Top 5 Tips: So You Want to Sue Your Boss?

So you want to sue your employer for racial discrimination, sexual harassment, whistleblower retaliation, failure to pay you your last paycheck, what have you. Now what? Here are five tips all clients should keep in mind before they pick up the phone to call a lawyer.
Tip 1: Write it, don’t say it. People think it’s enough to complain, request or report things orally to their employer. They complain about discrimination to HR over the phone. Or they tell their supervisor about a health and safety code violation. Well, what are you going to do when HR or the supervisor denies you ever talked with them? Don’t believe it? Happens all the time. Avoid the “he said, she said” by communicating with your employer by emails or send letters (certified mail, return receipt requested). By doing this, you create a record.
Tip 2: Keep a journal. Don’t rely on memory, write everything down. The names of witnesses, dates, times, places, what was said, documents involved – the more detailed the better. And be professional about it. Don’t write that your boss is a %*&@! in the journal, because the journal could become evidence. Another thing, don’t leave the journal on your desk or in your desk drawer at work where your boss can find it. You might end up fired and your lawsuit dead.
Tip 3: Get witnesses. Emails, memos and letters are one form of key evidence in a lawsuit. Witnesses are the other. When your boss calls you a racial slur, pats you on the rear, or threatens to fire you because you reported him for illegal activity, talk to whoever witnessed it. Confirm whether they saw it. Try to get them on your side. Do this carefully and your case will have just gotten a lot stronger.
Tip 4: Don’t play lawyer. So you went to the internet and learned that “retaliation”, “hostile work environment” and “whistleblowing” are magic words. That doesn’t mean you should go waving those terms around in your emails and conversations at the workplace like your sword and shield. Don’t play lawyer. Chances are, your employer’s lawyer will be better at it than you are and if, as is likely, you get it all wrong, you’re the one who could come off looking like the bully, not the employer. Get a lawyer instead.
Tip 5: Don’t get mad, get even (or turn the other cheek). You’re being treated outrageously by your co-workers, your supervisors or the owners of your company, or maybe all of them. You’re depressed, scared and . . . spitting mad! To quote Al Pacino in Scent of a Woman, you want to take a flamethrower to the place! That’s fine if you want to end up in jail and without a lawsuit. Otherwise, take a deep breath, follow tips 1 to 4, and call an attorney. That momentary lapse where you curse your boss out like a sailor in front of your entire office could mean you no longer have a case.
More tips to come, but if you follow these five, you will be way ahead of the game. And your lawyer will thank you for it.

IS SECURITY SCREENING TIME COMPENSABLE?

Security screening time is not compensable under the Fair Labor Standards Act. The Supreme Court reversed the Ninth Circuit in Integrity Staffing Solutions, Inc. v. Busk. In this class action, plaintiff warehousemen sought compensation for time spent undergoing security screening at the end of their shift. The purpose of the screening was to ensure against employee theft. The Supreme Court reasoned that security clearance was not an activity “related” to the work performed by the employees. Just as “walking, riding, or traveling to and from” the place of work is not compensable, neither is an “unrelated” activity such as “postliminary” security screening. See 2014 WL 6885951 (USSC 12/9/14).

Our opinion is that this does not bode well for wage and hour claims under the Fair Labor Standards Act. The decision was unanimous, and its reasoning appears highly suspect. Security screening is required by the employer, whereas commuting to and from the place of employment is a voluntary action by the employee.

In Laffitte v. Robert Half International, Inc., the court approved class counsel’s contingency fees of one-third of a $19 million “common fund” awarded to a class of employees. A putative class member objected to the settlement, claiming that the attorneys’ fee was excessive. The court disallowed the objection and upheld the contingency fee. It noted that the percentage of common fund monies remains viable under California law. 2014 WL 5470463 (10/29/14).

Note that under federal law, this award would likely not have survived challenge. In the Ninth Circuit there is a 25% “benchmark.” Moreover, federal courts generally compare a percentage recovery specified in an attorney-class fee agreement against the attorney fee that would be recovered under the Lodestar method. (The “Lodestar” method of calculating attorney fees is arrived at by multiplying the number of hours worked by each attorney against that attorney’s reasonable hourly rate. That total – which is subject to enhancement or reduction – is expected to bear a “reasonable relationship” to the award recovered under a common fund contingency.)

In Ferrick v. Santa Clara University (6th Dis. 12/1/14) 2014 WL 6748938, the Court of Appeal reinstated a cause of action for retaliatory discharge under Labor Code § 1102.5(b). Plaintiff’s complaint made numerous allegations that a member of administration and plaintiff’s immediate supervisor had engaged in extensive wrongdoing and inappropriate behavior. During discovery, it transpired that plaintiff had made only limited disclosures of allegedly inappropriate financial dealings to Santa Clara University (“SCU”) management. The trial court reasoned that because the injury was only to the pecuniary interests of SCU, a private institution, and not to the public at large, the public could not have sustained an injury; therefore, there could be no determination of violation of public policy.

The Court of Appeal disagreed and reinstated the claim. Plaintiff modified the claim to assert that she reasonably believed the behavior of her supervisor violated Penal Code § 641.3 (commercial bribery), California Code of Regulations, Title 2, Section 926-3 (taxable value of lodging), and other laws.

The Court of Appeal held that, “On this very narrow basis, the complaint states a cause of action for wrongful termination in violation of public policy embodied in section 1102.5(b).” Id., citing Foley v. Interactive Data (1988) 47 Cal.3d 654.

Perhaps most significantly, this court (which is the Court of Appeal for Santa Clara County) discussed the split of opinion between American Computer Corp. v. Superior Court (1989) 213 Cal.App.3d 664 on the one hand, and Collier v. Superior Court (1991) 228 Cal.App.3d 1117 on the other hand. Where American Computer expressly required that there can be no claim for retaliation where an employee simply complains to a supervisor, the court found that the decision in Collier, which held that an action may be stated where the employee only complains to the employer, rather than to a government entity, does state a cause of action. The Ferrick court noted, “We concluded that Collier is better reasoned. As observed in that case, Foley concerned an employee’s disclosures that the FBI was investigating a co-worker’s suspected embezzlement from a former employer … The Legislature’s recent amendment to section 1102.5 to protect disclosures to employees buttresses Collier’s analysis. Here … , the alleged misconduct did not affect only SCU’s private interest; it also implicated the public policy embodied in section 1102.5.” Id.

REIMBURSEMENT FOR WORK-RELATED PHONE CALLS ON PERSONAL CELL PHONES

In August, a 3-judge panel of the California Court of Appeals for the Second District held that when employees are required to use their personal cell phones for work-related voice calls, the employer must reimburse the employee for those cell minutes at a reasonable rate. Cochran v. Schwan’s Home Serv., Inc., (2014) 228 Cal. App. 4th 1137, 1140.

The plaintiffs in Cochran were employed to deliver meals to customers at their homes. The plaintiffs were required to use their personal cell phones to contact customers regarding order and delivery, but the employees were not reimbursed any money for these calls. The 3-judge panel found that reimbursement of a reasonable percentage of the employee’s cell phone bill for work-related calls is required by Labor Code § 2802 (a rule requiring employers to reimburse employees for necessary expenditures of carrying the duties of the job). Employer reimbursement is required whether the employee has limited or unlimited talk minutes on her cell phone plan.

TIMELY PAYMENT OF EARNED COMMISSIONS

In the realm of commissions on sales, when is payday? Does the law have anything to say about how quickly an employer must pay a salesperson the commission he or she has earned? It does.

The General Rule: Earned Commissions Must Be Paid Semi-Monthly

In July of 2014 the California State Supreme Court confirmed that in fact Labor Code § 204 (which provides the general rule on timely payment of earned wages) commands, “all earned wages, including commissions, must be paid no less frequently than semimonthly.” Peabody v. Time Warner Cable, Inc., (2014) 59 Cal. 4th 662, 668. [emphasis original]. “Semi-monthly” means every two (2) weeks after the commission has been “earned.”

Some exceptions apply. Where a more specific code section exists, it trumps a more general code section. Rose v. State, (1942) 19 Cal. 2d 713, 724. The Labor Code provides a special rule for “executive, administrative and professional” employees. For such employees, California law and Federal law (the Fair Labor Standards Act primarily) may grant slightly longer periods in which the employer can make payment of earned wages (Labor Code § 204c). A special rule of timely payment of earned commission wages applies just to salespersons at vehicle dealerships (Lab. Code § 204.1.).

