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PAGA Lawsuits Not Subject to Arbitration

PAGA Lawsuits

The Labor Code Private Attorneys General Act (PAGA) authorizes aggrieved employees to file PAGA lawsuits to recover civil penalties on behalf of themselves, other employees, and the State of California for Labor Code violations. Employees pursuing PAGA claims must follow specified requirements. Labor Code Sections 2698 – 2699.5.

Courts enforce employer-mandated arbitration agreements more often than before. Attorneys representing employees generally view arbitration as a less-favorable place for resolving disputes. They usually prefer to be in court. A recent California Court of Appeals decision held that a PAGA lawsuit is not subject to arbitration. The court opened with:

Bernadette Tanguilig, an employee at Bloomingdale’s, Inc. (Bloomingdale’s), filed a representative action on behalf of herself and fellow employees pursuant to the Labor Code Private Attorneys General Act of 2004 (PAGA) (Lab. Code, § 2698 et seq.), alleging several Labor Code violations by the company. Bloomingdale’s moved to compel arbitration of Tanguilig’s “individual PAGA claim” and stay or dismiss the remainder of the complaint. The trial court denied the motion. We affirm. Under Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348 (Iskanian) and consistent with the Federal Arbitration Act (FAA) (9 U.S.C. et seq.), a PAGA representative claim is nonwaivable by a plaintiff-employee via a predispute arbitration agreement with an employer, and a PAGA claim (whether individual or representative) cannot be ordered to arbitration without the state’s consent.

Iskanian and PAGA Lawsuits

Bloomingdale’s argued Iskanian was wrong under more recent U.S. Supreme Court decisions. On appeal, the company dropped it’s argument that it was distinguishable from Iskanian because the employee had the ability to opt out of the arbitration process. The court disagreed.

[W]e are bound by the Iskanian court’s interpretation of the pre-Iskanian United States Supreme Court decisions cited by Bloomingdale’s. Finally, we note that the Ninth Circuit has ruled that Iskanian correctly decided the federal question, thus superseding conflicting prior federal district court decisions cited by Bloomingdale’s. (See Sakkab v. Luxottica Retail North America, Inc., supra, 803 F.3d at p. 427.)

An essential point in Iskanian and Tanguilig is that PAGA lawsuits are not a dispute between an employer and an employee arising out of their contractual relationship. “It is a dispute between an employer and the state.” The employee is merely acting as a “deputized” agent of the state. Since the state did not sign an arbitration agreement with the employer, the company cannot force the state’s agent–e.g., the employee–into arbitration.

I can think of a couple of different unintended consequences of this analysis. For now, however, I’m keeping those close to my chest as I have a couple of ongoing cases where I may need to use the arguments. No sense giving away all my trade secrets.

Employers wishing to use arbitration agreements should review the agreements with counsel. Not all arbitration agreements are alike, and employees may be able to void an arbitration agreement as unconscionable. I anticipate seeing many more arbitration cases in the upcoming years. If you have an arbitration agreement you would like reviewed, or if you are considering using an arbitration agreement, feel free to contact the Nuddleman Law Firm, P.C.

Original article by Robert E. Nuddleman of Nuddleman Law Firm, P.C.

Feel free to suggest topics for the blog. We are happy to consider topics pertaining to general points of Labor and Employment Law. We cannot answer questions about specific situations or provide legal advice over the Internet. If you desire legal advice, you should contact an attorney.

Your use of this blog does not create an attorney-client relationship between you and Nuddleman Law Firm, P.C. The use of the Internet or this blog for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Do not post confidential or time-sensitive information in this blog. The Nuddleman Law Firm, P.C. cannot guarantee the confidentiality of anything posted to this blog.

The Nuddleman Law Firm, P.C. represents employees and businesses throughout Silicon Valley and the greater San Francisco Bay Area including Pleasanton, Oakland, San Ramon, Hayward, Palo Alto, Menlo Park, Mountain View, Los Altos, San Jose, the South Bay Area, Campbell, Los Gatos, Cupertino, Morgan Hill, Gilroy, Sunnyvale, Santa Cruz, Saratoga, and Alameda, San Mateo, Santa Clara, San Benito, Mendocino, and Calaveras counties.

