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.

Friday, April 08, 2016

Ninth Circuit's Tip Case Makes a Hash Out of California Tip Pool Law

The Ninth Circuit decided 2-1 that the U.S. Department of Labor was allowed to issue a regulation that applies to tip pooling arrangements, but even if the tips are not taken as credits against the federal minimum wage.  This is an interesting decision about federal agency power, but you don't care about that.  I'll just fume about that alone.

What you do care about in California is this: the DOL regulation will probably invalidate California law on tip-pooling in most cases.  That is because federal law trumps state law when it is more generous to employees.

The court in Oregon Restaurant and Lodging Association LLC v. Perez (Opinion here) decided that the DOL was within its rights to issue a regulation defining what a tip pool is, and that the DOL's definition applies regardless of whether the employer is using the employees' tips as a credit against the minimum wage.

So, let's look at the federal regulation:
§ 531.52 General characteristics of “tips.” 
A tip is a sum presented by a customer as a gift or gratuity in recognition of some service performed for him. It is to be distinguished from payment of a charge, if any, made for the service. Whether a tip is to be given, and its amount, are matters determined solely by the customer, who has the right to determine who shall be the recipient of the gratuity. Tips are the property of the employee whether or not the employer has taken a tip credit under section 3(m) of the FLSA. The employer is prohibited from using an employee's tips, whether or not it has taken a tip credit, for any reason other than that which is statutorily permitted in section 3(m): As a credit against its minimum wage obligations to the employee, or in furtherance of a valid tip pool. Only tips actually received by an employee as money belonging to the employee may be counted in determining whether the person is a “tipped employee” within the meaning of the Act and in applying the provisions of section 3(m) which govern wage credits for tips.

Ok so this regulation means that the employer cannot use a tip for any purpose except for a tip credit or "a valid tip pool."  What's a valid tip pool under federal law?

A valid tip pool is explained here:
§ 531.54 Tip pooling.
Where employees practice tip splitting, as where waiters give a portion of their tips to the busboys, both the amounts retained by the waiters and those given the busboys are considered tips of the individuals who retain them, in applying the provisions of section 3(m) and 3(t). Similarly, where an accounting is made to an employer for his information only or in furtherance of a pooling arrangement whereby the employer redistributes the tips to the employees upon some basis to which they have mutually agreed among themselves, the amounts received and retained by each individual as his own are counted as his tips for purposes of the Act. Section 3(m) does not impose a maximum contribution percentage on valid mandatory tip pools, which can only include those employees who customarily and regularly receive tips. However, an employer must notify its employees of any required tip pool contribution amount, may only take a tip credit for the amount of tips each employee ultimately receives, and may not retain any of the employees' tips for any other purpose.

Now the DOL's regulation says that only people who "customarily and regularly" receive tips can be in tip pools under federal law.  The cases say that those are people directly involved in service.  They include bussers, waiters, bar staff, even hosts.  But cooks, dishwashers, expediters, and the like are out of luck.  There are federal cases that say so.  So, bottom line is that federal law says that tip pools cannot include back of the house people.

State law, on the other hand, says that they can be included.  We've blogged a bunch about tip-pooling under California law here.   The net-net is that California does permit participation by back-of-the-house employees in the tip pool because they participate in making the service experience pleasant.

Anyway, the 9th Circuit may re-consider its decision in the Oregon case or the Supreme Court could decide to hear it.  If neither of those things happen, California employers that are covered by the Fair Labor Standards Act may wish to revisit their tip-pooling policies.

Saturday, April 02, 2016

California Minimum Wage Increases to $15.00!!..ZOMG..1!!1! There's Lots of Fine Print. But Much Is Not Good.

For one thing, it's not 2022.  Businesses can move away or raise prices 50% by then.  I kid.  ::cough::

Anyway, Governor Brown says he will sign SB 3 (here,) which is the bill you've heard of that "raises California's minimum wage" to $15.00 per hour.  Well, it may do so by 2022 (or a year later for employers with fewer than 25 employees). And it definitely will do so eventually. But there is lots of fine print.

"Good" News 

First, it's a staged increase. Second, the timing of the increase will depend on the business size.  Because California can't just pass a simple law.  See, e.g., the paid sick leave law, which looks like a tax code.