Additionally, the Labor Code sections following 204 (§§ 204a – 220.2) address a number of specific topics, including payment of regular wages (wages based on time worked) for enumerated industries and to public employees; timely payment of wages when an employee is terminated or resigns; notice; place of payment; releases of wage claims; time off in lieu of cash compensation, etc.

But, What About My Contract? 

Whether you are an employer or a salesperson employee, your reaction to this news that earned commission must be paid semi-monthly will likely be, “Wait a minute, our sales commission contract says commissions will be paid quarterly. So, what about the contract?”

While the Peabody decision is so new that cases applying it have yet to wind their way through the court system, Labor Code § 219 (a) makes timely payment of earned wages a protection that an employee cannot waive by contract:

(a) Nothing in this article shall in any way limit or prohibit the payment of wages at more frequent intervals, or in greater amounts, or in full when or before due, but no provision of this article can in any way be contravened or set aside by a private agreement, whether written, oral, or implied. Consequently, the likely outcome is that a contract term that says an employer may pay an earned at a date later than semi-monthly is void, unless an exception applies.

EXPENSE REIMBURSEMENT: YOUR EMPLOYEE RIGHTS

In our last post, the blog posed the question whether an employee must reimburse an employer for damage or loss during the course of employment (no).  This blog now examines the flip side of that question: must an employer reimburse you for expenses you incur as an incident to your employment?  That is, if you use your cell phone for company calls, dress in a required uniform, or use your car to travel or make deliveries are you entitled to be paid back for those expenses?  Here we have an unequivocal YES.

Labor Code section 2802 mandates that any employee expense incurred carrying out the employer’s duties shall be reimbursed to the employee.  In other words, any expense incurred by the employee that is necessary for the employee to carry out his or their duties for the employer. Labor Code § 2802 states that an employer must indemnify its employees “for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties … ” Lab.Code § 2802(a).The elements of a § 2802(a) cause of action are:

(1) the employee made expenditures or incurred losses;

(2) the expenditures or losses were incurred in direct consequence of the employee’s discharge of his or her duties, or obedience to the directions of the employer; and

(3) the expenditures or losses were necessary.” Cassady v. Morgan, Lewis & Bockius LLP (2006) 145 CA4th 220, 230.

An employer may satisfy this reimbursement requirement by paying an increased salary or commission but only if it is clearly defined what monies are being paid for labor performed and what amount is being paid as reimbursement for business expenses. Gattuso v. Harte–Hanks Shoppers, Inc. (2007) 42 C4th 554, 559.  Importantly, an employer may be required to pay for an employee’s defense as well as any settlement or judgment if the employee is sued for conduct arising within the course and scope of employment.  For example, an employee sued for discrimination may be entitled to a defense paid for by the employee.  On the other hand, an employee who punches somebody while “on the job” may not receive a defense.  See, Grissom v. Vons Cos., Inc. (1991) 1 CA4th 52, 55.; Freund v. Nycomed Amersham (9th Cir. 2003) 347 F3d 752, 765–760.  (Section 2802 allows indemnification for employees’ defense costs when sued for actions arising out of their employment). At least one case clearly states: “The statute requires the employer not only to pay any judgment entered against the employee for conduct arising out of his employment but also to defend an employee who is sued for such conduct.” Jacobus v. Krambo Corp. (2000) 78 CA4th 1096, 1100, 93 CR2d 425, 428.  Other cases have held that the employer need only reimburse the employee for legal expenses after a determination that the employee was in the course and scope of employment at the time of the incident being sued on. As a practical matter, an employer will invariable provide a defense for claims made against an employee.  If they do not, there are several options available to the employee.

Labor Code Section 2802 may also require an employer to indemnify employees for attorneys’ fees and costs incurred in successfully defending against criminal charges arising out of acts performed in the course and scope of employment. See Los Angeles Police Protective League v. City of Los Angeles (1994) 27 CA4th 168, 177, 32.  (Note:This is not well established by case law and remains something of an open question.)

WAGE DEDUCTION FOR BREAKAGE OR LOSS

It happens to everybody, you’re working away and you break something, or you come up short on your register, or, most commonly, you lose a tool or something of value that belongs to your employer.  The boss then tells you that he’s sorry but the cost of that damage or loss is going to come out of your paycheck. Can he do that?

In most cases the answer is “NO”.  Case law and orders of the Industrial Welfare Commission (IWC) make it clear that : Absent a showing of dishonesty, willful acts or gross negligence, an employer may not deduct for ordinary losses caused by an employee (e.g., for cash shortages, breakage or loss of equipment Kerr’s Catering Service v. Department of Industrial Relations (1962) 57 C2d 319. 326–330, Truck driver’s sales commissions not subject to reduction for cash shortages; see also Prachasaisoradej v. Ralphs Grocery Co., Inc.,(2007) 42 Cal. 4th 217. 229 “The law precludes the employer from using wages to shift business losses to employees, or to make employees the insurers of such losses … ” Prachasaisoradej . supra, 42 C4th at 238,  So if you lose that nice new power saw, crash the company truck, or drop a rack of dishes its on the employer’s dime, not yours.

The rationale for this principle is that losses due to an employee’s simple negligence, such as cash shortages and breakage or loss of equipment, “are inevitable in almost any business operation” and must be borne “as expenses of management.” The employer is better able to absorb the loss and can recoup the loss by passing the cost on to the customer or by lowering the wages of all employees. Kerr’s Catering Service, supra,, 57 C2d at 329.  Moreover, employees rely on the wage rate paid by the employer and “To subject that compensation to unanticipated or undetermined deductions is to impose a special hardship on the employee.” Id.

The term “deduction” means any action that deprives you of the full compensation promised: “The employer takes a ‘deduction’ … when it subtracts, withholds, sets off, or requires the employee to return, a portion of the compensation offered, promised, or paid … so that the employee, having performed the labor, actually receives or retains less than the paid, offered, or promised compensation, and effectively makes a forced ‘contribution’ of the difference.” [Prachasaisoradej, supra, at 227]

 If the employer does engage in self help and deduct wages for the loss, you are entitled to reimbursement and waiting time penalties as well as other damages depending on the circumstance.

These protections apply to rank and file workers.  Technically, they do not apply to management level employees.  At the management level, an employee may indirectly be responsible for loss.  For example, a manager who is paid partly on a commission based on store profits may have his commission effectively lowered when loss and breakage are offset against profits.  In such a circumstance the courts have found the wage reduction to be lawful. Ralphs Grocery Co. v. Sup.Ct. (Swanson) (2003) 112 CA4th 1090, 1106, 

On-the-Job Injury: Laws that protect you

As everyone knows, if you suffer an on the job injury you are entitled to Worker’s Compensation benefits. The injury may cause you to miss work or even suffer a permanent disability.  California has two statutory systems in place to protect you from retaliation or discrimination as a result of your industrial injury.  One statutory protection is enforced by the Workers Compensation Appeals Board (WCAB); another statute gives you the right to sue your employer if you are targeted because your injury has caused you to miss work or to become disabled. (The statutes also protect you from retaliation because you filed a claim for benefits.  Irrational as it may seem, employers all too often “blame the victim” of an accident because the injury may drive insurance costs higher.)

1. Administrative Remedies

The WCAB is empowered to redressviolations of Labor Code § 132a which expressly prohibits an employer from discriminating against an employee because that employee:

●    Applied for or intends to apply for workers’ compensation benefits; or

●    Received a rating, award or settlement in a workers’ compensation action; or

●    Testified or intends to testify on behalf of another employee in his or her case.  (Labor Code § 132a(1)(3).)

Because workers’ compensation claims are often handled by the employer’s insurance company, the penalties available under Labor Code § 132a apply equally against an insurer who advises an employer to fire or otherwise take action against an employee because he or she filed a workers’ compensation claim.  Labor Code § 132a(2).

“Discrimination,” as used in Labor Code § 132a has been defined as “treating injured employees differently, making them suffer disadvantages not visited on other employees because the employee was injured or had made a claim.”  Department of Rehabilitation v. WCAB (2003) 30 Cal.4th 1281, 1300; Crown Appliance v. Workers’ Comp. Appeals Bd.(200 115 Cal.App.4th 620, 626 (substantial evidence supported Workers’ Compensation Appeals Board’s (“WCAB”) finding that employer fired employee in retaliation for the worker filing a workman’s compensation claim).  In order to state a claim under Labor Code § 132a, you “must show that [you] suffered an industrial injury, that the employer caused [you] to suffer some detrimental consequences as a result, and that the employer singled [you] out for disadvantageous treatment because of [your] injury.”  Gelson’s Markets, Inc. v. Workers’ Comp. Appeals Board (2009) 179 Cal.App.4th 201, 210.