 

California Employers Cannot Designate Choice of Law or Venue

What is a Choice of Law or Venue Provision?

Many contracts, including employment contracts, contain choice of law and/or a venue provisions. A choice of law provision directs a court which state’s laws apply. A venue provision dictates where to try the case. For example, even though you work in California, your employment contract could follow Massachusetts law. The contract could also require litigation in Texas. Courts generally enforce choice of law and venue provisions unless it violates a fundamental public policy.

Why Employers Like Choice of Law and Venue Provisions

Employers like choice of law and venue provisions for two main reasons:

  1. They allow the employer reasonable certainly of consistency regarding which laws, and how those laws, will be applied.
  2. They allow the employer to move a case to a more favorable forum.

For employees, a choice of law provision deprives the employee access to California’s more beneficial laws.

On September 25, 2016, Governor Brown signed sB 1241 prohibiting employers from forcing employees to sign choice of law or venue provisions requiring litigation outside California.  Effective January 1, 2017, SB 1241 adds Labor Code section 925, which states:

(a) An employer shall not require an employee who primarily resides and works in California, as a condition of employment, to agree to a provision that would do either of the following:

(1) Require the employee to adjudicate outside of California a claim arising in California.

(2) Deprive the employee of the substantive protection of California law with respect to a controversy arising in California.

(b) Any provision of a contract that violates subdivision (a) is voidable by the employee, and if a provision is rendered void at the request of the employee, the matter shall be adjudicated in California and California law shall govern the dispute.

(c) In addition to injunctive relief and any other remedies available, a court may award an employee who is enforcing his or her rights under this section reasonable attorney’s fees.

(d) For purposes of this section, adjudication includes litigation and arbitration.

(e) This section shall not apply to a contract with an employee who is in fact individually represented by legal counsel in negotiating the terms of an agreement to designate either the venue or forum in which a controversy arising from the employment contract may be adjudicated or the choice of law to be applied.

(f) This section shall apply to a contract entered into, modified, or extended on or after January 1, 2017.

Effect of Prohibition again Non-California Choice of Law and Venue Clauses

There are two significant areas where I have seen choice of law provisions make a big difference in litigation: Non-competition/non-solicitation clauses and arbitration clauses.  California is one of the toughest states when it comes to non-compete clauses. Most other states allow an employer to prevent an employee from working with a competitor. In California, such agreements are usually void. As a result, companies oftentimes require litigation in more favorable states. In some cases, my clients were prevented from working for employers because the non-competition clauses were upheld in other states. New Labor Code 925 prevents that from happening.

I wrote several arguments about the enforceability of arbitration clauses in California. Although California courts seem to be currently favoring arbitration–or at least allowing it–there is still significant efforts to keep employment cases out of arbitration in California. Employers have an easier time enforcing arbitration agreements in other states. This new law will make it more difficult for companies to move employment cases into arbitration.

Choice of Law and Venue Choice OK If Employee Attorney Involved

The new Labor Code contains an exception for cases where the employee “is in fact individually represented by legal counsel in negotiating the terms of an agreement.” The statute doesn’t specify whether the attorney must actually negotiate the terms, or whether the employee needs to simply consult with an attorney regarding the negotiations. I expect that may come up in future cases. Don’t be surprised if this provision is challenged in court on other grounds. I also question whether courts in other states will even enforce the new Labor Code.

Original article by Robert E. Nuddleman of Nuddleman Law Firm, P.C.

Feel free to suggest topics for the blog. We are happy to consider topics pertaining to general points of Labor and Employment Law. We cannot answer questions about specific situations or provide legal advice over the Internet. If you desire legal advice, you should contact an attorney.

Your use of this blog does not create an attorney-client relationship between you and Nuddleman Law Firm, P.C. The use of the Internet or this blog for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Do not post confidential or time-sensitive information in this blog. The Nuddleman Law Firm, P.C. cannot guarantee the confidentiality of anything posted to this blog.

The Nuddleman Law Firm, P.C. represents employees and businesses throughout Silicon Valley and the greater San Francisco Bay Area including Pleasanton, Oakland, San Ramon, Hayward, Palo Alto, Menlo Park, Mountain View, Los Altos, San Jose, the South Bay Area, Campbell, Los Gatos, Cupertino, Morgan Hill, Gilroy, Sunnyvale, Santa Cruz, Saratoga, and Alameda, San Mateo, Santa Clara, San Benito, Mendocino, and Calaveras counties.

