Our colleagues   at Epstein Becker Green have a resent post on the Wage and Hour Defense Blog that will be of interest to our readers in the retail industry: “California Supreme Court’s Clarification of De Minimis Doctrine Leaves Many Questions Unanswered – and Does Little to Ease Plaintiffs’ Path to Class Certification.”

On July 26, 2018, the California Supreme Court issued its long-awaited opinion in Troester v. Starbucks Corporation, ostensibly clarifying the application of the widely adopted de minimis doctrine to California’s wage-hour laws. But while the Court rejected the application of the de minimis rule under the facts presented to it, the Court did not reject the doctrine outright. Instead, it left many questions unanswered.

And even while it rejected the application of the rule under the facts presented, it did not address a much larger question – whether the highly individualized issues regarding small increments of time allegedly worked “off the clock” could justify certification of a class on those claims. …

Read the full post here.

Our colleagues , at Epstein Becker Green, have a post on the Hospitality Employment and Labor blog that will be of interest to many of our readers in the retail industry: “Ninth Circuit’s Decision Holds That Salary History Is Not a Defense to Equal Pay Claims.”

Following is an excerpt:

The federal Equal Pay Act (“EPA”) mandates equal pay for equal work regardless of sex.  Employers that pay men and women different wages for the same work are strictly liable for violations of the EPA unless they can show that one or more of four exceptions apply to explain the wage disparity. The four statutory exceptions are seniority, merit, the quantity or quality of the employee’s work, or “any other factor other than sex.”  The Ninth Circuit recently took up the question of the meaning of the fourth, catchall exception – “any factor other than sex” – in order to consider whether an employer may rely, in whole or in part, on an employee’s prior salary as a basis for explaining a pay differential in Aileen Rizo v. Jim Yovino. …

Read the full post here.

Our colleague at Epstein Becker Green has a post on the Wage and Hour Defense blog that will be of interest to our readers in the retail industry: “Federal Court Concludes That 7-Eleven Franchisees Are Not Employees of 7-Eleven.

Following is an excerpt:

In November 2017, four convenience store franchisees brought suit in federal court against 7-Eleven, Inc., alleging that they and all other franchisees were employees of 7-Eleven. The case was filed in the United States District Court for the Central District of California, entitled Haitayan, et al. v. 7-Eleven, Inc., case no. CV 17-7454-JFW (JPRx).

In alleging that they were 7-Eleven’s employees, the franchisees brought claims for violation of the federal Fair Labor Standards Act (“FLSA”) and the California Labor Code, alleging overtime and expense reimbursement violations. The trial court granted judgment in 7-Eleven’s favor, concluding that 7-Eleven was not the four franchisees’ employer under California law or federal law. …

Read the full post here.

For the second time in as many years, California Governor Jerry Brown has vetoed “wage shaming” legislation that would have required employers with 500 or more employees to report gender-related pay gap statistics to the California Secretary of State on an annual basis beginning in 2019 for publication on a public website. Assembly Bill 1209 (“AB 1209”), which we discussed at length in last month’s Act Now advisory, passed the Legislature despite widespread criticism from employers and commerce groups.  This criticism included concerns that publication of statistical differences in the mean and median salaries of male and female employees without accounting for legitimate factors such as seniority, education, experience, and productivity could give a misleading impression that an employer had violated the law.  Opponents also decried the burden the bill would place on employers to do data collection and warned that it would lead to additional litigation.  In vetoing the measure, Governor Brown noted the “ambiguous wording” of the bill and stated he was “worried that this ambiguity could be exploited to encourage more litigation than pay equity.”

However, the same pen that vetoed AB 1209 signed another pay-equity law last week: Assembly Bill 168 (“AB 168”).  AB 168 precludes California employers from asking prospective employees about their salary history information.  “Salary history information” includes both compensation and benefits.  Like similar laws passed recently in several other states and cities, the policy underlying the inquiry ban is that reliance upon prior compensation perpetuates historic pay differentials.  Opponents have argued that such a ban will make it more difficult for employers to match job offers to market rates.  Go to our Act Now Advisory on AB 168 for a comprehensive review of this new law.