While employers are not required to reinstate or retain injured workers where “business realities” make that impossible, the employer still may not discriminate “in any manner” against employees who remain able to perform job duties if their former positions are still available.  See Labor Code § 132aJudson Steel Corp. v. WCAB (1978) 22 Cal.3d 658, 667. One example of discriminatory treatment is making an employee who has been injured on the job use vacation time rather than sick leave to attend medical appointments for work-related injuries.

Labor Code § 132a does not give you the right to bring a civil action against your employer.  The way the statute works is that you must file a worker’s compensation claim and then, if you are discriminated against, seek appropriate penalties and protections from the WCAB which include:

●    Criminal prosecution of the employer;

●    Reinstatement and reimbursement for lost wages and work benefits;

●    Increasing the employee’s workers’ compensation award by 50% (up to a total of $10,000); and

●    Reimbursement for any costs and expenses (up to $250) incurred in proving the discrimination.

The appropriate law firm to assist you in prosecuting a Labor Code § 132a action is a firm that practices workers’ compensation.  These attorneys specialize in obtaining recoveries for workers  injured on the job.  Ainley Law does notpractice in the field of workers’ compensation. You may find a list of practitioners in the Bay Area by clicking here. However, we provide this information to the general public, as all employees should be aware of these important rights.

2.  Civil Lawsuits

If you have suffered retaliation or discrimination resulting from your industrial injury you have the right to bring a lawsuit in civil court even if you have also sought administrative remedies.  You have protections both under Labor Code § 132a(recovery through an administrative process), and you also have protections under Government Code § 12920 et seq. In a landmark decision, the California Supreme Court in City of Moorpark v. Superior Court (1998) 18 Cal.4th 1143, held that a worker who suffers an on-the-job injury is protected from discrimination both by Labor Code § 132a and also by the general prohibition against discrimination because of disability set forth in the Fair Employment and Housing Act (FEHA) (codified at Government Code § 12920, et seq.) The court expressly found that “section 132a does not provide an exclusive remedy and does not preclude an employee from pursuing FEHA and common law wrongful discharge remedies.  We disapprove any cases that suggest otherwise.”  Id. at 1158.  The court did go on to note that “disability” has a special meaning under workers’ compensation law which is not the same as “disability” under the FEHA.  Therefore, an injured worker may pursue disability discrimination claims under Labor Code § 132a and under the Government Code (FEHA) only if he or she meets the statutory definitions of disability under the respective code sections.  For example, Government Code § 12926 subdivisions (i) and (k) have extensive definitions of physical and mental disability which an injured worker may or may not fall within even though he or she has a “disability” within the meaning of the Labor Code.  Finally, you should be aware that if you obtain a recovery for discriminatory treatment under Labor Code § 132a, you cannot also obtain a recovery for the same injury under FEHA:  “To the extent section 132a and the FEHA overlap, equitable principles preclude double recovery for employees.  For example, employees who settle their claims for lost wages and work benefits as part of a section 132a proceeding could not recover these damages as part of a subsequent FEHA proceeding.”  City of Moorpark, supra, at 1158.

Thus, you may potentially recover remedies under both the workers’ compensation system and in a civil lawsuit.  However, you should bear in mind that bringing your claim in one forum may compromise your claim in the other.  Injured workers often have civil and administrative claims pending simultaneously.  Generally, workers’ compensation remedies are smaller than the potential awards in a civil action; handled properly, there is no reason that a worker who is both injured and discriminated against should not recover in both forums.

AVOIDING THE “AT WILL” BAR

In California, an employee is presumed to be at-will.  Labor Code § 2922.  Virtually every time you receive an employment offer or sign an employment agreement, the phrase “at will” will feature in 14-point type – all caps – several times in the course of the letter.  Agreement to at-will status effectively prevents the formation of a contract between you and the employer, thereby precluding a claim for breach of an actual or “implied” contract by a terminated employee.  As the phrase suggests, the employer is free to terminate the employee “at will,” while the employee retains the dubious right of being able to end his employment without notice.  Although “at will” is the presumption and is broadly used, there are situations in which the at-will defense may be defeated.  They are as follows:

1. Fraudulent Inducement

If an employer solicits a prospective employee and then terminates him or her without giving the prospective employee a good faith opportunity to work, the employer may be liable both for breach of contract, and for fraudulent inducement to enter into the employment relationship.  Typically, this situation arises where an employee has been solicited away from a different job and before he or she starts working, or within a short period of time after work commences, the employer changes his mind and fires the new hire.  In such case, the employer may be estopped from asserting that the employment was at will.  For example, in Sheppard v. Morgan Keegan & Co. (1979) 218 Cal.3d 63, at 67-68, an employer hired a young man to work for him.  Prior to the start date, the prospective employee dropped by the work site in jeans and a T-shirt.  Seeing this, the employer decided that the employee was not fit for the job and terminated his prospective employment.  The employee sued for breach of contract and fraudulent inducement.  In response, the employer contended that the employment relationship – prospective or actual – was at-will and therefore he was free to breach his agreement with the employee.  The court rejected this defense, finding that the employer was estopped from breaching his promise without first giving the prospective employee a good-faith opportunity to perform.  Similarly, in Comeaux v. Brown & Williamson Tobacco (9th Cir. 1990) 915 F.2d 1264, 1270-1271, an employer was held liable after he reneged on an oral agreement after checking the employee’s credit rating.  The court held that the employer had no basis to claim the relationship was at-will without first providing the prospective employee, who had relied, to his detriment, on the employer’s promise, an opportunity to perform.  Thus, employees who have not yet begun employment, or those who have worked for only a short time may well be able to avoid an “at-will” defense in the event they are terminated.

2. Extended Service History

Conversely, an extensive history can give rise to an implied contract not to terminate without “good cause”.  Even where an employee has signed an express at-will agreement, there is an argument that can be made that the employer has modified that at-will agreement and has made an “implied-in-fact promise” not to terminate the employee without “good cause.”  In a series of decisions by the California Supreme Court, the test of whether there has been an “implied-in-fact contract” not to terminate without good cause depends on a variety of factors, which must be assessed on a case-by-case basis, as to whether such an agreement is shown by the parties’ acts and conduct “interpreted in the light of the subject matter and the surrounding circumstances.”  See Pugh v. See’s Candies, Inc. (1981) 116 Cal.App.3d 311, 329; Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 681; Guz v. Bechtel Nat’l, Inc. (2000) 24 Cal.4th 317.  Typically, the circumstances that the fact finder looks for come to light over the course of the parties’ relationship.  This means that the implied-in-fact terms may be developed over the course of the employment relationship and need not be fixed by the parties’ understanding at the time of the initial agreement.  See Pugh v. See’s Candies, Inc. (1988) 203 Cal.App.3d 743, 751-752.  This is extremely important, as virtually all employment agreements contain an at-will provision.

The facts the courts look to in order to determine whether or not there is an implied-in-fact promise not to terminate with good cause include the following:

●    The employee’s length of service (extremely important);

●    The employer’s personnel policies and practices;

●    Actions or statements by the employer constituting assurances of continued employment (e.g., “Doug, you have a job here for as long as you want it”; “We intend to keep you for as long as you want to work here.”)

●    Practices in the industry in which the employee is engaged; and

●    Whether the employee gave independent consideration for the employer’s promise (e.g., a promise not to work for a competitor, a promise not to disclose confidential information obtained during employment, or a promise to turn over patents and copyrights).  See Foley v. Interactive Data Corp., supra, 47 Cal.3d at 680-681.

None of these factors alone necessarily leads to a finding that the employee may be discharged only for good cause.  Rather, each case turns on its own facts and this court seeks to enforce the understanding of the parties as it develops over time.  Guz v. Bechtel Nat’l, Inc. (2000) 24 Cal.4th 317 at 337.

The kind of evidence used in connection with the factors outlined above include the following:

●    Personnel Handbooks and Manuals:  Where an employer distributes formal policies and procedures in handbooks,  policy and procedure manuals, and employee manuals, an inference arises that the employer intends workers to rely upon the policies set forth in those documents notwithstanding a typical disclosure at the front of the document stating that none of the terms and conditions in the policy and procedure manual are to be considered elements of a contract between the employee and the employer.  Guz v. Bechtel Nat’l, Inc. (2000) 24 Cal.4th 317, 344-345.