Here is the implementation schedule as it currently exists.
(1) For any employer who employs 26 or more employees, the minimum wage shall be as follows:
(A) From January 1, 2017, to December 31, 2017, inclusive,—ten dollars and fifty cents ($10.50) per hour. 
(B) From January 1, 2018, to December 31, 2018, inclusive,—eleven dollars ($11) per hour. 
(C) From January 1, 2019, to December 31, 2019, inclusive,—twelve dollars ($12) per hour. 
(D) From January 1, 2020, to December 31, 2020, inclusive,—thirteen dollars ($13) per hour. 
(E) From January 1, 2021, to December 31, 2021, inclusive,—fourteen dollars ($14) per hour. 
(F) From January 1, 2022, and until adjusted by subdivision (c)—fifteen dollars ($15) per hour.

(2) For any employer who employs 25 or fewer employees, the minimum wage shall be as follows: 
(A) From January 1, 2018, to December 31, 2018, inclusive,—ten dollars and fifty cents ($10.50) per hour. 
(B) From January 1, 2019, to December 31, 2019, inclusive,—eleven dollars ($11) per hour. 
(C) From January 1, 2020, to December 31, 2020, inclusive,—twelve dollars ($12) per hour. 
(D) From January 1, 2021, to December 31, 2021, inclusive,—thirteen dollars ($13) per hour. 
(E) From January 1, 2022, to December 31, 2022, inclusive,—fourteen dollars ($14) per hour. 
(F) From January 1, 2023, and until adjusted by subdivision (c)—fifteen dollars ($15) per hour.
After the rate goes up to $15 per hour, the minimum wage will be set according to price indexes as set forth in the statute.  Economists with advanced degrees and Sominex will figure out the amount of the increase and publish annually.

Effect of Minimum Wage Increases

Don't forget, the minimum wage increase will effect things like:

- Minimum salaries for exempt managers (which have to be at least 2X the minimum wage.

- Meal period premiums (penalties).

- Overtime premiums.

- Split shift pay (one hour at minimum wage).

- The minimum compensation to qualify for exempt inside sales (1.5 X minimum wage).

- Sick pay, vacation pay, and other paid leave costs.

-  Employers' payroll tax

- Public sector salaries / wages - and your personal taxes pay for those.

And there will be posters.

Also, this is the state minimum wage and does not preclude local minimum wage increases. What will the San Francisco minimum wage be in 2022?  It's currently going to $13.00 on 7/1/16.


OK, that's it for the positive part of this post.  The rest may be snarky.  But fair.

Small Employers: Look Out

As shown above, smaller employers can pay a lower wage.  If they are actually smaller employers under the law.  I know you're thinking it's easy to figure out if you're an employer of 25 or less employees because here's the handy definition:
(3) For purposes of this subdivision, “employer” means any person who directly or indirectly, or through an agent or any other person, employs or exercises control over the wages, hours, or working conditions of any person. For purposes of this subdivision, “employer” includes the state, political subdivisions of the state, and municipalities. 
(4) Employees who are treated as employed by a single qualified taxpayer under subdivision (h) of Section 23626 of the Revenue and Taxation Code, as it read on the effective date of this section, shall be considered employees of that taxpayer for purposes of this subdivision. 
Unfortunately, your thinking is incorrect, maybe because you are not cynical and paranoid like I am.  It is unclear who is a small "employer" under this standard because of the "indirectly"  and "agent" language.  

There may be litigation over whether "joint employers" (like temp agencies or contractor-subcontractor relationships) will count when the employer is assessing the small employer provision.  Plaintiff attorneys won't be shy, because they can bring class actions and seek one-way attorney's fees. And there's PAGA too!  

As we have covered, the government agencies and courts are expanding "joint employer" liability.  Paying below minimum wage is a very costly endeavor and can result in double pay and other penalties, personal liability, and more.  So, small employers may have to get a legislative fix for this provision, or pay the higher rate to avoid potential lawsuits.  That won't break a lot of hearts in the legislature.

Suspended Implementation?

Now here's another twist.  During the period when the minimum wage is increasing to $15.00, each year in July, the state Director of Finance will examine "economic conditions" according to certain listed criteria.  The purpose of the review is  "to ensure that economic conditions can support a minimum wage increase . . . "

Huh. Why would that be necessary?  I thought minimum wage increases were economically super duper!!!  Well, just in case the data come in not-super-duper, the Governor may suspend the minimum wage increase set for the following year.  If he does so, that will delay the above schedule for a year.