On September 13, 2017, California legislators passed California Bill AB 450, also known as the Immigrant Worker Protection Act (“the Act”).  The Act is one of three immigration bills currently awaiting Governor Jerry Brown’s approval or veto.[1]

The Act imposes specific restrictions on employers in instances where U.S. Immigration and Customs Enforcement (“ICE”) agents seek access to their workplaces for immigration enforcement. Specifically, the Act prohibits employers from (1) voluntarily consenting to allow an ICE agent to enter nonpublic areas of the workplace absent a judicial warrant; and (2) voluntarily consenting to allow an ICE agent to access, review, or obtain employee records, absent a subpoena or a court order.

Additionally, the Act requires employers to (1) post written notice[2] of an immigration agency’s intent to audit employee records, including I-9 Employment Eligibility Verification forms, within 72 hours of the employer receiving notice of such an inspection; and (2) following an immigration agency’s audit, provide each employee who was found to lack work authorization with a copy of the written results of the inspection within 72 hours of the employer’s receipt.

Violations of the Act may result in a civil penalty of between two thousand dollars ($2,000) and five thousand dollars ($5,000) for a first violation and between five thousand dollars ($5,000) and ten thousand dollars ($10,000) for each subsequent violation, to be enforced by the Labor Commissioner or the Attorney General. All penalties recovered under the Act shall be deposited in the Labor Enforcement and Compliance Fund.

At this time, the ultimate constitutionality of the Act is uncertain under Chamber of Commerce v. Whiting, 563 U.S. 582 (2011), in view of the steep monetary penalties it threatens to impose.

___________

[1] California legislators also recently passed the California Values Act (which is intended to prevent law enforcement officials from questioning and detaining individuals based on immigration violations alone) and the Immigrant Tenant Protection Act  (which prohibits landlords from reporting or threatening to report the immigration status of their tenants as a form of retaliation or to prompt an eviction.)

[2] No later than July 1, 2018, the Labor Commissioner will release a template to assist employers in complying with the notice posting requirements imposed by the Act.

In the latest of an increasing number of recent website accessibility decisions, in Gorecki v. Hobby Lobby Stores, Inc. (Case No.: 2:17-cv-01131-JFW-SK), the U.S. District Court for the Central District of California denied Hobby Lobby’s motion to dismiss a website accessibility lawsuit on due process and primary jurisdiction grounds.  In doing so, the Hobby Lobby decision further calls into question the precedential value of the Central District of California’s recent outlier holding in Robles v. Dominos Pizza LLC (Case No.: 2:16-cv-06599-SJO-FFM) which provided businesses with hope that the tide of recent decisions might turn in their favor.

The Hobby Lobby website provides a variety of services which are closely related to Hobby Lobby’s brick and mortar stores, including:  purchasing products online; searching for store locations; viewing special price offers; and purchasing gift cards.  Plaintiff alleged that Hobby lobby violated Title III of the ADA, as well as California’s Unruh Act, by not providing full and equal access to its website for individuals with disabilities (as the website was inaccessible to individuals who are blind and make use of a screen-reading program).  In the complaint, Plaintiff sought injunctive relief requiring Hobby Lobby to ensure that individuals with disabilities have as full and equal enjoyment of the website as individuals without disabilities.  However, importantly, Plaintiff did not seek the imposition of a specific technical rule or standard for Hobby Lobby to provide full and equal enjoyment.