●    Layoff Guidelines:  Where an employer has written termination guidelines, a trier of fact may infer an agreement to limit the grounds for termination to those expressed in the guidelines.  Foley v. Interactive Data Corp., supra, 47 Cal.3d at 681; Haycock v. Hughes Aircraft Co. (1994) 22 Cal.App.4th 1473, 1489 (written layoff procedures indicated an implied agreement to discharge only for cause, particularly if they afford significant protection to long-term employees).

●    Past Practices:  A practice of keeping administrative personnel employed except for cause may be considered an indicator of an implied contract not to terminate except for cause.  Pugh v. See’s Candies, Inc., supra, 116 Cal.App.3d at 327; Stilwell v. Salvation Army (2008) 167 Cal.App.4th at 382 (evidence of employer’s practice to terminate only for cause relevant to question of implied contract).

●    Length of Employment:  Length of employment is a highly important consideration in deciding whether an implied agreement not to terminate without cause has been formed.  See General Dynamics Corp. v. Superior Ct. (1994) 7 Cal.4th 1164, 1178 (fourteen-year tenure was one of many factors demonstrating an implied contract not to terminate absent good cause).  Stilwell v. Salvation Army, supra, 167 Cal.App.4th at 382 (evidence of a “long and distinguished career” supported finding of implied contract not to terminate without good cause).  It is important to note, though, that no particular length of service is required.  For example, in Foley v. Interactive Data Corp, supra, 47 Cal.3d at 681 (six years and nine months was sufficient time for conduct which was the basis for a finding of implied-in-fact contract not to terminate arbitrarily).

●    Consistent Promotion and Salary Increases:  Solid performance reviews, routine and regular promotions, salary increases and bonuses are all relevant factors, but do not, without more, imply a contract limiting the employer’s termination right.  See Kovatch v. California Cas. Management Co., Inc. (1988) 65 Cal.App.4th 1256, 1276.  The rationale here is that a rule granting an implied contract on the basis of successful performance alone would discourage the retention and promotion of good employees.  Guz v. Bechtel Nat’l, Inc., supra, 24 Cal.4th at 342.  However, consistent promotion and salary increases, combined with the other factors, may well lead to a finding of an implied contract.

●    Employer’s Assurances.  The employer may indicate, by words or conduct (including personnel policies and practices), offer protection for an employee against termination without good cause:  “The issue is whether the employer’s words or conduct on which the employee reasonably relied gave rise to that specific understanding.”  Guz v. Bechtel Nat’l, supra, 24 Cal.4th at 342; Foley v. Interactive Data Corp., supra, 47 Cal.3d at 681.

●    Quality of Assurances.  Courts are much more likely to consider an implied-in-fact contract not to terminate without good cause where there have been express statements by the employer made in combination with long service.  For example, plaintiff demonstrated an implied promise not to terminate without cause by introducing evidence that he was employed for 32 years, during which time he worked his way up from dishwasher to vice president; that the employer had given him assurances that his future was “secure”; that he received commendations and promotions throughout his employment with no criticism of his work; and that employer’s acknowledged policy was not to terminate without cause.  Pugh v. See’s Candies, Inc.supra, 116 Cal.App.3d. 311, 329.

●    Similarly, an employee sufficiently alleged an implied promise not to terminate with good cause by alleging that he was hired as a “career-oriented” employee with an expectation of permanent employment, provided his performance was satisfactory; that he was promised explicitly job security and substantial retirement benefits; that he regularly received outstanding performance reviews, promotions, salary increases and commendations throughout a fourteen-year tenure; and that the company abruptly terminated him without following the termination protocols set forth in its policy and procedure manuals.  General Dynamics v. Superior Court, supra, 7 Cal.4th 1164, 1178.

●    Plaintiff succeeded in establishing an implied-in-fact contract to terminate only for good cause by introducing evidence that his employer repeatedly told him that “he would have a job for as long as [plaintiff] chose to work for them.”  Stilwell v. Salvation Army, supra, 167 Cal.App.4th at 381-382.

On the other hand, vague or uncertain assurances may not give rise to an implied-in-fact agreement not to terminate.

●    In a letter from plaintiff’s employer stating, “We look forward to a long, pleasant, and mutually satisfactory relationship with you” was insufficient to establish an implied-in-fact contract.  The court held that the statements were mere expressions of hope and/or expectation.  Hillsman v. Sutter Comm. Hospitals of Sacramento (1984) 153 Cal.App.3d 743, 750.

●    An employee to whom the employer had promised salary increases and annual bonuses “appropriate” to employee’s responsibilities and performances along with assurances that employee would participate in executive meetings, creative activities and administrative matters; and that he would be subject to direction only by high-level executives were “simply too vague and indefinite to be enforceable” and could not support a breach of an implied contract claim for termination without good cause.  Rochlis v. Walt Disney Co. (1993) 19 Cal.App.4th 201, 213-214.

●    Industry Customs and Practice:  In Guz v. Bechtel Nat’l, Inc., supra, 24 Cal.4th at 341, the court considered that the employer, like other companies in its industry, operated by competitive bidding from project to project with a fluctuating workforce.  This indicated no guarantee of continued employment, as the business itself was in a state of constant flux and change.

In summary, the analysis of whether an implied-in-fact contract exists, despite an at-will provision in the original employment agreement, turns on a number of factors.  Of those, the core, and most important, are: (1) the length of service; (2) statements made to the employee; (3) the provisions of the employer handbook and personnel policies; and (4) the practices of the employer.  If you have been fired, carefully catalogue your experiences with an eye to the criteria above.  When you consult with counsel, you may be able to show him or her that you have a case for breach of implied contract that he or she might otherwise not be aware of.

MASSIVE STUDY FINDS NO BENEFIT TO “AT WILL” EMPLOYMENT

California presumes that the employment relationship is “at will” which in effect means that unless you have a contract that states otherwise (e.g. belong to a union with a Collective Bargaining Agreement) your employment may be terminated for any lawful reason, or for no reason, by your employer.  See Cal. Labor Code section 2922.  The “at will” presumption is not accidental.  It reflects a deliberate and quite Victorian view of the world.  The theory goes that society a whole prospers when labor markets are flexible.  Therefore, employers must be free to shed workers in downturns and hire them in upturns.  The increasing gap between the very rich and everyone else seems to make this notion suspect.  At the very least, however, one would think that there must be dozens of academic studies that have empirically validated the premise that “at will” employment leads to greater job creation and a more efficient labor force.  Surprisingly, there are no academic studies of any kind that show “at will” employment leads to greater economic growth and/or efficiency than employment with job protection.

Many of the EU countries have employment policies in which an employee cannot be fired after a given period of employment without a showing of “good cause” in a full round of trial like hearings.  (In the U.S. the closest example may be unionized teachers or other Civil Service employees who enjoy much greater protections than the rest of us.)  Britain’s coalition Government recently sought to reduce the job protections that apply in that country.  Before acting, Parliament commissioned an exhaustive study, called the “Beechcroft Review” whose goal was to collect and collate academic studies from around the world.  The Report would show conclusively the effect that “at will” employment had on economic activity and job creation when compared to the more regulated economies of the Continent.

Everybody expected a definitive, massive report detailing the negative effects of job protections on market economies.  Instead, the report, weighing in at 15 pages, meekly concluded that there is no data available that shows any benefit at all to an “at will” employment policy.  The BBC put up a great pod on the issue at: http://www.bbc.co.uk/programmes/b01hxtmp.  The hosts interviewed leading academics from around the world for their view on the benefits of “at will” employment.  The conclusion?  There is likely no benefit at all given the corresponding cost of sudden and severe unemployment.  Simply put, there is no proven benefit to “at will” employment and every reason to believe that it does more harm than good to a society as a whole.