The governor has the right to make that determination and suspend implementation twice.  So the $15.00 wage could be delayed a couple of years longer than the above schedule in case of an economic downturn.


Please prepare for minimum wage increases to begin 1/1/17 and to adjust other wage rates accordingly.

Please contact your Chamber of Commerce, legislator, or the Governor's office to express your concern if you have one, particularly about the potential mushy small employer definition.

And consider researching ETFs or mutual funds that focus on moving companies and Texas real estate. I kid again! ::cough:::

Tuesday, March 29, 2016

As promised, a longer article on California's New EEO Policy Requirement

I posted a couple of weeks ago (here) about the California Fair Employment and Housing Commissions new EEO regulations (here), which include specific requirements for anti-discrimination and harassment policies.  I promised to post our longer article for you.  Here it is. 

Of course, drafting a new policy is one thing, but putting in place the mechanisms for conducting investigations, having effective complaint procedures, etc. are something else.  Please work with your HR consultants, employment counsel, PEOs, etc. to get these requirements in place before too long.  The new regulations go into effect on April 1, 2016.

The legislature, agencies and courts are keeping us all busy.  I know it's a challenge for me to stay current.  It's probably tough for you too. My blog posts are less frequent than I would like as of late. But our Firm publishes a bi-weekly article on a current employment law issue, which you can find on our website or subscribe to via our *free* newsletter (Just sayin').

Supreme Court's Non-Decision Today in Friedrichs

The U.S. Supreme Court issued a one line, "per curiam" order, in which it noted a 4-4 deadlock in Friedrichs v. California Teachers Association.  You'll see a bunch of news about this, some of which will be...wrong.  So I thought I would explain what actually happened.

The issues before the court primarily focused on whether the Court should overrule a prior decision, Abood v. Detroit Bd. of Education, 431 U.S. 209 (1977).  The Court in Abood held that public sector employees may be required to pay certain fees to unions under the First Amendment, provided that the unions account for how much of the fees are used for bargaining and how much are used for extraneous activity, such as political lobbying.  Those employees who wish to "opt out" of the union's political activities are given the opportunity to pay a lower, "agency" fee, allegedly representing only the bargaining costs.  

In later cases, the Court has chipped away at Abood's First Amendment reasoning. So, the Court was considering whether to overrule Abood, and hold that government employees should not be required to join unions because compelled unionization, compelled financing of unions, etc. violate their right to freedom of association under the First Amendment.  Or the Court could have decided something else.  

We're not going to find out.  The lower courts (including the Ninth Circuit in a summary decision) followed Abood as they must.  This case came before the Court in January for argument. Then Justice Scalia passed away, leaving 8 justices to render a decision.  The Court often decides cases with 8 justices, such as when one justice is recused for conflicts of interest, or when one justice has retired and is being replaced. 

Here, though, the Court deadlocked 4-4.  When that happens, everything simply returns to the status quo as if no case had ever been accepted for review. Therefore, there is no new decision today.  No "victory" for unions or anyone else. And no "loss" for anyone either.   

One can argue that Justice Scalia would have voted to overrule Abood, but one cannot say what the vote would have been if he had been alive, or what the opinions would have said.  So, all the prognostications and news headlines on this issue frankly are silly.  The only thing that is certain is that Abood remains good law and so all remains as it was. 

Also, contrary to what I read this morning, the Senate's failure to confirm Judge Garland had no impact on the decision in this case.  He was just nominated a few days ago. So his confirmation would have had to have happened instantly and THEN, the Court would have had to agree to rehear this matter.  So, no.

Have a nice day.


Monday, March 28, 2016

California Supreme Court Upholds Arbitration Agreement Against Unconscionability Claim

Baltazar v. Forever 21, Inc. is one of the older employment cases on the California Supreme Court's docket. It has now been put to rest. And the employer came out the winner via a unanimous Court.  Justice Kruger wrote the opinion.

This is another arbitration case, focusing on whether an employer's agreement to arbitrate was "unconscionable" because it included certain provisions.  First, the Court does a nice job of summarizing its recent arbitration cases so that practitioners can one-stop shop  for case law. Thank you Supreme Court. 

When evaluating arbitration agreements, the courts look for procedural and substantive unconscionability. The more procedural unconsionability they find, the less substantive unconscionability they need to discern.  And vice versa.  They call this the "sliding scale."