The Magnificent Seven Wage and Hour Rules

The Magnificent Seven

The Magnificent Seven is one of my all-time favorite movies. The story is timeless and has been adapted several times. Yes, I know the Magnificent Seven is an adaptation of Akira Kurosawa’s Seven Samurai. Even Pixar came out with it’s own version in A Bug’s Life. I never tire of the story-line and the actors in the original Magnificent Seven. I even bare a scar on my forehead from when my brother tired to imitate James Coburn’s knife throwing skills. Thankfully the butt-end of the screwdriver hit me instead of the other end. Thanks, David!

When I saw the remake coming out with some of my current favorite actors, it definitely made my “must-see” list. It also got me thinking: what other Magnificent Sevens are worth considering?

The Magnificent Seven Wage and Hour Rules

Those familiar with my law practice know that I represent a lot of employers and employees regarding wage and hour disputes. I also frequently present seminars to attorneys, HR staff and payroll specialists regarding how to pay employees correctly. Therefore, I thought it would be fun to provide my Magnificent Seven Wage and Hour Rules.

In no particular order, here is my list of seven wage and hour rules to follow if you want to avoid problems in the workplace:

  1. Only pay a salary to employees if they are truly exempt from overtime.
  2. Keep accurate records of the hours worked for at least 4 years.
  3. Have policies in place providing for regular rest and meal breaks, and have employees clock out for unpaid meal breaks.
  4. Just because you think someone is an independent contractor, doesn’t mean the government or the courts will agree.
  5. Know if local ordinances require different rules for employees working in different cities and counties.
  6. Commission and bonus agreements should be in writing and identify when a commission or bonus is earned.
  7. Tips belong to the employees, not to the employer!

Employing workers in California can be difficult. Most employers make mistakes out of good intentions rather than evil objectives. Regardless of the intent, however, employers are responsible for following state and federal wage and hour laws. Hopefully this short list will help employers and employees avoid the most common wage and hour problems.

Now, go buy your ticket for the new Magnificent Seven. I don’t know if Denzel Washington, Chris Pratt and Ethan Hawke can match Yul Brynner, Steve McQueen and James Coburn, but I’m sure it will be a good time.

Original article by Robert E. Nuddleman of Nuddleman Law Firm, P.C.

Feel free to suggest topics for the blog. We are happy to consider topics pertaining to general points of Labor and Employment Law. We cannot answer questions about specific situations or provide legal advice over the Internet. If you desire legal advice, you should contact an attorney.

Your use of this blog does not create an attorney-client relationship between you and Nuddleman Law Firm, P.C. The use of the Internet or this blog for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Do not post confidential or time-sensitive information in this blog. The Nuddleman Law Firm, P.C. cannot guarantee the confidentiality of anything posted to this blog.

The Nuddleman Law Firm, P.C. represents employees and businesses throughout Silicon Valley and the greater San Francisco Bay Area including Pleasanton, Oakland, San Ramon, Hayward, Palo Alto, Menlo Park, Mountain View, Los Altos, San Jose, the South Bay Area, Campbell, Los Gatos, Cupertino, Morgan Hill, Gilroy, Sunnyvale, Santa Cruz, Saratoga, and Alameda, San Mateo, Santa Clara, San Benito, Mendocino, and Calaveras counties.

Workplace Rules that Violate the NLRA: Conduct Toward Management

Last week I wrote about workplace confidentiality rules that the NLRB’s General Counsel says violate the NLRA (National Labor Relations Act).  This week, we are looking at the same report and what it has to say about workplace rules regarding conduct toward management.

Employees have Section 7 right to criticize or protest their employer’s labor policies or treatment of employees.  According to the General Counsel,” rules that can reasonably be read to prohibit protected concerted criticism of the employer will be found unlawfully overbroad.”  The GC goes on to say:

a rule that prohibits employees from engaging in. “disrespectful,” “negative,” “inappropriate,” or “rude” conduct towards the employer or management, absent sufficient clarification or context, will usually be found unlawful.

