California employment law

California has created additional protections for unpaid interns and created additional requirements for sexual harassment prevention training.  In addition, California has mandated a new requirement for most employers to provide their employees with paid sick leave.  This new sick-leave requirement will go into effect next summer on July 1, 2015. For a more detailed description of these changes, click here to review the Act Now Advisory written by our colleagues Jennifer L. Nutter and Marisa Ratinoff.

 

By Marisa S. Ratinoff and Amy B. Messigian

One of the main battlegrounds between employers and employees relates to the ability of employers to preclude class actions by way of arbitration agreements containing class action waivers.  In California, the seminal case of Gentry v. Superior Court (“Gentry”) has had the practical effect of invalidating class action waivers in employment arbitration agreements since 2007.  Gentry held that an employment class action waiver was unenforceable as a matter of California public policy if the class action waiver would “undermine the vindication of the employees’ unwaivable statutory rights” under the Labor Code.  Thus, California retailers and national retailers with a business presence in California have found it extremely difficult, if not impossible, to enforce class action waivers in their employment arbitration agreements over the past seven years and have seen scores of California wage and hour cases proceed in court under the harsh hand of Gentry.

The landscape changed drastically in 2010 when the United States Supreme Court issued its decision in AT&T Mobility, LLC v. Concepcion (“Concepcion”).   There, the Supreme Court held that the Federal Arbitration Act (“FAA”) preempts state laws or policies that deem arbitration agreements unconscionable and unenforceable on the basis that they preclude class actions.  While the Concepcion case related to a consumer arbitration agreement, many have questioned whether its impact extended to employment arbitration agreements, such as the ones invalidated on public policy grounds under Gentry

Iskanian v. CLS Transportation Los Angeles, LLC is the first case to test this issue before the California Supreme Court.  The decision takes one step forward and one step back.  First, the Court held that Gentry has been abrogated by Concepcion.  As such, courts may not refuse to enforce an employment arbitration agreement simply because it contains a class action waiver.  The Court further rejected the argument that a class action waiver is unlawful under the National Labor Relations Act. 

However, the Court also found that an employee’s right to bring a representative action under Private Attorney General Act (“PAGA”) is nonwaivable. Under PAGA, an employee may bring a civil action personally and on behalf of other current or former employees to recover civil penalties for Labor Code violations.  Of the civil penalties recovered, 75 percent goes to the State of California and the remaining 25 percent go to the “aggrieved employees.”  The Court held that “an arbitration agreement requiring an employee as a condition of employment to give up the right to bring representative PAGA actions in any forum is contrary to public policy.”  The Court also found that “the FAA’s goal of promoting arbitration as a means of private dispute resolution does not preclude [California’s] Legislature from deputizing employees to prosecute Labor Code violations on the state’s behalf.”  The Court explained that PAGA waivers do not frustrate the FAA’s objectives because the FAA aims to ensure an efficient forum for the resolution of private disputes, whereas a PAGA action is a dispute between an employer and the State, which is being brought in a representative capacity by the employee.  Because the State derives the majority of the benefit of the claim and any judgment is binding on the government, it is the “real party in interest,” making a PAGA claim more akin to a law enforcement action than a private dispute.  Because of this, it is within California’s police powers to enact PAGA and prevent the waiver of representative PAGA claims.

The practical effect is that even if a class action waiver is enforceable, any purported waiver of a representative PAGA action will be unenforceable.  As a result, a complaint filed in court that includes a PAGA cause of action will arguably remain with the court unless the claims are bifurcated.  As for Iskanian and his former employer, the Court left these questions to the parties to resolve.  While it is possible that Iskanian will be appealed to the United States Supreme Court for guidance, at least for the foreseeable future employers should expect plaintiffs’ counsel to include PAGA causes of action in order to frustrate employer efforts to move wage and hour claims to arbitration.

Going forward, retail employers may want to consider adopting agreements with their California employees that expressly permit representative PAGA claims to be brought in arbitration while waiving all other class claims to the extent allowed by law.  Alternatively, employers may revise their agreements to allow for bifurcation of claims or expressly exclude PAGA claims from the scope of the agreement.  In either case, employers should use this opportunity to review the terms of their arbitration agreements and put new agreements in place with California employees, if necessary.    