Pregnancy Disability Leave Law: The Special Protections of Pregnancy Related Disability

Some of the most obvious discrimination in the workplace is taken against pregnant women.  In response the Legislature has enacted a powerful set of protections embodied in the PDDL which creates special statutory protections for employees who become disabled as a result of pregnancy, childbirth, or a related medical condition. Gov.C. § 12945(a). These amount to “super protections” and if you are disabled by pregnancy related issues or by childbirth you can benefit from the special protections afforded under the law.  The salient features include the following:

  • Employees are entitled to 4 months of unpaid protected leave (your job – or a comparable position) must be preserved for four months if a doctor certifies that you are unable to carry out your essential job functions.  For example, a woman suffering morning sickness is considered disabled by pregnancy, as is a woman who must take time off for prenatal care. 2 Cal.C.Regs. § 7291.2(g)
  • The disability extends to 4 months even if your employer has a policy of providing less than 4 months leave for similarly situated employees with other temporary disabilities (illness, injury , etc. ). 2 Cal.C.Regs. § 7291.7(a).
  • Unlike protections under the Federal Family Medical Leave Act (FMLA), 29 USC § 2611(4)(A)(i), or the State California Family Rights Act (CFRA), Gov.C. § 12945.2, there is no requirement that you have worked at least 1250 hours ( e.g.FMLA) or have been employed at least one year (CFRA ) before taking PDDL leave. 2 Cal.C.Regs. § 7297.0(e)(2)
  • Because the statute is part of the broad Civil Rights protections of the Fair Employment and Housing Act (FEHA) Gov.C. § 12940 et seq., your employer must make efforts to reasonably accommodate your pregnancy related disability including offering you a transfer, adjusting your duties and schedule, and entering into good faith discussions with you regarding accommodating your disability. (Remember though that if you cannot perform your “essential job duties” the employer does not have to accommodate you – the PDDL leave benefits still apply, however.)
  • An employee may, but is not required, to use accrued vacation time during her disability period. See 2 Cal.C.Regs. § 7291.11(b)(2). On the other hand, an employer may require that the employee use accrued but unused paid sick leave prior to using the PDDL leave. 2 Cal.C.Regs. § 7291.11(b)(1).
  • The PDDL runs concurrently with the FMLA but importantly runs consecutively with the CFRA.  Thus, if you take 4 months of PDDL leave, you may take another 12 weeks of protected leave under the CFRA. This allows you a total of 7 months protected leave in which to prepare for childbirth and bond with your baby once he or she is born. 2 Cal.C.Regs. § 7291.13(c).
  • PDDL leave may be taken intermittently or on a reduced work schedule “when medically advisable as determined by the health care provider of the employee.” 2 Cal.C.Regs. § 7291.7(a)(3).  Thus, the leave may taken incrementally and on an hourly basis.  If, for example, an employee misses two hours of work due to morning sickness, only those two hours may be counted against the time available for her PDDL leave of 4 months. 2 Cal.C.Regs. § 7291.7(a) (2)(B).
  • An employee returning from PDDL leave is entitled to all the same benefits that she had before the leave began. Leave does not constitute a break in service and she may not be deemed to have forfeited any earned seniority. 2 Cal.C.Regs. § 7291.11(c)(2).

The PDDL is a statute that confers special status on pregnancy disability.  It is uniquely flexible and generous.  Perhaps most important is that it can be tacked to leave available under CFRA.  Working women have a powerful set of statutes that can provide up to 7 months of leave for pregnancy and childbirth.  Any working woman considering taking leave due to pregnancy or to bond with their newborn should consider the benefits of invoking this statute.

California Paid Family Leave: It can be a Life Saver

In 2002, California became the first State in the nation to offer paid family leave to employees who take time off work to care for a seriously ill child, spouse, parent or domestic partner, or to bond with a new child. Unemp.Ins.C. §§ 2601, 3301(a); 22 Cal.C.Regs. § 3303–1.  The statute is known either as the Paid Family Leave Act (PFL) or Family Temporary Disability Insurance (FTDI). This is almost a hidden statute; few people are aware of it and many, many HR departments are unaware of its existence or fail to inform properly the employee of the benefits available.  This statute is essentially an extension of the State SDI (Disability Insurance) program.  When it enacted PFL the legislature approved a .08 pecent increase in SDI withholding to pay for the program.  So, you’ve paid for it; use it if you need it! The key features of the PFL are the following:

  • PFL works in conjunction with the FMLA or the CFRA.  If you take protected leave to care for another under either of those statutes, PFL will provide you with benefits for up to 6 weeks.
  • The compensation available is 55% of your wages up to a weekly benefit maximum of $1011.  The rate schedule is identical to the disability schedule.  You can find your benefit amount at the EDD here: http://www.edd.ca.gov/pdf_pub_ctr/de2588.pdf
  • PFl does not cover your disability: that comes from Disability Insurance.
  • There is a one week waiting period (seven consecutive days) before PFL benefits apply.  However, leave taken at different times during one 12 month period to care for the same family member are considered one “benefit period” so that a new waiting period is not necessary.
  • PFL includes incapacity due to pregnancy; there is no waiting period after pregnancy leave to obtain benefits for bonding with the newborn child.
  • The employer may require the employee taking PFL to use up to two weeks of earned but unused vacation pay before receiving PFL benefits.  The waiting period runs during while vacation is being used. Unemp.Ins.C. § 3303.1(c); 22 Cal.C.Regs. § 3303.1(c)–1
  • The employee must provide a certificate attesting to the illness of the family member or the birth of a child.
  • There is no job protection by virtue of the PFL.  It is designed for use with the CFRA or FMLA which allow 12 weeks of protected but unpaid leave to care for a family member.

If you take CFRA or FMLA leave be sure to request PFL or FTDI benefits at the time your leave begins.  Your employer must participate in the processing of your request for benefits.  The employer must notify you of your right to PFL benefits.  If they have no idea what to look for, tell HR they need form DE 2501F from the EDD.  If they are still confused, direct them to http://www.edd.ca.gov/Forms/#footer which is a searchable forms bank on line with the DFEH.  This site and other EDD sites lays out in detail the mechanics of claim filing.

Do not be a misclassified independent contractor

Many employers seek to avoid liability for Payroll taxes, Social Security taxes, Medicare taxes, and the payment of health care benefits by classifying employees as “Independent Contractors” instead of employees. These workers receive 1099 forms instead of W-2’s and generally receive no benefits beyond their hourly rate.
This is bad for the Government and bad for you if you are misclassified as an independent contractor.

Under the tax code, your employer pays half of the social security tax that is due on your wages. As an independent you pay all of it. Although social security may not seem like a heavy tax burden, remember that it is not subject to reduction through credits or deductions; it is a flat tax and you pay 15% of your income (or the applicable rate) as an independent contractor. As an employee, you pay only 7.5%; the employer pays the other half. In addition, the usual benefits of health insurance, dental insurance, etc. that may be available to employees will not be available to you. Self employment has many rewards, but you pay a price to be your own boss. When you are not your own boss and you still pay the price as if you were then it is just unfair.

Starting January 2012, the Legislature enacted an extraordinarily tough new enforcement sanction against the misclassification of employees as independent contractors. Codified at Labor Code Section 226.8, this little known provision imposes a penalty of between $5,000 and $15,000 per violation (one pay period is one violation). If the court or jury determines that the violations are part of a pattern or practice then the penalty imposed is $10,000 to $20,000 for each violation. So, if ten waitresses, for example, are misclassified as contractors the penalty is $200,000 per pay period against the employer. This is effectively a death sentence for the business operation and so a group of misclassified workers have an extraordinary degree of leverage over their employer. The law looks to many factors in deciding whether a person is an employee or an independent contractor. The IRS has a set of criteria and California courts apply what is known as the common law test. In each case the dispositive factor is the degree of control exercised by the boss over the person performing his or her job. Typically, the factors relevant to control include the degree of management and supervision; mandatory schedules; dress codes; direction and choice over the task or work to be performed and how it is to be done. Other factors include the nature of the worker’s task and whether it is part of the general operations of the company. If for example, a law firm hires a paralegal, that is closely related to the practice of law. Someone who repairs the elevators, or patches the roof is in a different line of work entirely and is unlikely to be an employee. Also important is whether you bring your own equipment to work and whether you work at the site of the employer. How you are paid (1099 or W-2) is also a factor that courts weigh in analyzing a worker’s status.

The determination is fact intensive and turns on the specific merits of each case. If you believe that you may be misclassified it may be worth your while to examine the issue closely because the rewards may be substantial if you have been willfully misclassified.

