion, you will see that the employee made a variety of excuses why he falsified time records to show that he took compliant breaks, while in reality he had taken overly long ones.  If you sift through it, you'll see the trial court's and employee's argument was that he had a "good faith" misunderstanding about whether he was doing something wrong.

The court of appeal rejected these arguments and the trial court's conclusions, relying on the EDD's regulations:

There is no basis for a finding that a reasonable person would have thought plaintiff’s conduct was not dishonest under the circumstances. As noted, one sentence in California Code of Regulations, title 22, section 1256-34, subdivision (b) mirrors the good faith misunderstanding language in section 1256, “Dishonesty does not exist if the employee’s act or statements arise from a good-faith misunderstanding between the employer and employee where a reasonable person would not have interpreted the acts or statements as dishonest under the circumstances.”

This rule, with its multiple uses of negatives, incorporates the following elements. For purposes of finding misconduct based upon dishonest actions, dishonesty does not exist under specified circumstances set forth in California Code of Regulations, title 22, section 1256-34, subdivision (b). For purposes of California Code of Regulations, title 22, section 1256-34, subdivision (b), the necessary circumstances must involve a dispute between the employer and the employee concerning whether conduct is dishonest. However, the dispute must arise from a good-faith misunderstanding between the employer and the employee. The good-faith misunderstanding is viewed from a reasonable person’s perspective; not from the employee or employer’s standpoint. Once the good faith dispute concerning whether the conduct is dishonest is viewed in that context, there are generally two possible outcomes. The first potential outcome is that if a reasonable person would not have interpreted the employee’s conduct as dishonest, then there has been no dishonesty. Under this first potential outcome, the employee is entitled to recover unemployment compensation benefits. By contrast, the second possible outcome arises if a reasonable person would have interpreted the employee’s conduct as dishonest. If a reasonable person concludes the employee’s conduct is dishonest, then there has been dishonesty for purposes of denying recovery of unemployment insurance benefits. Here, a reasonable person would not have interpreted plaintiff’s actions in taking four excessively long breaks and repeatedly falsifying his time records as honest. There is no evidence that a good-faith misunderstanding existed or could exist concerning plaintiff’s admitted taking of excessive breaks on four occasions and falsifying his time records.
But the court noted that this was a public employer, and that its conclusion might not apply automatically in a private sector setting.  Editorial comment: $%^&*
It bears emphasis that unlike other disputes that arise in the workplace, making false entries in a public document can be, depending on the circumstances, a crime. (Gov. Code, §§ 6200-6201; Pen. Code, § 115, subd. (a); see People v. Garfield (1985) 40 Cal.3d 192, 196.)
The court also rejected the "everybody does it" gambit:
The fact that other employees took excessive breaks is legally irrelevant. California Code of Regulations, title 22, section 1256-34, subdivision (b) addresses the situation when other employees engage in dishonest acts. When an employee engages in dishonest acts or statements and is thereby discharge, it is not an excuse that other employees engaged in an equally culpable act. (Ibid.) This rule applies even though the employer has no specific rule forbidding dishonesty. (Ibid.) 
The case is Irving v. California Unemployment Insurance Appeals Board and the opinion is here.

Sunday, September 07, 2014

9th Circuit Upholds Statistical Sampling to Determine Liability in Off the Clock Overtime Class Action

Allstate re-classified its adjusters to be non-exempt some years back.  Rather than require employees to keep their work time on time sheets or use a time clock, the employees were paid a standard eight hours per day / 40 hours per week.  However,
the manager of each local office has the power to file a timekeeping “exception” or “deviation” from the default expectation of 8 hours per day and 40 hours per week. This adjustment takes place when a claims adjuster’s request for overtime or early leave is approved. Managers do not adjust time cards based on either their own observations of work habits or on the technological records contained in computer and telephone systems. Each local office has a nonnegotiable compensation budget, which creates a functional limit on the amount of overtime a manager may approve.
Auto-punching, overtime pay only upon request, and a budget restricting overtime... What could go wrong?  