Hobby Lobby made a motion to dismiss Plaintiff’s complaint on two grounds – due process and the primary jurisdiction doctrine.  In short, Hobby Lobby argued that because the U.S. Department of Justice had not promulgated final website accessibility regulations under Title III setting forth specific accessibility standards, it would violate due process to provide Plaintiff with injunctive relief imposing website accessibility obligations as Hobby Lobby lacked sufficient notice of its obligation.  Additionally, Hobby Lobby argued the action should be dismissed under the primary jurisdiction doctrine which, if applied, would hold that the court should not rule on website accessibility issues until DOJ – the expert regulator in this area – first speaks on the issue by promulgating and adopting regulations.  While these arguments have generally failed in the context of website accessibility, their potential viability was recently revisited following the Dominos decision which dismissed a website accessibility action based on these very grounds (noting that businesses might be able to provide access to a website’s services via alternative means than making the website itself accessible – e.g., a 24/7 toll-free, sufficiently staffed, hotline).

Here, in denying the motion to dismiss, the court rejected each of Hobby Lobby’s arguments.  First, the court took great exception with the contention that Hobby Lobby did not have sufficient notice of the need to make its website accessible.  The court stressed that DOJ had articulated its position that Title III requires website accessibility for over 20 years – including in speeches, congressional hearings, amicus briefs and statements of interest, rulemaking efforts, and enforcement actions and related settlement agreements.  Moreover, at a broader level, the court noted that from its inception, Title III has always required “full and equal enjoyment” and the provision of “auxiliary aids and services” for “effective communication” and further explained that these overarching civil rights concepts could (and should) easily apply to websites and screen-readers.  Second, following up on this reasoning and underscoring other comparable times when courts have interpreted similar issues under Title III’s civil rights provisions, the court disagreed that it would be appropriate to apply the primary jurisdiction doctrine.  The court saw no reason the issue of website accessibility could not be adjudicated in the same way countless other Title III matters had been handled in the past.  Moreover, the court expressed concern that – given that seven years has already passed since DOJ first expressed an intent to promulgate website accessibility regulations under Title III with little progress – invoking the doctrine could needlessly delay potentially meritorious claims.

The Court also rejected Hobby Lobby’s efforts to rely upon the Dominos decision – which was reached in the very same court – to support its arguments.  In Dominos – contrary to the law that had come before it in website accessibility matters decided in other jurisdictions – citing due process concerns, the court did invoke the primary jurisdiction doctrine to dismiss a website accessibility claim.  However, the court in Hobby Lobby, readily distinguished the Dominos decision in concluding it did not dictate the same ruling in this case.  Specifically, in Dominos the plaintiff sought injunctive relief that required Dominos comply with the WCAG 2.0, a specific standard that has not been officially adopted by DOJ in Title III regulations (though it has been officially adopted in other government regulations and is readily used by DOJ in its settlement agreements).  In Hobby Lobby plaintiff merely sought “full and equal” enjoyment of the website’s services without specifying how that would have to be accomplished – a pivotal distinction.

The Hobby Lobby decision underscores the likelihood that the Dominos decision remains, for now, an outlier.  Taken in tandem with last week’s post-trial verdict in Gil v. Winn-Dixie Stores, Inc., this most recent decision should be viewed as another reason why businesses should seriously consider prophylactic efforts to make their websites (at least when linked to places of public accommodation) accessible.  (For now, the most commonly accepted path to accessibility remains compliance with WCAG 2.0 at Levels A and AA).

California’s Fair Employment & Housing Council has finalized and adopted new regulations to establish criteria for the use and consideration of criminal history information in employment decisions where such use may constitute a violation of California’s Fair Employment and Housing Act. The new regulations take effect July 1, 2017, and are available here and on the Council’s website.  The regulations are intended to clarify, outline and maintain consistency between the laws governing the consideration of criminal history information in employment decisions.