Victory for Plaintiffs in Wage and Hour Class Action

The recent decision of the Second District Court of Appeal in Harris v. Superior Court (2012) 207 Cal.App.4th 1225 ends a long battle over the classification of thousands of claims adjusters employed by Liberty Mutual Insurance Company. Plenty of money was at stake. In Bell v. Farmers Insurance Exchange (2001) 87 Cal.App.4th 805, plaintiff insurance adjusters recovered in excess of $170 million in unpaid overtime. Accordingly, the parties in Harris had a great deal at stake, which fueled an epic battle. The specific issue at stake was whether insurance adjusters may be classified as exempt from the overtime laws under the so-called “administrative” exemption. This exemption has been the subject of a number of cases in recent years, largely because of what is known as the “administrative/production” dichotomy. In short, that legal theory attempts to distinguish between those employees who are engaged in producing the goods and services of the employer as opposed to those who are employed to run the business. Federal regulation 29 C.F.R. section 541.201 puts it this way:

“To meet the [administrative exemption] requirement, an employee must perform work directly related to assisting with the running or servicing of the business, as distinguished, for example, from working on a manufacturing production line or selling a product in a retail or service establishment.” Id.

Employees engaged in an activity that constitutes the company’s primary purpose are production workers. Martin v. Cooper Elec. Supply Co. (3rd Cir. 1991) 940 F.2d 896, 903. However, there has been a recent trend, in cases where the plaintiffs are white collar workers, to limit or reject out of hand the administrative/production dichotomy. These new cases conclude that the purpose of this analysis is to distinguish between those who work on a factory floor and those who effectively run the business from an office. In today’s service-dominated economy, the theory goes, it is an artificial distinction to differentiate between those who run the business and those who provide the service or product of the business.

In Harris, as in Bell, plaintiffs argued that claims adjusters, by definition, perform duties and provide services which are the essential product of the insurance company. The employers argued that claims adjusters do not produce the employers’ product because employers’ product is the “transference of risk,” not claims adjusting. Round one went to the employers, with the Court of Appeal siding with Liberty Mutual in 2007. On petition to the Supreme Court, plaintiffs emerged victorious. In Harris v. Superior Court (2011) 53 Cal.4th 170, the court held that the Court of Appeal had misapplied the administrative/production dichotomy and remanded the case back to the Court of Appeal for further proceedings consistent with its direction. Grudgingly, the Court of Appeal applied the criteria specified by the Supreme Court and found in favor of plaintiffs.

This case is significant (as is the Supreme Court’s reversal) not only because it reaffirms the viability of wage and hour class actions, but also because it clearly establishes that the administrative/production dichotomy is alive and well in the field of white collar employment: a conclusion that a number of courts have in recent years urged is not the case. Although the plaintiffs here were claims adjusters, the reasoning applies to any office or “white collar” employment.

Nelson v. Legacy Partners: An Ainley Law Review

If any two cases illustrate the extraordinary instability in wage and hour class actions, those cases surely are the recent decision in Hoover v. American Income Life Insurance (previously reported) and the current case, Nelson v. Legacy Partners. Hoover came out of the blocks strongly in favor of plaintiff. Unlike other recent decisions, Hoover held that only in the case where the employee is “expressly and directly” involved in interstate commerce would the would the Federal Arbitration Act ( FAA) override California’s prohibition (Labor Code section 229) against arbitration agreements purporting to require Plaintiff to arbitrate his or her wage claims. However, the ink was barely dry on the Hoover decision Hoover’s before Nelson jumped out of the shadows reached an almost exactly opposite conclusion. Just as Hoover is a resounding victory for plaintiffs, Nelson, decided August 14, 2012, is a home run for the defense bar.

In Nelson, plaintiff was employed by defendant as a property manager. When she became employed, she signed an arbitration agreement which committed her to arbitrate her claims rather than bring them in a court of law. Nothing in the arbitration agreement addressed whether class action remedies could be brought in the arbitration. As in Hoover, Plaintiff brought multiple claims arising under the Labor Code for unpaid overtime, missed meal breaks etc. The Nelson court completely ignored Labor Code section 229 as well as the Federal statutes and chose to characterize the question of whether a Plaintiff is bound by an arbitration agreement (and whether that agreement may prohibit class actions) as simply an issue of contract interpretation.

In so doing, the Nelson court referenced Gentry v. Superior Court (2007) 42 Cal.4th 443 in which our Supreme Court held that a class action waiver in an arbitration agreement, could be enforced so long as cetian public policy factors were complied with.

In a truly extraordinary judicial detour, the Nelson court held that the Gentry policy factors analysis could be ignored (in fact, the court found the agreement to be procedurally unconscionable) because Gentry involved an arbitration clause which explicitly required the parties to arbitrate and forbade class actions. In Nelson, the arbitration agreement signed by Plaintiff made no mention one way or another of class actions, but merely stated “the agreement covers disputes and controversies between [plaintiff] and [defendants].” Thus, reasoned the court, there was no contractual ban on class arbitration so the policy analysis under Gentry was inapplicable.

Having dispensed with Gentry the court went on to conclude that the language of the agreement “between [plaintiff] and [defendants]” impliedly precluded the right to arbitrate on a class-wide basis. The reasoning that a failure by the employer to expressly preclude class action excuses a policy analysis is absurd. Equally ridiculous is the Court’s failure anywhere in its opinion to address California’s existing prohibition against arbitration of wage and hour claims. According to Nelson, the court is free to ignore state and federal statutes, as well as public policy concerns when reviewing the enforceability of an arbitration agreement. What happened in this case is that the Court invented an arbitration clause where none existed; excused itself from any policy analysis, and gave an opinion directly in conflict with the Legislatureís clear directive against arbitration of wage claims. Why would a court create an arbitration clause where none exists knowing that the State legislature has condemned such clauses? The answer, we believe is that court’s are now willing to stretch beyond reason to block wage and hour class action claims at all costs. The judicial zeitgeist is strongly against class wage claims.

Interestingly, the Nelson court did attempt to address the Hoover decision, which was decided by another district of the Court of Appeal. According to the Nelson decision, The court in Hoover found the arbitration agreement in issue was not subject to the FAA and did not encompass state statutory claims. [citations] That is not our case. Id. at 215. Of course this is pure nonsense. Every California case which does not directly and substantially involve interstate commerce cannot be subject to any arbitration clause, according to the decision in Hoover. By definition, the Hoover analysis should apply each and every time a plaintiff brings a wage and hour claim arguably subject to an arbitration agreement. The Nelson court also found itself struggling to justify its decision in the face of National Labor Relations Boardís decision in D.R. Horton, Inc. (2012) 357 NLRB No. 184 (Horton) (previously reported in the March issue of this update) which found that any arbitration agreement requiring an employee to submit to an arbitration agreement and waiving his or her right to file a class action as a condition of employment was a violation of 29 U.S.C. section 151, commonly known as the National Labor Relations Act.

Horton, of course, was a very significant victory for employees. The Nelson court, for unknown reasons, simply stated that it would not follow Horton: :”For a number of reasons, we decline to follow Horton here.” The court, rather snootily, went on to observe that it was not bound by the decisions of lower federal courts, much less by federal administrative interpretations. The fact that Horton was one of the longest and most thoroughly reasoned administrative decisions ever recorded seemed not to trouble the court whatsoever.

In conclusion, the court in Nelson held that a plaintiff was subject to an arbitration agreement (which the court agreed was procedurally unconscionable) even though no such agreement existed and that she could not arbitrate on a class-wide basis even though the arbitration agreement was silent on class actions in any forum.

At Ainley Law, we fully expect plaintiffís counsel to petition the Supreme Court for review of this decision. As an example of judicial overreach, it stands alone in recent memory. If it remains good law, a worker may be subject to an unconscionable arbitration agreement and lose the ability to litigate on a class-wide basis in the arbitration where there is (a) no prohibition against such a proceeding in the arbitration agreement itself and the employer may do so without reference to Labor Code Section 229 prohibiting arbitration agreements with respect to wage and hour claims and without respect to the procedural safeguards laid down by the Supreme Court in Gentry v. Superior Court (2007) 42 Cal.4th 443. It is remarkable that a court could effectively encourage employers to omit from an arbitration clause prohibitions on class actions. However, that precisely is the effect of the Nelson decision. Where no such prohibition is in place, Gentry, supra, 42 Cal.4th 443, can be ignored, Labor Code Section 229 somehow also ignored, and the Federal Arbitration Act equally ignored. According to the Nelson decision, the matter simply devolves to an issue of contract interpretation. No other issues apply.

It is not surprising that this decision comes from the same district that issued Duran v. US Banc (2012) 203 Cal.App.4th 212 earlier this year. That decision was recently depublished by the Supreme Court and has been accepted for review, with every indication being that it will be reversed. Plaintiff’s litigating wage and hour claims should be aware of the Nelson decision and, to the extent possible, urge the California Supreme Court to depublish it as an almost absurdly pro-employer decision far outside the mainstream.