Right.  Jiminez, an adjuster, filed a class action. He claimed Allstate had an "unofficial policy" of discouraging employees from reporting overtime.  As a result, he and the class  members worked "off-the-clock" overtime for which they were not compensated.

Of note, the panel approved a district court's formulation of the elements of an off the clock work claim as follows:
Under California law, there are three elements of an off-the-clock claim of the type raised by the class here: “[A] plaintiff may establish liability for an off-the-clock claim by proving that (1) he performed work for which he did not receive compensation; (2) that defendants knew or should have known that plaintiff did so; but that (3) the defendants stood idly by.” Adoma v. Univ. of Phoenix, Inc., 270 F.R.D. 543, 548 (E.D. Cal. 2010) (internal quotation marks omitted).
Unfortunately, the court did not also cite Jong v. Kaiser Found. Hospital, a California decision (prior post here).

Anyway, the Court of Appeals here agreed with the district court that the class action should be certified.  The district court found these common questions predominated over individual ones:
(i) whether class members generally worked  overtime without receiving compensation as a result of Defendant’s unofficial policy of discouraging reporting of such overtime, Defendant’s failure to reduce class members’ workload after the reclassification, and Defendant’s policy of treating their pay as salaries for which overtime was an “exception”; (ii) whether Defendant knew or should have known that class members did so; and (iii) whether Defendant stood idly by without compensating class members for such overtime.

The Court of Appeals decided that these common questions would resolve the "common issue" of whether Allstate could be liable for off-the-clock work.  You may ask how a class can prove that its employees worked under the "unofficial" policy or the "official" policy requiring payment for all overtime?  

With statistics, that's how.  The Ninth Circuit panel held that the statistical models proposed by the plaintiff, and approved by the district court, could be used to prove liability:

the district court carefully analyzed the specific statistical methods proposed by plaintiffs. It struck some of the expert testimony offered by plaintiffs as insufficiently empirically supported and took pains to ensure that the statistical analysis it did accept conformed to the legal questions to which the analysis was being applied. Unlike the putative class in Comcast, 133 S.Ct. at 1434, which relied on
statistical analysis that was not closely tied to the relevant legal questions, or in Duran, 325 P.3d at 940, which used a sample of 20 names drawn from a hat without evidence showing that the number of names chosen or the method of selection would produce a result that could be “fairly extrapolated to the entire class,” the district court has accepted a form of statistical analysis that is capable of leading to a fair determination of Allstate’s liability, and preserved the rights of Allstate to present its damages defenses on an individual basis.
Allstate argued that the "unofficial policy" did not exist and that it had strong policies against off-the-clock work. But the court held that this argument was properly made at trial rather than certification:
Allstate argues that its formal policies which call for employees to be  paid for all overtime worked are lawful, and that the alleged informal “policy-to-violate-the-policy” does not exist. This argument is appropriately made at trial or at the summary judgment stage, as it goes to the merits of the plaintiffs’ claim. See In re Whirlpool Corp. Front-Loading Washer Products Liab. Litig. , 722 F.3d 838, 857 (6th Cir. 2013) (noting that if a defendant has a strong argument against classwide liability, it “should welcome class certification” as that allows it the opportunity to resolve claims of all class members at once). Whether any of these common questions are ultimately resolved in favor of either side is immaterial at this class certification stage, where we determine whether any answer that the questions could produce will drive resolution of the class’ claims.
So, take-aways: 
- "auto-clocking" is not a good practice if you want to avoid off-the-clock class actions.  
-  courts are continuing to certify now, ask about liability later.  
- statistical sampling can be used to determine liability without violating due process, at least for now. The U.S. Supreme Court has yet to rule on this issue.

This case is Jimenez v. Allstate Ins. Corporation and the opinion is here.

Thursday, September 04, 2014

Court of Appeal: Employer's Fitness for Duty Examination Was Justified to Evaluate Workplace Threat

Professor John Kao engaged in a series of confrontations with other academics at University of San Francisco over time.  His co-workers became afraid of him.   He angrily responded to innocuous questions, and became enraged at colleagues over seemingly benign interactions.