The regulations reiterate existing prohibitions on the use of criminal history information and also require employers to demonstrate a business necessity, in addition to job-relatedness, for requesting a criminal history if the policy or practice of considering criminal history information creates an adverse impact on applicants or employees based on certain protected classes. Applicants and employees bear the initial burden of demonstrating that the policy or practice has an adverse impact on a protected class.  If this showing is made, the burden shifts to the employer to establish that the policy is justifiable because it is job-related and consistent with business necessity. To do so, the employer must demonstrate that the policy or practice is appropriately tailored, taking into account several factors including: (i) the nature and gravity  of the offense or conduct; (ii) the passage of time; and (iii) the nature of the position held or sought.  Even if an employer can demonstrate job-relatedness and consistency with business necessity, an applicant or employee may still bring a claim if he or she can show that there is a less discriminatory alternative available to advance the employer’s legitimate concerns.

Retail employers in California should review their policies and practices to ensure that their use of criminal history information complies with the new regulations. Employers are also reminded of their obligation to comply with the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq., and the California Investigative Consumer Reporting Agencies Act, Cal. Civ. Code § 1786 et seq.

On December 9, 2016, Los Angeles Mayor Eric Garcetti signed ordinances no. 184652 and 184653, collectively referred to as the “Fair Chance Initiative.” These ordinances prohibit employers and City contractors (collectively “Employers”), respectively, from inquiring about job seekers’ criminal convictions until after a conditional offer of employment has been made. Both ordinances will go into effect on January 22, 2017 and will impact all employers in the City of Los Angeles and for every position which requires an employee to work at least an average of two hours per week within the City of Los Angeles and all City contractors and subcontractors, regardless of their location.

No Criminal Inquiry Until After Offer

Specifically, these ordinances prohibit Employers from inquiring about a job applicant’s criminal history, at any time or in any manner, unless and until a Conditional Offer of Employment has been made to the applicant. Following the Conditional Offer of Employment, Employers are permitted to request information regarding the applicant’s criminal history. However, Employers can only withdraw or cancel the conditional offer as a result of the applicant’s criminal history after engaging in the “Fair Chance Process.”

New “Fair Chance Process” Required

The “Fair Chance Process” requires Employers to prepare a written assessment highlighting the specific aspects of the applicant’s criminal history that pose an inherent conflict with the duties of the position sought by the applicant. Employers must provide the applicant with written notification of the proposed withdrawal of the conditional offer, a copy of the written assessment regarding the risks posed by the applicant’s criminal history, and any other relevant documentation. The applicant is then given an opportunity to provide the Employer a response to the written assessment, including any supporting documentation. Employers must wait at least 5 business days after the applicant is informed of the proposed withdrawal before taking any action, including filling the position for which the applicant applied.

New Posting and Recordkeeping Requirements

Additionally, Employers’ job postings must now include a notice stating that they will consider all qualified applicants regardless of their criminal histories, in compliance with these ordinances. Employers must also conspicuously post a notice regarding the “Fair Chance Initiative” in a location in the workplace visible to all job applicants; this notice must also be sent to each union or workers’ group with which the employers have any agreement that governs over employees. Further, Employers must retain all job application documents for three years. Penalties for violations of these ordinances may be assessed at up to $500 for the first violation, up to $1,000 for the second violation, and up to $2,000 for subsequent violations. The City may then, at its discretion, distribute a maximum of $500 from that penalty directly to the applicant. The penalty provision of the ordinances will not go into effect for employers in Los Angeles City until July 1, 2017. However, the penalty provision for City contractors is effective immediately.

Exceptions from these ordinances include: (1) employers who are required by law to seek a job applicant’s criminal history; (2) positions for which an applicant would be required to possess or use a firearm; (3) positions which, by law, cannot be held by an individual with a criminal history; and (4) employers who are prohibited, by law, from hiring persons with criminal convictions.

Employers with operations in the City of Los Angeles should:

  1. Remove questions regarding criminal history from job applications;
  2. Ensure future job postings include required equal employment notices;
  3. Defer inquiries regarding criminal history until making conditional job offers; and
  4. Ensure the Fair Chance Process is followed before denying employment based on criminal history.

