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California Employment Law

Commentary on Issues Facing California Employers

Ten Commandments for Avoiding Employment Lawsuits in California

Posted in Class Actions, Disability discrimination, Discrimination, Employment Litigation, Harassment, Wage and Hour

From the employer’s perspective, the only way to truly ”win” an employment case is to avoid it in the first place. We litigators love the thrill of gettting a judge, arbitrator, or jury to decide in our client’s favor. But it can be awfully expensive to get to that point. So without further ado, here are ten commandments for avoiding employment litigation in California.

I. Thou shalt pay employees for all hours worked and provide them their breaks. It’s hard to think of a large employer in California that hasn’t spent gobs of time and money litigating this issue.

II. Thou shalt not treat nonexempt employees as exempt. This is another wage and hour issue that has given rise to thousands of class action claims.

III. Thou shalt not treat employees as independent contractors. Multiple government agencies are reviewing this issue in an effort to collect unpaid taxes.

IV. Thou shalt engage disabled employees in the interactive process. This is one of the hot areas in employment litigation. Failure to comply is, by itself, a violation of the Fair Employment and Housing Act.

V. Thou shalt pay attention to the unique legal requirements of the localities thou operates in. Following federal law isn’t enough. Even following California law isn’t enough if you’re operating in a locality, like San Francisco, with its own requirements.

Moses with the Ten Commandments VI. Thou shalt train thy managers to comply with applicable laws. Having the best policies in the world won’t protect a company if its managers don’t know how to implement them or whom to turn to with issues. This is especially true for harassment training (which is mandatory in California for employers with 50 or more employees).

VII. Thou shalt properly document the steps thou takes. I completed an arbitration last week that, because an issue went up on appeal, took place four years after the decisions in question. Notes of key conversations are critical in these situations.

VIII. Thou shalt require employees to waive class actions and arbitrate disputes. The law is now clear in California that, with an appropriate arbitration agreement, you can require employees to waive their right to class-wide relief. There are still open issues regarding collective actions under California’s Private Attorney Generals Act, but protection against class actions can still be of great value.

IX. Thou shalt provide employees an up-to-date employee handbook.

X. Thou shalt stay up to date regarding ever-changing legal requirements. One way to do that is to subscribe to this blog.

Another way to avoid litigation is to consult an employment lawyer (like me or my colleagues) before making decisions that may result in litigation. It’s frustrating to see companies spend years and hundreds of thousands of dollars litigating issues that could have been avoided with a phone call. So next time you confront these issues, make the call!

California Supreme Court Defines Scope of Commissioned Salesperson Exemption

Posted in Class Actions, Wage and Hour

California wage and hour law provides an exemption for commissioned salespersons. As with the more common executive, administrative, and professional exemptions, employees don’t qualify for the exemption unless their earnings exceed one and a half times the minimum wage. With the state minimum wage having increased to $9 per hour on July 1, 2014, this means that employees must earn at least $13.50 per hour to qualify for the exemption.

In Peabody v. Time Warner Cable, Inc., a salesperson sued claiming that she was not paid enough to qualify for the exemption. Since commissions were not paid in every biweekly paycheck, the issue turned on how you allocate the commission payments. Time Warner Cable wanted the court to look at the issue on a monthly basis, in which case it would satisfy the minimum compensation requirement. Peabody wanted the court to look at each paycheck separately, in which case her pay would be below the minimum for certain two-week periods when she received no commission.

The federal district court granted summary judgment for Time Warner Cable and Peabody appealed. The Ninth Circuit, finding no controlling authority, asked the California Supreme Court to answer the question. On July 14, 2014, the state court issued its opinion that the focus should be on each individual paycheck. So Peabody’s claims get new life.

The key take-away here is that employers need to review their pay practices to ensure that exempt employees meet the minimum compensation threshold in every pay period. If in any pay period the compensation paid divided by the hours worked is less than 13.5, the employee is not exempt.

On a more macro level, this is similar to what’s happening with suitable seating cases, where the federal courts are asking the California Supreme Court to explain what the law means. As I’ve asked before, how is it fair to punish employers for not complying with laws that no one understands?