So, the University began investigating.  It retained some specialists in workplace violence and threat assessment.  The experts recommended that Professor Kao be examined by a professional, who would render a "fitness for duty" opinion.  The University explained to Kao that he had to submit to the fitness for duty, or be placed on a leave of absence and excluded from the premises.  The University explained in detail the requirements of the FFD exam, including strict limitations on the expert evaluator's dissemination of information about Kao's condition.

Kao's lawyer got involved, and objected to the FFD.  As a result, the University placed Kao on a leave.   There were further meetings and exchanges with Kao's counsel, the faculty's union representative, and the University, to no avail.  The University then agreed to arbitration - under which the University would be bound, but Kao would not (!).  But Kao objected and would not agree to any ADR and would not submit to the exam.  Kao's attorney wanted to have a "clear the air meeting," at which Kao would assure the University he meant no harm.   The University ultimately terminated Kao's employment, about a year after all the problems started.

Kao sued for disability discrimination and defamation, among other things. A jury rejected Kao's claims and he appealed.

Kao argued at trial that the FFD was a medical examination.  Under the Fair Employment and Housing Act, a medical examination of an employee is permissible if "job-related and consistent with business necessity."  And Kao argued that the FFD could not be job-related or necessary without the University's first engaging in the "interactive process" that is part of the "reasonable accommodation" process.

The Court of Appeal rejected that argument. First, the court noted that the FFD is not an accommodation, and the interactive process relates to the accommodation process.   Second, the court noted that Kao was required to initiate the interactive process, not the University:

Unless a disability is obvious, it is the employee’s burden to initiate the interactive process. (Gelfo v. Lockheed Martin Corp (2006) 140 Cal.App.4th 34, 62, fn. 22; 2 Wilcox, Cal. Employment Law (2013) § 41.51[3][b], p. 41-278.) Kao cannot plausibly claim it should have been obvious to USF that he was disabled because he never admitted any disability in the workplace. When a disability is not obvious, the employee must submit “reasonable medical documentation confirm[ing] [its] existence.” (Cal. Code Regs., tit. 2, § 11069, subd. (d)(2).) Kao did nothing of the sort. He provided no information to USF after learning of the university’s concerns other than documents at the October 2008 meeting with Philpott, which were aimed at showing that those concerns were illusory.
The court concluded that no interactive process was necessary.  For those of you wondering what "job-related and consistent with business necessity means," the court quoted from the jury instruction:
The jury was instructed in accordance with Government Code section 12940, subdivision (f): “ ‘John Kao claims that the university wrongfully required a medical and psychological examination (fitness-for-duty or FFD). [¶] . . . The University of San Francisco asserts that the medical or psychological examination (fitness-for-duty or FFD) request was lawful because it was necessary to the university’s business. To succeed, the university must prove both of the following: 1, that the purpose of the FFD was to operate its business safely and efficiently; and 2, that the FFD would substantially accomplish this business purpose. [¶] . . . If the university proves that the FFD is necessary to the university’s business, then the FFD is lawful unless John Kao proves both of the following: 1, that there was an alternative to the FFD that would have accomplished the university’s business purpose equally well; and 2, that the alternative would have had less adverse impact on John Kao.’ ”
The Court also rejected Kao's claim that the University fired him for not releasing his medical records in violation of California's Confidentiality of Medical Information Act.  The Court approved of the instruction to the jury that the University avoided liability if the jury found that the University fired Kao for refusing a lawful fitness for duty exam.

The Court upheld the trial court's granting of "non-suit" on Kao's defamation claim.  The claim was based on HR's sharing of a letter detailing Kao's conduct in connection with the FFD examination request.  The Court agreed that the "common interest" privilege applied and there was not evidence of the "malice" required to defeat the privilege.

Finally, the Court ruled that the University was entitled to put on evidence of available employment to Kao, even outside the context of a tenured University professor job.  That is important to the argument regarding mitigation of damages.   The Court of Appeal said it was up to the jury to decide if the comparable replacement employment was sufficiently similar.