Citing Casino San Pablo, 361 NLRB No. 148, slip op. at 3 (Dec. 16, 2014).

As with the confidentiality rules, the General gives several examples of rules regarding conduct toward management that he believes violate the NLRA and examples of rules that do not violate the NLRA.

Rules that Violate the NLRA

  • “Be respectful to the company, other employees, customers, partners, and competitors.”
  • Do “not make fun of, denigrate, or defame your co-workers, customers, franchisees, suppliers, the Company, or our competitors.”
  • “Be respectful of others and the Company.”
  • No “[d]efamatory, libelous, slanderous or discriminatory comments about [the Company], its customers and/or competitors, its employees or management.
  • “Disrespectful conduct or insubordination, including, but not limited to, refusing to follow orders from a supervisor or a designated representative.”
  • “Chronic resistance to proper work-related orders or discipline, even though not “Refrain from any action that would harm persons or property or cause damage to the Company’s business or reputation.”
  • overt insubordination” will result in discipline.
  • “[I]t is important that employees practice caution and discretion when posting content [on social media] that could affect [the Employer’s] business operation or reputation.”
  • Do not make “[s]tatements “that damage the company or the company’s reputation or that disrupt or damage the company’s business relationships.”
  • “Never engage in behavior that would undermine the reputation of [the Employer], your peers or yourself.”

Rules that Do Not Violate the NLRA:

  • No “rudeness or unprofessional behavior toward a customer, or anyone in contact with” the company.
  • “Employees will not be discourteous or disrespectful to a customer or any member of the public while in the course and scope of [company] business.”
  • “Each employee is expected to work in a cooperative manner with management/supervision, coworkers, customers and vendors.”
  • “Each employee is expected to abide by Company policies and to cooperate fully in any investigation that the Company may undertake.”
  • “Being insubordinate, threatening, intimidating, disrespectful or assaulting a manager/supervisor, coworker, customer or vendor will result in” discipline.

Confused yet?  Does it seem that some of the lawful rules are extremely close to the unlawful rules? You’re not alone.  It’s difficult to tell the difference in many examples.

When drafting workplace conduct policies, employers should be mindful that employees have the right to complain about their workplace and share their experiences and opinions regarding management and the company.  Limiting an employee’s right to complain about management will likely violate the NLRA.  Employers have to consider the impact of workplace rules on employee rights and find an appropriate balance.

Original article by Robert E. Nuddleman of Nuddleman Law Firm, P.C.

Feel free to suggest topics for the blog. We are happy to consider topics pertaining to general points of Labor and Employment Law, but we cannot answer questions about specific situations or provide legal advice. If you desire legal advice, you should contact an attorney.

Your use of this blog does not create an attorney-client relationship between you and Nuddleman Law Firm, P.C. The use of the Internet or this blog for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be posted in this blog and Nuddleman Law Firm, P.C. cannot guarantee the confidentiality of anything posted to this blog.

The Nuddleman Law Firm, P.C. represents employees and businesses throughout Silicon Valley and the greater San Francisco Bay Area including Pleasanton, Oakland, San Ramon, Hayward, Palo Alto, Menlo Park, Mountain View, Los Altos, San Jose, the South Bay Area, Campbell, Los Gatos, Cupertino, Morgan Hill, Gilroy, Sunnyvale, Santa Cruz, Saratoga, and Alameda, San Mateo, Santa Clara, San Benito, Mendocino, and Calaveras counties.

 

Employer Cannot Fire Employees for Reporting Theft at Work

Rosa Lee Cardenas worked for M. Fanaian, D.D.S., Inc. as a dental hygienist.  When Ms. Cardenas could not locate her wedding ring—she typically took it off while performing her job duties—she called the local police and reported that a coworker may have stolen her ring.  After the police came to the workplace on two separate occasions, the employer pulled Ms. Cardenas aside and told her that “the situation was causing great tension and discomfort among the staff, and that he was going to have to let her go.” Cardenas filed a lawsuit alleging she was fired for reporting theft of her wedding ring. A jury agreed and awarded her $117,768 in damages. The lesson: Don’t fire employees for reporting theft at work.