I Didn’t Steal the Potato Chips, My Disability Did (Part 2)

Posted in Disability discrimination, Discrimination

Last April, we reported on a case where an employer fired an employee for helping herself to a bag of potato chips without paying. The employee argued that she is diabetic and needed the chips because of low blood sugar. The EEOC, striking a blow for the rights of snack food thieves everywhere, filed suit on the employee’s behalf and, as we reported, the court denied the employer’s motion for summary judgment.

Now, as reported by our colleagues at the Employment Discrimination Report, the employer has settled for $180,000. The law provides scant guidance for employers on how to address misconduct that the offending employee attributes to a disability. And as this case shows, a misstep can be expensive. So employers facing these decisions have a choice. They can get legal guidance at the decision-making stage or they can just wing it and let the chips fall where they may.


9 Key NLRB Decisions Invalidated by the Supreme Court’s Noel Canning Decision

Posted in Labor law

When the Supreme Court decided National Labor Relations Board v. Noel Canning on June 26, 2014, it invalidated the cases that the NLRB decided between January 4, 2012 and August 3, 2013. Here are some of the key cases affected by this opinion:

  1. Costco Wholesale Co.Here the Board held unlawful an employer’s handbook policy prohibiting employees from electronically posting statements that damage the company, defame any individual, or damage any person’s reputation.
  2. FreseniusThe Board decided that the employer violated the Act when it terminated employee for writing vulgar, offensive, and threatening statements on materials; left the materials in employee break rooms; and then lied about writing the statements.
  3. Hispanics United of Buffalo - The Board found that the employer violated the Act by firing five employees for making bullying and harassing Facebook comments in response to a co-worker’s criticism of their job performance.
  4. D.R. Horton - The Board held that the employer violated the Act by maintaining a mandatory arbitration policy that required all disputes be arbitrated on an individual basis, thereby precluding class or collective treatment of the arbitration.
  5. Alan Ritchey, Inc. - The Board concluded that an employer must bargain with a union before imposing discretionary discipline on an employee during the period after the union has become the bargaining representative but before the parties have agreed to a first contract.
  6. Banner HealthHere the Board found that the employer violated the Act by maintaining a policy that asked employees subject to an internal union investigation to refrain from discussing the matter during an ongoing investigation.
  7. Piedmont GardensThe Board overruled longstanding precedent exempting witness statements gathered during an employer’s internal investigation from disclosure to a union.
  8. WKYC-TV - The Board overruled a fifty-year precedent and concluded that an employer is obligated to continue deducting union dues after expiration of a collective bargaining agreement that includes a dues check-off clause.
  9. Micro-union decisions - The Board has announced that it will approve a bargaining unit proposed by a union if the group is readily identifiable as a unit and shares a community of interests. This new standard would permit a union to organize a single department even if a majority of the employees at that location voted against a union.

Many of these cases reflect the Board’s continuing efforts to stretch its reach to non-union workplaces. While the decisions are invalid for now, the current Board will likely readopt them. So the safest practice may be to follow them for the time being. One notable exception is D.R. Horton, which has been rejected by federal and state courts (including the recent Iskanian decision in California). Even a reconstituted Board will have difficulty resuscitating that one.

Thanks to Chip Zuver for helping to pull this post together.


California Supreme Court Approves Class Action Waivers in Arbitration Agreements

Posted in Class Actions, Employment Litigation, Wage and Hour

Here’s yet another post from Dave Faustman. This time he discusses today’s decision in Iskanian v. CLS Transportation, in which Fox Rothschild LLP represented the employer.


Today, the California Supreme Court issued its long-awaited decision in Iskanian v. CLS on whether employees signing arbitration agreements can be required to waive participation in class actions.

The California Supreme Court acquiesced in recent U.S. Supreme Court precedents and declared that its prior decisions refusing to enforce class action waivers were no longer operative law. The Court found that the Federal Arbitration Act (“FAA”) preempts the subject matter, and that federal law requires the enforcement of class action waivers. Thus, Mr. Iskanian must bring his case in arbitration, and only on behalf of himself. This is a clear win for the employer. The Court also held that the National Labor Relations Act’s protection of “concerted activity” does not prohibit class action waivers. Another good result.