Procedural Unconscionability

So, the first piece of business the Court addressed is the issue of "procedural unconscionability." That is, whether the arbitration agreement was "take it or leave it" and whether it was obtained via trick or surprise.

Now, as a practical matter, nearly every employment arbitration agreement has some degree of "procedural" unconscionability, because they are almost always "take it or leave it," or "contracts of adhesion."  And here's where the court explained that it will not count an "adhesion" contract as a significant amount of procedural unconscionability unless there is something more - evidence that the employer hid the agreement, or lied to the employee.   

In this case, Baltazar knew about the agreement And she even tried to refuse to sign it.  The employer told her if she did not sign, she would have no job.  The agreement was presented to her in a straight-forward way. Therefore, the court said it was a plain-old adhesion contract. 

The Court also addressed the argument that the employer did not attache the AAA rules to the arbitration contract as evidence of procedural unconscionability. The Court said that there was nothing Baltazar pointed to in the rules that affected her rights. Therefore, there was nothing in the rules that created more procedural unconscionability because they were not given to her.  

Substantive Unconscionability

The Court then turned to Baltazar's substantive unconscionability arguments.  Her first argument was that the arbitration agreement stated that either party could seek injunctive relief in accordance with the California Civil Procedure Code's section 1281.8.   Yes, she argued that the agreement was illegal because it included a statute's provision within it.   Bad argument?  Not when you consider that a previous court of appeal (Trivedi v. Curexo Technology Corp. (2010) 189 Cal.App.4th 387) had held just that.  The court in Trivedi held that a provision that simply stated that either party could seek injunctive relief was unconscionable because employers were more likely to use it.   Goodbye Trivedi.  The Supreme Court disapproved it.  It was on the books for 6 years too long.  

Baltazar also argued that the list of covered claims in the arbitration agreement was unconscionable because only employee-type claims were specifically mentioned.  Here's what the agreement said, as described by the Court:
The parties “mutually agree” to arbitrate “any claim or action arising out of or in any way related to the hire, employment, remuneration, separation or termination of Employee.” The agreement specifies that the disputes subject to arbitration “include but are not limited to: claims for wages or other compensation due; claims for breach of any employment contract or covenant (express or implied); claims for unlawful discrimination, retaliation or harassment . . . , and Disputes arising out of or relating to the termination of the employment relationship between the parties, whether based on common law or statute, regulation, or ordinance.”
The Court had no trouble finding that this language included all claims whether brought by the employer or employee:
The illustrative list of claims subject to the agreement is just that; the agreement specifically states that such claims “include but are not limited to” the enumerated claims, thus making clear that the list is not intended to be exhaustive. It thus casts no doubt on the comprehensive reach of the arbitration agreement. It is not particularly remarkable that the agreement’s list of examples might highlight certain types of claims that employees often bring, since part of the purpose of the agreement is to put employees such as Baltazar on notice regarding the scope of the agreement, thus eliminating any possible surprise.
Finally, Baltazar tried to argue that the agreement's provision protecting trade secrets and confidential information rendered the agreement unconscionable.  Again, the Court was not having it.

Baltazar argues that the arbitration agreement here is unduly one-sided because it provides that, in the course of arbitration, “all necessary steps will be taken to protect from public disclosure [Forever 21’s] trade secrets and proprietary and confidential information.” Baltazar contends that because the agreement neither defines “all necessary steps” nor specifies what constitutes “proprietary and confidential information,” the agreement unfairly demands that employees take whatever steps the employer deems “necessary” to protect whatever information the employer claims to be “proprietary and confidential.”
Baltazar misreads the confidentiality provision. Nothing in the agreement indicates that an employee must accede to any and all demands Forever 21 might make for the protection of confidential and proprietary information. As defendants explain: “This provision contemplates that if trade secret, confidential and proprietary information need[s] to be introduced into the arbitration that the parties [will] work with the arbitrator to make sure that such information is not disclosed to the public.” The agreement does not restrict the use of such information in the proceeding, nor does it pretermit any determination of whether a particular piece of information is a trade secret or otherwise qualifies as proprietary and confidential. Agreements to protect sensitive information are a regular feature of modern litigation, and they carry with them no inherent unfairness.
To the extent that Baltazar’s complaint is instead that the agreement calls for the protection of an employer’s confidential information without similarly calling for the protection of the confidential information of employees, we disagree with the suggestion that this omission renders the arbitration agreement unduly harsh or one-sided. As we stated in Armendariz, supra, 24 Cal.4th at page 117: “ ‘[A] contract can provide a “margin of safety” that provides the party with superior bargaining strength a type of extra protection for which it has a legitimate commercial need without being unconscionable. [Citation.]’ ” Here, the basis for the extra measure of protection is a legitimate commercial need to protect Forever 21’s “valuable trade secrets and proprietary and confidential information” from public disclosure. Although Baltazar may dislike the wording of the confidentiality provision, she does not dispute that it is based on a legitimate commercial need. Moreover, nothing in the agreement precludes employees from seeking comparable protection for their personal information during arbitration proceedings, as circumstances may warrant.
So, this case is another one that will make it easier to draft arbitration agreements without worrying about excessive false mutuality.   You know what I mean.

