Wednesday, April 27, 2011

Welcome Back, Arbitration?

I think the rumors of the demise of employment arbitration might have been exaggerated. I for one am guilty of presuming arbitration was dead. And who can blame me, what with the California courts and the 9th Circuit?

Well, today, the U.S. Supreme Court breathed new life into employment arbitration. The Court held that the Federal Arbitration Act preempts California case law prohibiting arbitration agreements that exclude class actions.

So, if arbitration agreements can require only individual arbitration, that means that employers may avoid those expensive California wage and hour class actions by properly implementing arbitration agreements.

The interesting question that the Supreme Court did not decide today is what about California case law imposing lots of other conditions and burdens on employment arbitration. The "Armendariz" line of cases impose special burdens on arbitration that do not apply equally to other kinds of contracts. If you read Concepcion a certain way, Armendariz will not be around long. For example consider this statement in the opinion:

Parties could agree to arbitrate pursuant to the Federal Rules of Civil Procedure, or pursuant to a discovery process rivaling that in litigation. Arbitration is a matter of contract, and the FAA requires courts to honor parties’ expectations. Rent-A-Center, West, 561 U. S., at ___ (slip op., at 3). But what the parties in the aforementioned examples would have agreed to is not arbitration as envisioned by the FAA, lacks its benefits, and therefore may not be required by state law.

Of course, I've been wrong before. Like when I thought arbitration was dead.

The case is AT&T Mobility LLC v. Concepcion and the opinion is here.

Saturday, April 16, 2011

Court of Appeal Clarifies "Alter Ego" Liability for Employment Claims

Cooper was the sole shareholder and day to day operator of Auburn Honda, a corporation. A group of former employees sued Auburn Honda and Cooper for age discrimination and other things.  Cooper moved for summary judgment on the ground he could not be held liable, since only the employer is liable for employment discrimination. The plaintiffs argued Cooper indeed was the employer as an "alter ego" of the corporation.

The court did not permit the plaintiffs to claim Cooper was the alter ego of Auburn in opposition to the motion for summary judgment. So, small business owners, here is the discussion of application of the alter ego doctrine to a shareholder:

To succeed on their alter ego claim, plaintiffs must be able to show: (1) such a unity of interest and ownership between the corporation and its equitable owner that no separation actually exists, and (2) an inequitable result if the acts in question are treated as those of the corporation alone. (Sonora Diamond, supra, 83 Cal.App.4th at p. 538.)

Several factors are to be considered in applying the doctrine, among them are: “„[c]ommingling of funds and other assets, failure to segregate funds of the separate entities, and the unauthorized diversion of corporate funds or assets to other than corporate uses; . . . the treatment by an individual of the assets of the corporation as his own; . . . the failure to obtain authority to issue stock or to subscribe to or issue the same; . . . the holding out by an individual that he is personally liable for the debts of the corporation; . . . the failure to maintain minutes or adequate corporate records . . .; sole ownership of all of the stock in a corporation by one individual or the members of a family; . . . the failure to adequately capitalize a corporation; the total absence of corporate assets, and undercapitalization; . . . the use of a corporation as a mere shell, instrumentality or conduit for a single venture or the business of an individual or another corporation; . . . the concealment and misrepresentation of the identity of the responsible ownership, management and financial interest, or concealment of personal business activities; . . . the disregard of legal formalities and the failure to maintain arm's length relationships among related entities; . . . the use of the corporate entity to procure labor, services or merchandise for another person or entity; . . . the diversion of assets from a corporation by or to a stockholder or other person or entity, to the detriment of creditors, or the manipulation of assets and liabilities between entities so as to concentrate the assets in one and the liabilities in another; . . . the contracting with another with intent to avoid performance by use of a corporate entity as a shield against personal liability, or the use of a corporation as a subterfuge of illegal transactions; . . . and the formation and use of a corporation to transfer to it the existing liability of another person or entity.‟ . . . [¶] This long list of factors is not exhaustive. The enumerated factors may be considered „[a]mong‟ others „under the particular circumstances of each case.‟" (Morrison Knudsen Corp. v. Hancock, Rothert & Bunshoft, LLP (1999) 69 Cal.App.4th 223, 249-250, quoting Associated Vendors, Inc. v. Oakland Meat Co. (1962) 210 Cal.App.2d 825, 838-840.)
So, the court held that Cooper did not qualify as an alter ego under this list of factors because the Plaintiffs did not bring forth sufficient evidence.

The case is Leek v. Cooper and the opinion is here.