In this month’s Take 5 newsletter, I discuss how California is unique for making numerous types of protected leaves of absence available to employees.  All of these options can add up to a lot of protected leave.

Following is from the introduction:

National employers often find it challenging to navigate the employment laws of the various states in which they do business. In most cases, the easiest solution may be to adopt national policies that follow federal law. This process will not work, however, for employers that do business in California, where state protections are often more expansive and provide greater employee rights than their federal law equivalents. This is particularly true in the leave of absence arena. California is unique in that it makes numerous types of protected leaves of absence available to employees. The cumulative impact of administering all of the available leaves in California can be quite burdensome and lead to a perfect storm in which an employee may continue to be on a protected leave of absence for more than one year. Here’s why …

The full issue is here.

by Lisa M. Watanabe

In recent years, retailers, grocery stores and banks have been hit with a wave of lawsuits over California’s suitable seating requirements set forth in §14 of the Industrial Welfare Commission’s Wage Orders.  (See http://www.dir.ca.gov/iwc/wageorderindustries.htm for § 14 in 16 of the 17 industry-specific Wage Orders).  Despite the surge in lawsuits, there continues to be several unanswered questions regarding the interpretation of subsections (A) and (B) to §14 which state the following:

  1. All working employees shall be provided with suitable seats when the nature of the work reasonably permits the use of seats.
  2. When employees are not engaged in the active duties of their employment and the nature of the work requires standing, an adequate number of suitable seats shall be placed in reasonable proximity to the work area and employees shall be permitted to use such seats when it does not interfere with the performance of their duties.

For example, how does an employer determine when the “nature” of an employee’s work “reasonably permits the use of seats” (in which case §14(A) would apply) or generally “requires standing” (in which case §14(B) would apply)?  Additionally, as is often the case with retail employees such as a cashier or clerk, what if an employee performs a variety of assigned job duties, some of which may permit seating and some which may not?

A pending case before the Ninth Circuit – Kilby v. CVS Pharmacy, Inc. – should provide answers to courts and litigants to these questions.  Kilby, a former cashier/clerk, filed a representative suit against CVS in 2009 for its alleged failure to provide her with suitable seating under §14(A).  The district court dismissed the lawsuit on the grounds that §14(A) was not applicable to Kilby’s job position.  (See Order Granting CVS’s Motion for Summary Judgment.)  In its decision, the district court interpreted §14(A) as requiring a “holistic” assessment of an employee’s entire range of assigned duties to determine whether the employee’s job “as a whole” reasonably permitted the use of seats (§14(A)) or generally required standing (§14(B)).  The district court also considered CVS’s business judgment in its decision – i.e., CVS expected its clerks/cashiers to perform their work while standing, and trained them to do so (among other things, CVS showed a training video to new hires that reinforced its expectations of them to perform a variety of work while standing).

On appeal, Kilby contends that the district court misinterpreted §14 and, and in doing so, failed to account for evidence that she spent approximately 90% of her time performing duties that could have been done while seated.  The district court’s interpretation of §14, according to Kilby, allows employers to deprive employees of seats “simply by assigning a handful of tasks that require standing … even if the workers’ other assigned tasks consume a significant portion or even the vast majority of the work day.”  As such, Kilby requests the Ninth Circuit to interpret §14 as guaranteeing employees the right to suitable seating whenever a specific task or duty performed for an appreciable period of time can reasonably be accomplished while seated.  Kilby also challenges the district court’s consideration of CVS’s business judgment in determining the nature of an employee’s work on the grounds that it frustrates the Industrial Welfare Commission’s intent to create an objective standard for determining which duties could be performed while seated.

The Ninth Circuit now has an opportunity to clarify the legal standard for §14 and offer much-needed guidance on the scope of suitable seating requirements for employees, including those individuals with mixed seating and non-seating job tasks.   Moreover, the case will clarify what role, if any, an employer’s business judgment, expectations and training may have in assessing the nature of an employee’s work.  The parties’ briefing has been completed and oral arguments before the Ninth Circuit (which should be scheduled and posted on the Ninth Circuit’s website — http://www.ca9.uscourts.gov/calendar/ — in the next few months) will surely keep courts, litigants, and employers on the edge of their seats.