California Employment Law: News You Can Use

A Handy Guide to Your Leave Rights

What are your leave rights? Everybody at some point gets sick, has an emergency, gets called for jury duty, has military service commitments, or has to care for a ill relative or friend.  In what situations can you leave and still protect your job.  If you have been refused leave or told that you may not return, is your boss breaking the law? These are questions that all of us have asked ourselves at some point in time.  Most of the time, we never find the answer and the HR department is often as clueless.

To assist workers in better understanding their Leave Rights, Ainley law is making available a complete chart of every leave statute in California  The chart comprehensively outlines the eligibility and coverage for your rights when pregnant, when baby arrives, when you have a sick relative, when you become sick or disabled or are injured, when you are in the Armed Forces, at school, or are required for jury duty, emergency duty, and your right to leave work to vote.  The chart identifies each specific statute along with the Agency responsible for administering it.  The statutes covered are Pregnancy Disability Leave (PDL), California Family Rights Act (CFRA), Family Medical Leave Act (FMLA), Reasonable Accomodation Leave (R/A), Paid Family “Leave” (PFL), “Kin Care Leave” (KCL), and company disability leave policy (CoDL).  This chart outlines the rights available under each statute and compares them in a succinct 4 pages.

Statute Comparison Chart

Ainley law also makes available a comprehensive Powerpoint presentation assembled by the Department of Fair Employment and Housing called “Leave Laws and Disability Discrimination”.  Here you will find a wealth of clear and concise information about your rights under the Fair Employment and Housing Act (FEHA) and other statutes that protect us from illegal leave practices and discrimination.

Guide to Disability Discrimination

CALIFORNIA SUPREME COURT RULES BRINKER V. SUPERIOR COURT

CALIFORNIA SUPREME COURT rules against employees and holds that employers have no duty to ensure that employees take meal or rest breaks. This is a huge case and a significant defeat for employees. In its ruling the court held that if a company provides a meal or rest break that meets the statutory requirement of Labor Code section 512 and the interpretive regulations. In its 54-page opinion, the Court concluded that an employer’s obligation is to relieve its employees of all duty during meal periods, leaving the employees at liberty to use the period for whatever purpose they desire, but that an employer need not ensure no work is done.
“The difficulty with the view that an employer must ensure no work is done — i.e., prohibit work — is that it lacks any textual basis in the wage order or statute,” said Justice Kathryn M. Werdegar

“While at one time the (Industrial Welfare Commission)’s wage orders contained language clearly imposing on employers a duty to prevent their employees from working during meal periods, we have found no order in the last half-century continuing that obligation.”

Werdegar continued, “Indeed, the obligation to ensure employees do no work may in some instances be inconsistent with the fundamental employer obligations associated with a meal break: to relieve the employee of all duty and relinquish any employer control over the employee and how he or she spends the time.”

Of course, this leads the door wide open to abuse. An employer now has only to publish a policy stating that meal breaks are available and then simply not give that break. For example, If you are working on a machine that runs continuously and you cannot leave without a replacement, you have no choice but to keep working. So too, if you are obligated to meet milestones or lose your job, do you work during lunch? You bet you do. Businesses now are free to assume that people will “choose” to work through lunch to meet their target, quota, or milestone. In other words, the entire workforce will become “volunteers” during their lunch period so long as the employer posts a bogus notice “entitling” employees to a lunch break. For employees, this decision imposes a de facto 9 hour work day.

As to when meal periods must be provided, the Court ruled a first meal break generally must fall no later than five hours into an employee’s shift. However, an employer does not need to schedule meal breaks at five-hour intervals throughout the shift.

With respect to breaks, the Court found that employees are entitled to 10 minutes of rest for shifts from three and one-half to six hours in length, and to another 10 minutes rest for shifts from six to 10 hours in length. Rest periods need not be timed in relation to meal periods.

This is very bad news for California workers and a victory for business. This properly, in our opinion, should become a political issue. The Supreme Court has handed a major victory to the capitalist classes and the worker and has essentially created a 9 hour work day. In other words the Court has taken us back 80 years

Hoover v. American Income Life Insurance

This case, decided on May 16, 2012, marks a significant expansion of a plaintiffís right to litigate his or her wage and hour claims in court, notwithstanding the existence of an arbitration clause. In Hoover, plaintiffs filed an action alleging violation of various provisions of the Labor Code, including violations of Labor Code Sections 1194 and 1194.2, Wage Order No. 4-2001, and Labor Code Section 2802 (collectively, the “statutes”) to seek reimbursement of business expenses (Section 2802) and minimum wage for time spent on mandatory training (Sections 1190, 1194.2 and Wage Order No. 4-2001). Plaintiffs brought suit on behalf of themselves and on behalf of a putative class of similarly situated people.

After litigating for 15 months, defendant American Income Life Insurance asserted that an arbitration agreement entered into by plaintiffs compelled the plaintiffs to arbitrate all of their class action claims. The Hoover court, in one of the most plaintiff-friendly cases to emerge in recent memory, denied the defendant’s motion to compel arbitration and re-established that, in California, “as a general rule” state statutory wage and hour claims are not subject to arbitration, whether the arbitration clause is contained in a collective bargaining agreement or an individual agreement. A collective bargaining agreement cannot waive the right to sue under applicable federal or state statutes because the statutory rights devolve on petitioners as individual workers, not as members of a collective organization. Id. at 322. The concept that wage and hour claims “as a general rule” are not subject to arbitration is a sea change in recent judicial attitude towards arbitration of wage and hour claims. The California Legislature, as far back as 1959, intended to protect actions to enforce payment of wages from arbitration claims. Labor Code Section 229 states:

“Actions to enforce the provisions of this article for the collection of due and unpaid wages claimed by an individual may be maintained without regard to the existence of any private agreement to arbitrate. This section shall not apply to claims involving any dispute concerning the interpretation or application of any collective bargaining agreement containing such an arbitration agreement.”

However, in 1987, the United States Supreme Court, in Perry v. Thomas (1987) 482 U.S. 438, 490, held that the California statute violated section 2 of the Federal Arbitration Act and was, therefore, preempted by federal law. The leading California handbook on arbitration of wage and hour claims continues to assert that section 229 is preempted. In California Employment Litigation, the Rutter Guide, at 18:361, the authors state:

“Lab. [18:361] Lab. C. Section 229 preempted: California Lab. C. Section 229 authorizes lawsuits for unpaid wages without regard to the existence of any private agreement to arbitrate.” As applied to contracts involving interstate commerce, this statute conflicts with Section 2 of the FAA and is therefore preempted.”

Until recently, virtually every decision interpreting an arbitration clause applicable to wage and hours claims has held consistent with Supreme Court precedent that the extremely broad reach of the FAA operates to preempt wage and hour claims in any situation involving interstate commerce. Because the Commerce Clause of the United States’ Constitution is read broadly and inclusively, that meant the FAA applied in virtually every situation. The significance of the Hoover decision, consistent with the decisions in Valles v. Ivy Hill Corp. (9th Cir. 2005) 410 F.3d 1071, 1081-1082 and Cicairos v. Summit Logistics, Inc. (2005) 133 Cal.App.4th 949, 954 is to limit the reach of the FAA and affirm California’s Labor Code Section 229 in a broad range of areas. In Hoover, for example, the defendant was a Texas corporation. Hoover was engaged in sales which necessarily means the use of telephones, computers, etc., which have typically been held to “involve” interstate commerce, as those means of communications are part of a national grid.

Hoover explicitly turns back the clock and limits preemption of Labor Code Section 229 to those situations where, and only where, the relationship “between [plaintiff and] defendant had a specific effect or bearing on interstate commerce in a substantial way.” Id. at 323. See also Citizens Bank v. Alafabco, Inc. (2003) 539 U.S. 52, 56-57.

Equally significant for plaintiff is the Hoover court’s determination that an arbitration clause is valid as to individual statutory claims only where there is ìa clear and unmistakable waiver of a judicial forum.î Id. at 1207 (citing Vasquez v. Superior Court (2000) 80 Cal.App.4th 430, 434-436). “A clear and unmistakable waiverî of a statutory right means that the arbitration agreement must explicitly include specific statutes, identified by name or citation.”Id. In Hoover, the arbitration agreement at issue merely stated that “any dispute or agreement arising out of or relating to this contract” and “all disputes, claims, questions, and controversies of any kind or nature arising out of or relating to this contract” must be arbitrated. Id.