In a curious twist, however, the Supreme Court refused to dismiss the companion “representative action” under the California Private Attorney General Act (“PAGA”), holding that asking an employee to waive the right to participate in such a case was against California “public policy.” The employer had argued that there was no principled difference between a class action and a PAGA representative action, and that both should be subject to federal preemption.

Justice Liu, writing for the majority, disagreed: “We conclude that the rule against PAGA waivers does not frustrate the FAA’s objective 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 Labor Workplace Development Agency.” Such reasoning may be vulnerable on appeal to the U.S. Supreme Court. In the meantime, what the PAGA action will look like upon remand remains quite a procedural muddle, which the California Court did not really try to resolve. It will take a little while to sort this out, but for now employers should continue to seek waivers of class and representative actions in their arbitration agreements.


Congratulations to Dave, Yesenia Gallegos, Cristina Armstrong, Namal Tantula, Chip Zuver, Lorraine Harris, and everyone else who contributed to this result. Here’s a copy of the Iskanian opinion.

California Supreme Court To Decide on “Suitable Seats” In The Workplace

Posted in Class Actions, Wage and Hour

Here’s another post from Dave Faustman who, along with Cristina Armstrong, is doing an amicus brief in this matter on behalf of the Retail Industry Leaders Association.

As we’ve been reporting for years, an obscure provision in the Wage Orders of the Industrial Welfare Commission has spawned a rash of lawsuits against California companies, primarily banks and large retailers, to force the employers to provide seats for employees. Section 14(A) of the Wage Orders states:

All working employees shall be provided with suitable seats when the nature of the work reasonably permits the use of seats.

This provision’s predecessor was enacted in 1919, and was originally intended to protect women and children in the garment industry. The language was later changed to apply to all employees, but it was assumed for decades that it didn’t apply to retail employees who interact with the public at the sales counter or on the floor.

That is, until now. Recently, a group of plaintiffs’ lawyers, and their cheerleaders in the unions, have been using the Private Attorney General Act (“PAGA”) as the vehicle to sue employers for millions of dollars in penalties and attorneys’ fees for failure to provide seats. The lower courts have been grappling with these cases, trying to decide the meaning of the words “nature of the work”, “reasonably permits” and “suitable seats”. The California Supreme Court has agreed to step into the fray in a consolidated case involving the drug chain CVS and the retail bank JP Morgan Chase (Case No. S215614).

The primary issue for the High Court to decide is whether Section 14(A) should be decided using a “holistic” approach that considers all of the circumstances of the job and the workplace, as well as the employer’s business judgment as to whether employees should be required to stand when working. The employers urge this approach. The plaintiffs, on the other hand, argue that the “nature of the work” really means specific tasks during the work shift that may be performed while seated, such that employees should be allowed to sit during certain times. The companies counter that employers should be allowed to require employees to be “on their toes” and ready to provide good customer service at all times.

The plaintiffs also argue that sitting is important for the “health and safety” of employees. The employers respond that the supposed health benefits of sitting are questionable, that forcing chairs into the work space may create a safety problem, and that in any event, with mandatory meal and rest breaks in California, the most an employee is required to stand at one time is only two hours.

Finally, the plaintiffs argue that employers should be required to redesign and rebuild workstations to allow for the addition of seats. The companies argue that courts are ill-equipped to impose such a requirement, and to do so would be an abuse of PAGA. Obviously, the Court’s decision could have far ranging effects on the cost and practicality of doing business in California. The parties’ briefs have been filed, and friend-of-the-court briefs will be filed within the next few weeks. A hearing and decision in the case will likely happen within the next few months.

Get Ready for Paid Sick Leave in California

Posted in Employment Litigation, Wage and Hour

On June 12, 2014, the state Senate Labor and Industrial Relations Committee voted in favor of Assembly Bill 1522 (pdf) which will require California employers, large and small, to provide paid sick leave. The bill is called the “Healthy Workplace, Healthy Families Act” (“HWHFA”?).