By:  Jennifer L. Nutter

Floating Holidays” are typically a fixed number of personal days that employees may use at any time during the year over and above any vacation, sick or other paid time off (“PTO”) they may have.  Usually such days do not accrue under the employer’s policy and are not paid out at the time of termination.

Those of you familiar with some of the idiosyncrasies of California wage and hour law are probably aware that “use it or lose it” vacation policies are not permissible, while bona fide sick leave policies may be set up in this fashion, and the treatment of holidays (such as Christmas and Thanksgiving) is largely left up to employers.

What you may not know is that California views “Floating Holidays” as little more than a linguistic disguise, and they can spell trouble if not managed properly.  If the Floating Holidays may be taken at any time, then California will consider them to be vacation days and they will be governed by all of the same rules, including automatic accrual (subject to reasonable capping) and payout upon termination of employment.  If, on the other hand, the Floating Holidays must be taken on (or within close proximity to) specific events such as employee birthdays or anniversary dates, then California will treat them like any other holiday.

One way employers can avoid confusion and potential pitfalls is by not offering Floating Holidays to their California employees at all and instead institute a combined PTO policy.

If Floating Holidays are offered, there are some things to keep in mind:

1.   The written policy should clearly reflect when Floating Holidays may be used and what happens when they are not.

2.   If the Floating Holidays must be used on or near specific days, treat them the same as other holidays and spell this out in your written policy.

3.   If the Floating Holidays may be taken at any time, they will be treated as vacation days under California law.  Accordingly:

a.   Be sure to track accrued and unused days because they must be paid out at the time of termination along with any other wages owed.

b.   Consider capping Floating Holidays as you would vacation time so that they do not accrue indefinitely for employees who do not take them.  Reasonable caps (usually 1.5 to 2 times the annual accrual) may be applied such that once employees reach the cap, they do not accrue any additional time until some time is used.

 If you do decide to offer your California employees Floating Holidays and to cap them, be careful that you do not inadvertently turn the cap into a frontloaded “use it or lose it” policy.  Here is an example of how this may occur:  On January 1st each year, an employer grants its employees 2 Floating Holidays to be used any time during the year, and caps accrual at 3 days (1.5 times the annual allotment).  Because the employer uses January 1st as the date that it grants Floating Holidays, it looks at employees’ accrued days on that date in order to determine how many new days, if any, each employee will receive for the year.  An employee who is at the 3-day cap on January 1st will not be granted any Floating Holidays for that coming year.  The problem with this practice is that employees may lose some or all of their annual Floating Holidays based on their accrual status on a single date (i.e., if an employee with 3 accrued Floating Holidays has not used at least 2 of those days by January 1st, he or she will lose some or all of the Floating Holidays for that coming year).  Thus an employee who happens to take his or her 2 Floating Holidays for 2013 in December of that year, will earn 2 Floating Holidays for 2014, but an employee who waits until January 2nd and 3rd of 2014 to use the 2 days from 2013 will not earn any Floating Holidays for 2014.  This is the classic “use it or lose it” scenario just shifted by one day from December 31st to January 1st.  This result can easily be avoided by treating the accrual just as you would vacation time and allowing employees to earn their 2 Floating Holidays at any time during the year that they fall below the cap, not just on January 1st.

In summary, consider combining PTO for your California employees instead of offering separate “Floating Holidays.”  This will simplify administration and avoid confusion.  If you do offer Floating Holidays, be sure to decide whether they will be treated as vacation (taken at any time) or as holidays (tied to a specific event), spell this out in your written policy, and follow the applicable set of rules.

By Amy Messigian

Last month, the California Court of Appeal ruled that a former employee of Forever 21 must try her claims against the retailer in arbitration, enforcing the company’s employment arbitration policy and reversing a lower court decision finding the agreement unconscionable under California law.  The plaintiff, Maribel Baltazar, alleged that she had been discriminated against by the retailer due to her race and sexually harassed by a supervisor and coworker.  She filed a complaint against Forever 21 and several of its employees in the Los Angeles Superior Court and the retailer moved to compel Baltazar to arbitration.

Reversing the lower court, the Court of Appeal found that Baltazar had been given the opportunity to review the arbitration agreement, which was contained in her employment contract, and that the contract’s provision allowing the parties to seek injunctive relief in court did not unduly favor Forever 21.  The panel noted that six of the claims asserted in Baltazar’s suit were brought under the Fair Employment and Housing Act (“FEHA”), which authorizes injunctive relief, and that there was nothing to suggest that the employer would be more likely than the employee to seek provisional remedies.