This case is Kao v. University of San Francisco and the opinion is here.

Wednesday, September 03, 2014

Court of Appeal (Finally) Holds Workers' Compensation Act Preempts Intentional Infliction Claims

Yau was a service manager at a car dealer, claims he was fired for reporting to management that his bosses were defrauding Ford Motor Company by submitting false warranty claims.  For the most part, Yau complained about the nature of his discharge, which included deputy sheriffs lurking as he packed up his belongings.

The trial court dismissed the case.  The court of appeal reversed.  The appellate court decided Yau had adequately alleged a claim for wrongful termination in violation of public policy based on his allegations of warranty fraud.  But that's not really the interesting part of the case.

The interesting part is that the court of appeal decided that no cause of action for intentional infliction of emotional distress is available separate from the wrongful termination claim. The court finally addressed a 2008 California Supreme Court decision that I have been pushing up hill for years.  Here's how the appellate court saw it:

Physical and emotional injuries sustained in the course of employment are pre-empted by the workers’ compensation scheme and generally will not support an independent cause of action. (Cole v. Fair Oaks Fire Protection Dist. (1987) 43 Cal.3d 148, 160 (Cole).) Emotional injuries caused by workplace discipline, including termination, fall within this rule. (Ibid.; see also Shoemaker v. Myers (1990) 52 Cal.3d 1, 7.)  * * *

Yau relies on a series of cases that have found exceptions to this general rule of preemption when the intentional infliction of emotional distress claim is based on conduct that violates a fundamental public policy. (See e.g., Cabesuela v. Browning-Ferris Industries of California, Inc. (1998) 68 Cal.App.4th 101, Leibert v. Transworld Systems, Inc. (1995) 32 Cal.App.4th 1693; Phillips v. Gemini Moving Specialists (1998) 63 Cal.App.4th 563.) Those cases were decided before our Supreme Court’s decision in Miklosy v. Regents of University of California (2008) 44 Cal.4th 876 (Miklosy), which held the exception to workers’ compensation preemption for employer “conduct that ‘contravenes fundamental public policy’ is aimed at permitting a Tameny action [for wrongful discharge in violation of public policy] to proceed despite the workers’ compensation exclusive remedy rule.” (Id. at pp. 902-903.) This exception does not, however, allow a “distinct cause of action, not dependent upon the violation of an express statute or violation of fundamental public policy.” (Id. at p. 902.) Miklosy held that even “‘severe emotional distress’” arising from “‘outrageous conduct’” that occurred “at the worksite, in the normal course of the employer-employee relationship” is the type of injury that falls within the exclusive province of workers’ compensation. (Ibid.) “‘An employer’s intentional misconduct in connection with actions that are a normal part of the employment relationship . . . resulting in emotional injury is considered to be encompassed within the compensation bargain, even if the misconduct could be characterized as “manifestly unfair, outrageous, harassment, or intended to cause emotional disturbance.”’ [Citation.]” (Vasquez, supra, 222 Cal.App.4th at p. 833.)
This case is Yau v. Santa Margarita Ford, Inc. and the opinion is here

Saturday, August 30, 2014

California Enacts Paid Sick Leave

The Governor signed AB 1522, which confers upon most California employees paid sick leave.  The law is somewhat similar to San Francisco's paid sick leave ordinance.

Here is the text of the new law. 

The law adds sections 245-249 to the Labor Code.

Here are key provisions, although we'll have a more detailed article soon:


1.  The effective date is 7/1/15.  So employers will have time to develop their policies.

2.  All employers, of any size, are covered.  Public sector too.

3.  Employees with collective bargaining agreements providing paid sick leave (and other issues), and who make more than 30% more than minimum wage, are not covered.

4.  Employees in the construction industry may not receive any paid sick leave if there is a collective bargaining agreement that expressly waives the new law, provided other requirements in the law are met.

5. Flight crew members covered by the federal Railway Labor Act who receive compensatory time off under certain circumstances are not covered.

6.  Providers of in-home supportive services under certain sections of the Welfare and Institutions Code are not covered.  However, it looks like other home care employees will be.