This case is Baltazar v. Forever 21, Inc. and the opinion is here

Saturday, March 12, 2016

California Supreme Court: Plaintiffs Who Settle for Money are "Prevailing Parties" for Costs Purposes

Here's a quick post, mostly for litigators in employment law cases.  But clients should make sure that settlement agreements are drafted correctly when they review them.

The California Supreme Court once again interpreted California's costs statute, Civil Procedure Code section 1032.  The case happens to be an employment law lawsuit, but the facts do not really matter.

Section 1032 awards "costs" of suit, such as deposition transcripts, subpoena fees, filing fees, and the like to the "prevailing party" in litigation.

The "prevailing party" can mean "the party with a net monetary recovery, a defendant in whose favor a dismissal is entered, a defendant where neither plaintiff nor defendant obtains any relief, and a defendant as against those plaintiffs who do not recover any relief against that defendant."

Well, if the case settles before trial and the defendant pays the plaintiff money, does that mean that the plaintiff is prevailing party because the plaintiff is "the party with a net monetary recovery?"  Could be!  

But wait. Isn't defendant also the prevailing party because there's a "dismissal" in favor of defendant?  Probably so!  Can there be two prevailing parties then?   Who gets the costs?  Whatever will happen to us now?  

That's why there's a Supreme Court and here's what the Court said:
When a defendant pays money to a plaintiff in order to settle a case, the plaintiff obtains a net monetary recovery, and a dismissal pursuant to such a settlement is not a dismissal in [the defendant‘s] favor. (§ 1032(a)(4).) As emphasized below, this holding sets forth a default rule; settling parties are free to make their own arrangements regarding costs.
So, that means that when there's a settlement, it's very important for the parties to expressly include in the settlement agreement and/or the request for dismissal "each side will bear his/her/its/their own costs."  Unless the parties address the issue, the "default rule" will apply. The plaintiff can go into court and file for costs, which can mean more money on top of the settlement that the defendant paid

Sometimes legal mumbo-jumbo in settlement agreements matters and this is one of those times.

This case is  DeSaulles v. Community Hospital of the Monterey Peninsula and the opinion is here. 

California Fair Employment and Housing Council Regulations Effective April 1, 2016 Require Employers to Change EEO Policies Now

The California Fair Employment and Housing Council is issuing revised regulations regarding discrimination, harassment and the like under the Fair Employment and Housing Act.  Shaw Valenza will be publishing a more detailed article in the next couple of weeks, which I'll post here.

The full text of the revised regulations, with redline and strikeout to show the changes is here. 

Some of the changes will not affect how employers do business, but will affect liability in litigation if courts adopt the Council's view.  But there are several new provisions that employers will have to deal with by amending policies and procedures.