By Amy Messigian

Yesterday, the California Court of Appeal ruled against The Wet Seal Retail, Inc. in its appeal of the denial of its motion to compel arbitration.  The trial court determined that the arbitration agreement at issue impermissibly waived representative actions under the Private Attorney General Act (PAGA).  Because the agreement also stated that it was not to be enforced if the waiver provision was found unconscionable, the court denied the motion to compel arbitration.  On appeal, the decision was affirmed.  This case highlights the current divide between state and federal courts in California on the enforcement of representative action waivers and the need for the US Supreme Court to accept certiorari of Iskanian v. CLS Transp. Los Angeles, LLC.  (See our prior blog post on Iskanian here.)

In 2011, the US Supreme Court in AT&T Mobility v. Concepcion ruled that class actions may be waived through arbitration agreements.  Last year, the California Supreme Court followed suit in Iskanian.  However, the California Supreme Court gave with one hand and took with another, also finding that the statutory right to bring representative claims under PAGA may not be waived by an arbitration agreement.  Because PAGA claims are typically included in wage and hour litigation, employers were faced with the conundrum of crafting agreements in which PAGA claims are bifurcated or permitting PAGA representative claims to be heard in arbitration.  Although a petition for writ of certiorari with the US Supreme Court has been filed in Iskanian, until the Court accepts the petition and rules, or denies the petition and lets the California holding stand, employers will remain uncertain as to how to address PAGA claims in arbitration agreements.

In the meantime, Iskanian has created a divide between state and federal courts in California on the issue of PAGA waivers.  Montano v. The Wet Seal Retail, Inc. is among the California state court cases adopting the holding in Iskanian.  Meanwhile, five federal district courts have all found PAGA waivers enforceable: Ortiz v. Hobby Lobby Stores, Inc.; Chico v. Hilton Worldwide, Inc.; Langston v. 20/20 Companies, Inc.; Mill v. Kmart Corp.; and Fardig v. Hobby Lobby Stores, Inc.   The line in the sand has been drawn and employers should expect that the choice of forum in which their motion to compel arbitration is heard will largely decide whether a PAGA waiver will be found enforceable for the time being.

The Wet Seal case serves as a cautionary tale to retailers whose arbitration agreements call for the court to nullify the agreement if the class/collective action waiver is found to be unenforceable.  Had the agreement permitted the court to enforce the remainder of the agreement, Wet Seal may have been able to compel the individual claims into arbitration and bifurcate the PAGA representative claims, as the court suggested in Iskanian.  Thus, employers who wish to proceed with individual claims in arbitration should consider including either a PAGA waiver with instructions to enforce the remainder of the agreement even if the PAGA waiver is found unenforceable or language that carves out representative claims that may not be waived as a matter of law. Because the law remains in flux, this is a particularly good time to assess risks under currently operative arbitration agreements and adjust agreements accordingly.

By William Stein

In rolling out arbitration policies, retail employers should heed the recent California Court of Appeal decision Gorlach v. The Sports Club Co. That case gives employers reason to be cautious when asking employees to sign agreements requiring them to arbitrate any disputes arising out of their employment.  In that case, the trial court found the former Director of Human Resources, who was responsible for obtaining employees’ signatures on a mutual agreement to arbitrate claims, intentionally misled the company into believing that had signed the agreement when she had not.  Nevertheless, it denied the company’s motion to compel.  The Court of Appeal affirmed, holding that, even though she misled the company, she was not bound by the arbitration agreement because she did not sign it. Human Resources.jpg

The Court of Appeal decision is a cautionary tale for all retail employers that require their employees to sign arbitration agreements.  It emphasizes that retail employers should have procedures in place to make sure that employees sign arbitration agreements.  But it requires employers to have to go a step further: they must also have safeguards in place to make sure that those in charge of collecting such signatures also sign the agreement.  If not, such employees, even if they are members of the executive team, can mislead their employers into believing that they have signed the arbitration agreements and still not be required to arbitrate claims arising out of their employment.