Friday, April 15, 2011

Court of Appeal Reconsiders, but then Re-Affirms Case re Work Week

We previously wrote about Seymore v. Metson Marine here.  Then we wrote an article covering it and other new wage-hour cases here.  This was the case in which the court held that the employer could not set a workweek to start on a day when the employees did not begin the week.

I am not so presumptuous to think the employer's lawyers or the court read my article, but maybe the they heard the other HOWLS from the employment bar about how bad a case this was.  So, the employer filed a petition for re-hearing, and the Court actually granted re-hearing and issued a new opinion.

The employer's lawyers submitted copious new case law, regulations, and new facts to support its argument that the employer can set the workweek for Monday when the employees start their 14-day hitches on Tuesday.  (That was the issue the Court of Appeal addressed in the initial opinion).

The Court on re-hearing remarked how much new information the employer's lawyers provided in support.  I think the Court was a bit miffed that the initial briefing was not as thorough as it might have been. Nevertheless, the Court affirmed its decision to reverse summary judgment. This time, however, the Court allowed more flexibility for employers to start the work-week on a different day than the employees' actual work begins, as long as there is a sufficient business reason for doing so (other than avoiding payment of overtime). The court hinted that Metson set up its work week for the purpose of avoiding certain wage-hour obligations.

So, the new opinion in Seymore v. Metson Marine is here.  It is now going to be up to the Supreme Court to de-publish or review this case.  On the bright side, the current version of the opinion is less dangerous for employers than the original one was.


Wednesday, April 13, 2011

Court of Appeal Says No Acommodation for Violent Threats

Disagreeing with the Ninth Circuit's ridiculous  insaneoutlier opinion  in Gambini v. Total Renal Care (in which the court of appeals said that a bi-polar employee who threw papers at her boss was immune from discharge), the Court of Appeal held that the Orange County Superior Court lawfully fired an employee who made violent threats against co-workers.  The Court of Appeal decided that a "bi-polar" employee does not have the right to threaten co-workers, even if that conduct is caused by the disability. Chalk one up for reasonable.
Oh the court also held that checkig the box for "denial of family care leave" on an administrative charge is NOT sufficient to exhaust administrative remedies on disability discrimination.
I've written about Gambini here. And here.
This decision is Wills v. Superior Court and the opinion is here.

Tuesday, April 05, 2011

Ninth Circuit Allows FEHA National Origin Claim

Raytheon Company is a defense contractor. The federal government required Raytheon to require security clearances.

Raytheon hired Hossein Zeinali for an enginerring position requiring a Secret security classification. While he was waiting for the security clearance, Raytheon let him perform other duties not requiring the Secret authorization.  Ultimately, the Department of Defense denied the security clearance. So, Raytheon fired him.  Zeinali sued for national origin discrimination.

The Ninth Circuit first held that it had jurisdiction, rejecting Raytheon's contention that there was none because federal courts cannot second-guess denials of security clearances.  Although federal courts indeed cannot overturn determinations about security clearances, that is not what Zeinali was suing about. He did not contest that he was rejected. Rather, he argued that Raytheon's decision to fire him because he did not meet the job qualification - obtaining the clearance - was pretextual.

The court agreed with Zeinali. He produced evidence that although Raytheon consistently said he would have to have a security clearance to retain his job, and although Raytheon imposed this requirement on many employee positions, Raytheon did not always enforce the requirement:

In light of the fact that Raytheon retained multiple non-Iranian engineers after their security clearances were revoked, Zeinali has raised triable disputes regarding (1)whether security clearances were a bona fide requirement for Raytheon engineers, and (2) whether Raytheon’s central purported reason for terminating him (his lack of a security clearance) was pretextual. The Supreme Court’s McDonnell Douglas opinion contains a salient observation about pretext:

“Especially relevant to such a showing [of pretext] would be evidence that white employees involved in acts against [the employer] of comparable seriousness to the [plaintiff’s disruptive protesting activities] were nevertheless retained or rehired. [An employer] may justifiably refuse to rehire one who was engaged in unlawful, disruptive acts against it, but only if this criterion is applied alike to members of all races.” McDonnell Douglas, 411 U.S. at 804.

Analogously, in the present case, Raytheon would certainly be justified in firing employees who lack security clearances, “but only if this criterion is applied alike to members of all races.” Id.; see also Godwin v. Hunt Wesson, Inc., 150 F.3d 1217, 1220 (9th Cir. 1998) (holding that pretext is shown if other employees with similar qualifications are treated more favorably).

So, here's a message you may have heard from an employment lawyer.  Consistency. There, no charge.

The case is Zeinali v. Raytheon Company and the opinion is here.