Injunctive relief provisions have sounded the death knell for many employment arbitration agreements in California of late, with multiple appellate decisions citing an injunctive remedy as unduly favoring the employer.  Ostensibly, these courts are inclined to believe that an employer is more likely than an employee to seek injunctive relief.  The Baltazar court felt otherwise. Until this issue is considered by the California Supreme Court, it remains likely that the luck of the draw will ultimately decide whether an arbitration agreement is enforceable if it contains a provisional remedies provision that allows parties to seek an injunction in court.

By: Michael S. Kun

The latest wave of class actions in California is one alleging that employers have not complied with obscure requirements requiring the provision of “suitable seating” to employees – and that employees are entitled to significant penalties as a result.

The “suitable seating” provisions are buried so deep in Wage Orders that most plaintiffs’ attorneys were not even aware of them until recently.  Importantly, they do not require all employers to provide seats to all employees.  Instead, they provide that employers shall provide “suitable seats when the nature of the work reasonably permits the use of seats.”

Because the “suitable seating” provisions were so obscure, there is scant case law or other analysis for employers to refer to in determining whether, when and how to provide seats to particular employees.  Among other things, the most important phrases in the provisions – “suitable seats” and “nature of the work” – are nowhere defined.  While those terms would seem to suggest that an employer’s goals and expectations must be taken into consideration – including efficiency, effectiveness and the image the employer wishes to project – plaintiffs’ counsel have not unexpectedly argued that such issues are irrelevant.  They have argued that if a job can be done while seated, a seat must be provided.

The first “suitable seating” case has gone to finally gone to trial in United States District Court for the Northern District of California.  The decision issued after a bench trial in Garvey v. Kmart Corporation is a victory for Kmart Corporation on claims that it unlawfully failed to provide seats to its cashiers at one of its California stores.  The decision sheds some light on the scope and meaning of the “suitable seating” provisions.  But it also may provide some guidance to plaintiffs’ counsel on arguments to make in future cases.

Addressing the “suitable seating” issue at Kmart’s Tulare, California store, the court rejected plaintiffs’ counsel’s arguments that Kmart was required to redesign its cashier and bagging areas in order to provide seats.  Importantly, the court recognized that Kmart has a “genuine customer-service rationale for requiring its cashiers to stand”:  “Kmart has every right to be concerned with efficiency – and the appearance of efficiency – of its checkout service.”  That concern is one likely shared by many employers.

In reaching its decision, the court expressed concern not only about safety, but also about the cashiers’ ability to project a “ready-to-assist attitude”: “Each time the cashier were to rise or sit, the adjustment exercise itself would telegraph a message to those in line, namely a message that the convenience of employees comes first.”  The court further explained, “In order to avoid inconviencing a seated cashier, moreover, customers might themselves feel obligated to move larger and bulkier merchandise along the counter, a task Kmart wants its cashiers to do in the interest of good customer service.”

While recognizing that image, customer service and efficiency goals must all be taken into consideration in determining whether seating must be provided, the court then appeared to provide some guidance to plaintiffs.  The court addressed the possibility that these issues could be addressed through the use of “lean-stools.”  Acknowledging that the use of “lean-stools” had not been developed at trial, the court invited arguments about them at the trial of “suitable seating” claims for the next Kmart store.  Thus, while expressly refusing to decide whether Kmart employees should have been provide “lean-stools,” the court may have provided plaintiffs’ counsel with an important argument to make in future trials.

And, as a result, employers in California – particularly in the hospitality and retail industries – should now be expected to address whether they could or should be providing “lean-stools” to employees whom they expect to stand during their jobs.

by Dena L. Narbaitz and Marisa S. Ratinoff

While everyone awaits the California Supreme Court’s ruling in Brinker Restaurant Corp. v. Superior Court (Hohnbaum) – which is expected sometime in early 2012 and will determine the scope of an employer’s meal and rest period obligations – employers must not lose sight of other important developments in California employment law. Below are brief summaries of some of the legislative enactments in California that will affect employers. Unless otherwise noted, these laws will take effect on January 1, 2012.

Read the full advisory online