7.  Employees who work 30 days or more in California are covered.

8.  "Exempt" employees, such as managers, lawyers, etc. are covered.

Sick Leave Terms

1. Sick leave can be used to take care of the employee, as well as family members. Family members include parents, children, foster and step-children, grandparents, siblings, domestic partners, and others.

2.  "Pay" is at the employee's base rate.

3.   The right to use paid sick leave begins at 90 days of employment.

4.  Sick leave accrues from the first day of employment.

5.  The employee earns an hour of sick pay for each 30 hours worked.

6.   The employer can limit paid sick leave to 3 days or 24 hours per 12 month period (rolling, calendar, or anniversary year).

7.  Accrued sick leave carries over to the next year. But the employer can cap accrual at 48 hours or 6 days.

8.  The employer can set a minimum increment of 2 hours of sick pay usage.  However, the employee can use how much he or she wishes.  The employer cannot mandate that the employee use more than the employee wants to use.

9.  PTO  and existing sick plans may be sufficient if they satisfy the minimums in the law.  That is, there is no need to provide additional sick pay above what the employer offers already (assuming the employer's policy is at least as generous).

10. Anyone reinstated < 12 months from termination has accrued, unused sick leave restored.

11.  No payout on termination.

12. The law does not repeal "Kin Care."  So, employers with more generous plans will have to allow employees to use 1/2 of the annual sick leave entitlement for Kin Care under that statute (assuming the employer's plan provides for more than 6 days of paid sick leave per year).


1.  The employee only has to give notice if foreseeable or, if not foreseeable, as soon as practicable. That's a change to employer policies that will have to be implemented.

2.  Employee notice can be written or verbal.

3. The employer must include the accrued balance of sick pay on the wage statement per Lab. Code section 226.  Or, the employer can provide a separate document at each pay day. However, the section 226 penalties do not apply.  Rather the special penalties in this statute apply.

4.  Section 2810.5 (Wage Theft notice law) is amended to now include a notice re paid sick leave.

5.  New poster.  $100 penalty for violating the poster requirement.


1. No private right of action.  This law is enforced by the DLSE or the attorney general.  However, there appears to be a provision that will allow for a "private attorney general" action for "equitable, injunctive, or restitutionary relief, and reasonable attorney’s fees and costs."  That is, no penalties under PAGA.  It is unclear how this will work, given the rest of the statute provides only for enforcement by the DLSE or attorney general.

2. It remains to be seen whether a cause of action for wrongful termination in violation of public policy will lie for those who claim wrongful termination due to taking sick leave.

3.  There is a "safe harbor" from penalties applicable to "isolated" and "inadvertent" record keeping or notice errors.

4.  The labor commissioner can award unlawfully withheld sick pay, reinstatement, and back pay at an administrative hearing.

5.  There are a variety of $50 penalties per day per employee available, which apply for different violations.  It's unclear how they work together. But the  maximum aggregate penalty per violation is $4,000.00 to each person whose rights were violated. That penalty may include triple the sick pay that was withheld.  The labor commissioner can award pre-judgment interest too.

6.   There is a "rebuttable presumption" of retaliation if an employer takes negative action against an employee who files a complaint with the labor commissioner, participates in an investigation about paid sick leave, or opposes an employer practice related to paid sick leave.

7.  The law says that the labor commissioner can conduct hearings, but the law does not specify that the hearings take place under the normal wage hearing statute.   So, if the labor commissioner rules against you on a sick leave / discharge claim, you have to go to superior court on a writ of mandate, maybe?  No appeal de novo and bond filed in superior court?  We'll see I guess.

8.  The labor commissioner can file suit if the employer does not comply with the labor commissioner's rulings.

*  *  *

Well that's a good start.   The nice news is that these modest minimum paid sick leave requirements are easily amended in future years.  So, don't get used to the 3-day minimum, k?

Before July 2015, ensure you revise your sick leave policies, payroll checks, and Wage Theft forms!

We will have more information as it becomes available and so will the DLSE. Good luck.


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.