The most urgent issue for employers to deal with - right now - is the Council's new, specific requirements for anti-harassment, discrimination and retaliation policies:   Employers already have a duty to distribute a DFEH brochure or alternative document that complies with Govt Code section 12950. But now, the Council requires much more. This is from section 11023(b) of the new regulations:
In addition to distributing the Department’s DFEH-185 brochure on sexual harassment, or an alternative writing that complies with Government Code section 12950, an employer shall develop a harassment, discrimination, and retaliation prevention policy that: 
(1) Is in writing; 
(2) Lists all current protected categories covered under the Act; 
page10image23872 page10image24032 page10image24192
(3) Indicates that the law prohibits coworkers and third parties, as well as supervisors and page11image2112
managers, with whom the employee comes into contact from engaging in conduct prohibited by the Act; page11image3424 page11image3584
(4) Creates a complaint process to ensure that complaints receive:
(A) An employer’s designation of confidentiality, to the extent possible;(B) A timely response; (C) Impartial and timely investigations by qualified personnel; (D) Documentation and tracking for reasonable progress; (E) Appropriate options for remedial actions and resolutions; and (F) Timely closures.
(5) Provides a complaint mechanism that does not require an employee to complain directly to his or her immediate supervisor, including, but not limited to, the following:page11image10776
(A) Direct communication, either orally or in writing, with a designated company representative, such as a human resources manager, EEO officer, or other supervisor; and/or
(B) A complaint hotline; and/or
(C) Access to an ombudsperson; and/or
(D) Identification of the Department and the U.S. Equal Employment Opportunity Commission (EEOC) as additional avenues for employees to lodge complaints.
(6) Instructs supervisors to report any complaints of misconduct to a designated company representative, such as a human resources manager, so the company can try to resolve the claim internally. Employers with 50 or more employees are required to include this as a topic in mandated sexual harassment prevention training, pursuant to section 11024 of these regulations.  
(7) Indicates that when an employer receives allegations of misconduct, it will conduct a fair, timely, and thorough investigation that provides all parties appropriate due process and reaches reasonable conclusions based on the evidence collected.
(8) States that confidentiality will be kept by the employer to the extent possible, but not indicate that the investigation will be completely confidential 
(9) Indicates that if at the end of the investigation misconduct is found, appropriate remedial measures shall be taken. 
(10) Makes clear that employees shall not be exposed to retaliation as a result of lodging a complaint or participating in any workplace investigation.

These are all good ideas for employers to follow. But these now must be included in a written policy disseminated to all employees.  

The new regulations also explain how the policy must be disseminated:page12image4352
Dissemination of the policy shall include one or more of the following methods:

(1) Printing and providing a copy to all employees with an acknowledgment form for the employee to sign and return;

(2) Sending the policy via e-mail with an acknowledgment return form;

(3) Posting current versions of the policies on a company intranet with a tracking system
ensuring all employees have read and acknowledged receipt of the policies;
 (4) Discussing policies upon hire and/or during a new hire orientation session; and/or (5) Any other way that ensures employees receive and understand the policies.

(d) Any employer whose workforce at any facility or establishment contains 10 percent or more of persons who speak a language other than English as their spoken language shall translate the policy into every language that is spoken by at least 10 percent of the workforce.
So, multi-state employers, no more "or any other characteristic protected by state law" in your policies. Please review EEO policies and revise them ASAP.  

It is also critical to ensure there are systems in place for addressing complaints should they arise that are consistent with the policy - such as translation if needed, dissemination of the policy and record keeping, investigations, complaint procedures, etc.

Tuesday, February 23, 2016

EEOC Will Provide Position Statements to Employees While Charge Is Pending...But

the door does not swing both ways.

When an employee files an administrative charge or complaint with the Equal Employment Opportunity Commission, the agency usually requires the employer to provide a position statement. A position statement is a response to the complaint charge, which is often a letter explaining the legitimate reason for action taken, along with a response to requests for information.  The EEOC uses the charge and position statement to investigate whether there is "reasonable cause" to find a violation of the federal anti-discrimination laws.

The position statements are usually subject to disclosure under the federal Freedom of Information Act during later litigation.  However, under a revised policy, employees who file the charge (and their lawyers) can simply ask for the position statements while the charge is pending. That gives the employees and their counsel what is known as "free discovery" It also gives them a chance to respond to the position statement.

The "but" in the title of this post is that the EEOC will not provide the employer with the Employee's response to the position statement upon request.  So, employers and their lawyers do not get a "free look" at the employee's proof of discrimination or harassment.

Writing a good position statement is key for several reasons.  Of course it will influence the EEOC's decision on the merits of the charge. But it also will influence the employee's lawyer's decision regarding whether to take a case. And it will affect the employer's litigation position later if there is a lawsuit.  Accuracy is important, because when an employer's reasons change over time, that can be used as proof of a discriminatory motive.

The EEOC's policy is explained on the agency's website here. The EEOC also provides tips to employers and employees linked on its site.