Under the proposed legislation, any employee who works at least seven days in a calendar year is entitled to sick leave at the rate of one hour for every 30 hours worked. (San Francisco employers have been living with a similar municipal scheme for a few years.) The employee is entitled to use the paid sick time after 90 days of employment for diagnosis or treatment of a health condition of the employee or a family member. The paid time off can also be used for leave related to domestic violence or sexual assault. The bill contains provisions for statutory penalties and litigation for alleged employer violations.

This increased cost of paid sick leave is proposed at a time when California employers are already bracing for a $1.00 increase in the minimum wage starting in July. The bill has been opposed by major employer groups such as the California Retailers Association and the California Restaurant Association. It has been labeled a “job killer’ by the California Chamber of Commerce.

AB-1522 has already passed the Assembly, and, after review by the Senate Judiciary Committee, is expected to easily pass the full Senate. Governor Brown might issue a surprise veto, but he is generally expected to sign the bill in a nod to his Labor base. The law would go into effect next year.

Thanks to Dave Faustman for this post.

To Do List for Minimum Wage Increase on July 1st

Posted in Wage and Hour

Here is a practical list of the less than obvious things you need to do to make sure your California business is ready for the July 1st minimum wage increase to $9 per hour:

  • Make sure your payroll company is implementing the increase in all categories: base rate, overtime rate, meal premium, and split shift premium.
  • Confirm all exempt salaried employees earn at least $37,440 per year (twice the increased minimum wage).
  • Confirm anyone classified as exempt under the inside salesperson exemption (applicable only to Wage Orders 4 and 7), earns at least $13.51 for all hours worked (1.5x the increased minimum wage), and that more than half of the compensation represents commissions.
  • If you are changing any aspect of a commission plan to offset the minimum wage increase, make sure to put any such changes in writing with a sign off.
  • Consider providing a new Pay Notice. While not required if the rate increase shows on the next paystub, if all of your non-exempt employees don’t already have a signed Pay Notice on file, this is a good excuse to give them one.



In Praise of England’s 1842 Mines Act

Posted in Uncategorized

I spend a lot of time on this blog railing against heavy-handed government enforcement and laws intended to benefit employees that actually drive jobs away. So I want to go on record as a supporter of the 1842 Mines Act. Among other things, this law prohibited boys and girls under age 10 from working in iron and coal mines in England. Call me a bleeding heart, but I think that was a good idea.

There, I said it and am prepared to accept the consequences.


Don’t Lick Your Lips at Me. That’s Harassment!

Posted in Discrimination, Employment Litigation, Harassment

One of my favorite parts of giving harassment training is explaining the types of behaviors that can create a hostile work environment. If you haven’t already, be sure to add lip licking to the list. (And, to be clear, we’re talking about an alleged harasser licking his own lips.)

A recent case out of Connecticut, Lewis v. City of Norwalk, 122 FEP Cases 703 (2d Cir. 2014), reminds us that a plaintiff can base a sexually hostile work environment claim on lip licking. There, the plaintiff complained of lick lipping and leering. The court concluded, however, that the licking and leering weren’t sufficiently severe to create a hostile work environment.

What can employers do to protect themselves? Provide free lip moisturizer?

As long as employees interact, there’s the potential for one to take offense – sometimes justifiably. And once a claim gets made, in a very real sense, the employer has already lost. Even a victory in court can be an expensive and disruptive proposition.

Still, employers can take steps to demonstrate that they oppose harassment. These can include:

If you’re an employer, you want every employee to know where to find the company’s policy against harassment and whom to complain to if there’s an issue. You also want them to know that, if they bring an issue forward, they’ll be treated fairly.

Inevitably, harassment litigation focuses more on what the company did (or didn’t do) than what the alleged harasser did. So take steps now to show that your company actively opposes this behavior.

Close-up of a Crossbreed, 5 months old, licking lips against white background