This decision is a significant victory for plaintiffs on several levels. First, it means that an arbitration clause is, once again, presumptively valid unless it has a specific and substantial effect on interstate commerce and the agreement itself specifically names statutory provisions which are subject to arbitration. Secondly, and perhaps most significantly, it makes clear that class actions, when they arise from a statute, assert individual statutory rights and therefore are not subject to arbitration unless all of the criteria that would have to be met for an individual are met on a class-wide basis for each of the individuals in the class. In short, the decision is a significant vindication of a plaintiffs’ right to litigate individual wage and and hour claims despite the existence of an arbitration clause. Equally, it allows individuals to litigate their claims in a representative capacity (as a class action) in court. Finally, this decision can be relied on to contest the validity of an arbitration agreement compels arbitration and that also precludes class actions.

Kirby v. Imoos Fire Protection case

In the wake of the seminal Brinker Restaurant Corp.v. Superior Court (2012) 53 Cal. 4th 1004, the Kirby case, a true jewel for the defense bar, has slipped by virtually unnoticed. This case, another gift from our local Supreme Court to the defense bar and to industry, has the potential to be just as deadly to actions for wage and hour violations as its more celebrated sibling. In short, the ruling in Kirby is that a Plaintiff who sues for meal and rest break violations under Labor Code Section 226.7 is not entitled to attorneys fees under any statute. The legislative purpose in awarding attorneys fees to a victorious Plaintiff suing for overtime is to make it economically viable to punish small violations that would uneconomical without the incentive of attorneys fees.

Labor Code Section 1194 expressly provides that a prevailing Plaintiff in an action for unpaid overtime is entitled to reasonable attorneys fees. Thus, a worker who has been ripped off for $2,000 in unpaid overtime may be able to persuade a lawyer to take his or her case, knowing that the fee award if Plaintiff wins will compensate him or her for the time expended, thereby deterring illegal behavior. One would logically think that the same statute would apply to unpaid meal and rest periods; violations that go hand in hand with overtime violations. The legislative principle is identical, the problem widespread, and the damages usually smaller than in an overtime case. The court labored hard in Kirby to find a reason why Section 1194 should not apply to meal and rest period violations. The reasoning is unsound and unpersuasive. The fact is, as Brinker illustrates very clearly, the California courts are legislating away compensation for meal and rest period violations.

This court though not only held fees unavailable under Labor Code Section 1194, it went further to deny fees to Plaintiff under any statute, including Labor Code Section 218.5. That section provides that in an action for unpaid wages except overtime, the prevailing party, be it Defendant or Plaintiff, may recover reasonable attorneys fees. Determined to shut off oxygen to suits for meal and break violations, the court held that each side bears their own fees, win, lose ,or draw. This is very bad news for the Plaintiff bar: attorneys will, we predict, only rarely take on a meal or break violation case. For now, such cases are effectively dead unless they are an adjunct to a case whose main focus is another legal theory.

The judiciary seems to have taken on the role of protector of business. The economy may be playing a role, along with political pressure to make California a “business friendly” state…….like Texas. The fact is that at the end of the day it is the little guy who pays. We are determined to fight even harder for your rights through the legal and political process. If we at Ainley Law can help you, we will. You can count on it.

Vacation Pay. It belongs to you

One issue that repeatedly comes up is whether an employer may adopt a “use it or lose it” vacation day policy.  This usually takes the form of a policy by which the employer states that for each year worked, employees a certain number of days of paid vacation.  Sometimes, the employer builds into that policy a statement that vacation days which have accrued, but which have not been used by the end of the calendar year, will be forfeited.  This is against the law:  Vacation days that you have accrued are days that have been earned and are part of your compensation.  They are, therefore, wages, as defined by Labor Code section 200.  To compel a worker to give up a vacation day is the same, in the eyes of the law, as forcing a worker to repay wages to his or her employer.  Apart from being unfair, this is effectively a garnishment of wages without judicial process which is in violation not only of the spirit of the entire Labor Code, but also specifically violates Code of Civil Procedure section 487.020(c).  See also Phillips v. Gemini Moving Specialists (1998) 63 Cal.App.4th 563, 572. :  Suastez v. Plastic Dress-Up Co. (1982) 31 Cal.3d 774, 779 (vacation pay is simply a form of deferred compensation). In sum, “use it or lose it” policies are  illegal.

That being said, an employer is not obligated to provide vacation days as part of a compensation agreement.  When an employee and employer enter into an employment relationship, an agreement arises:  the employee will perform services in the future in exchange for compensation.  If vacation days are offered as part of that compensation package, they may not be withheld.  However, some employers do not offer vacation pay as part of their package of benefits.  This is not unlawful, but is rare, as it almost guarantees a very high turnover of personnel.  Vacation includes “floating vacation days,” as well as personal time off (PTO).  Also, an employer may “cap” the amount of accrued vacation days so long as the extra days accrued are “bought out” by the employer in lieu of providing a day off

Duran v. U.S. Bank National Association case

The Duran decision, preceding the Brinker case by 2 months is yet another milestone in the judicial effort to curtail or eliminate the right to recovery of unpaid overtime wages.  Duran was a class action case; the class plaintiffs followed the mechanism by which most class actions have been tried in this State for the past 50 years.  In brief, the Duran Plaintiffs were 260 employees of the Defendant bank who claimed that they were misclassified as exempt from the right to overtime.  At the trial court level, the judge selected 21 Plaintiffs as representative of the class of 260 plaintiffs and certified the class.  (By certifying the class the court in essence said that common issues of fact outweigh individual issues and that the most expeditious way to proceed was to “certify” a class of people who would be represented by the 21 chosen plaintiffs.  Liability would then be determined by the 21 witnesses as representative of the whole class.  In that fashion, the parties would avoid 260 separate trials).  USB challenged the Court’s certification on two grounds. First, USB argued that taking a statistical sampling to represent all of the people in the class was unfair because USB believed that at least a third of the people in the class were not misclassified; and, even if this were legitimate, the statistical methodology was unsound.  Second, USB argued that on the issue of liability, it had the right to present a defense to each and every claimant on hours worked and whether they were exempt.  In short, USB argued that determining liability in a class action could not be determined by use of a sample group.

The appellate court bought USB’s arguments with every bell and whistle attached.  While it did not have the nerve to say that there could be no wage and hour class action claims, it did hold that a defendant has the right to defend against every single claim in a class action.  In a decision stretching to 38 pages and 80 footnotes (a sure sign that a court thinks it is making new law) the court attacked the concept of trial by representative parties; i.e. the class action as it has been known for half a century.  To illustrate its point, the court noted that even if the trial were to take 520 days, as plaintiffs claimed, that was acceptable to protect the defendant.  Further, according to the court a class of 260 is really too small to worry about things like efficiency (“We also note that the class here is comprised of 260 members…it would not have been implausible …to conduct some type of individualized inquiries as to each plaintiff’s entitlement to damages.”).  This is a flat out re-writing of the law.  The whole point of class actions is judicial economy and protection of the class.  To eliminate the class action process with as many as 260 plaintiffs is unprecedented.

Plaintiffs in this case correctly stated that USB’s position, if upheld, would effectively kill off class actions, in wage and hour cases at least, in California.  That is most certainly true and the court does not really try to deny it.  The most it can say is that the “situation is not quite that dire.”  Ah, but it is that dire.  This decision must either be overturned or legislatively annulled; if not, there is a very small chance of any class action case surviving.  At a minimum, every plaintiff may look forward to an appeal.  It worked for UBS, precedent is now out there, and any like minded conservative judge can simply follow the lead.

This case is a true milestone; a de jure throw over of the legislature’s injunction in Code of Civil Procedure section 382 that cases with common issues may be tried as one if common issues prevail.  This decision is nothing more than an attempt to kill off what the big business lobby considers nuisance number 1.  While we are all in favor of job creation and a friendly business environment, we do not believe that extends to a carte blanche to deprive workers of their statutory rights.  Simply put, an individual case for overtime is, to the employer, not something to lose sleep over.  A class action is altogether different and encourages employers to respect the law because the damages can be very high indeed.  When, as here, the judiciary becomes a cheerleader for big business (banks, no less) the incentive to follow the law drops dramatically.  As a weatherman might say: “we are looking at unpaid overtime increasing in the near future.”