Don’t Fire Employees for Reporting Theft

Fanaian appealed claiming the real reason Cardenas filed a police report was to serve her private interest, not a public purpose, and a termination in violation of public policy does not exist when the employee reports a purely personal issue (e.g., not something related to the employment).  Cardenas claimed that Labor Code section 1102.5 stands alone, and does not require a separate showing that the employee’s subjective motivation and/or the particular crime he or she reported concerned a fundamental public policy.  Cardenas pointed out that section 1102.5 embodies a sufficient public policy for purposes of permitting an award of damages.

The court of appeals agreed, and affirmed the judgment. “[T]he plain and unambiguous language of section 1102.5(b) creates a cause of action for damages against an employer who retaliates against an employee for reporting to law enforcement a theft of her property at the workplace.”

Anytime an employee reports a suspected crime to the police, he or she is possibly engaging in protected activity.  Employers should be mindful that Labor Code section 1102.5 is very broad, and terminating an employee because the employee complained or made know his or her intention to complain to a government agency is unlawful.  Fanaian learned the hard way not to fire employees for reporting theft of personal items at work.

Class Action Waiver Unenforceable

In Garrido v. Air Liquide Industrial U.S. LP (CA2/2  B254490 on rehearing 10/26/15) the court held the employer’s class action waiver unenforceable for non-FAA arbitration.

Mario Garrido signed a written employment agreement with his employer, American Air Liquide, Inc. (Air Liquide).  The agreement required all disputes arising out of Garrido’s employment with Air Liquide to be resolved by arbitration, and the agreement prohibited class arbitration.

After being terminated, Garrido filed a class action complaint against Air Liquide, alleging various Labor Code violations and unfair business practices.  The trial court denied a motion to compel arbitration brought by Air Liquide, finding that the agreement’s class waiver provision was improper under the test laid out in Gentry v. Superior Court (2007) 42 Cal.4th 443 (Gentry).  Following the trial court’s ruling, our Supreme Court held, in Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 364 (Iskanian), that Gentry’s rule against employment class waivers was preempted by the Federal Arbitration Act (9 U.S.C. § 1 et seq.) (FAA).

Class Action Waiver Unenforceable

The court determined that if the case were governed by the FAA, arbitration (on an individual basis) would likely be required. Because Garrido’s lawsuit was not subject to the FAA, and Gentry’s holding has not been overturned under California law in situations where the FAA does not apply, the court found that the agreement’s class waiver unenforceable.  Neither party claimed that class arbitration was appropriate.

Original article by Robert E. Nuddleman of Nuddleman Law Firm, P.C.

Feel free to suggest topics for the blog. We are happy to consider topics pertaining to general points of Labor and Employment Law, but we cannot answer questions about specific situations or provide legal advice. If you desire legal advice, you should contact an attorney.

Your use of this blog does not create an attorney-client relationship between you and Nuddleman Law Firm, P.C. The use of the Internet or this blog for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be posted in this blog and Nuddleman Law Firm, P.C. cannot guarantee the confidentiality of anything posted to this blog.

The Nuddleman Law Firm, P.C. represents employees and businesses throughout Silicon Valley and the greater San Francisco Bay Area including Pleasanton, Oakland, Berkeley, San Ramon, Concord, Hayward, Palo Alto, Menlo Park, Mountain View, Los Altos, San Jose, the South Bay Area, Campbell, Los Gatos, Cupertino, Morgan Hill, Gilroy, Sunnyvale, Santa Cruz, Saratoga, and Alameda, San Mateo, Santa Clara, San Benito, Mendocino, and Calaveras counties.

New Law Promises More Liability for Employee Wages

California has been a pioneer in terms of enforcing the state’s wage and hour laws.  No sooner is a problem identified than a new law is passed to resolve the problem. This year, the governor signed SB 588 to help ensure employers pay employees the wages they are owed.  It creates powerful enforcement mechanisms for the Labor Commissioner, but it also expands who can be sued when an employee thinks s/he is owed wages.

New Law Promises More Liability for Employee Wages

The new law promises more liability for employee wages by making employers, directors, officers and managing agents responsible for unpaid wage claims.

SB 588 creates Labor Code section 588.1, which provides:

Any employer or other person acting on behalf of an employer, who violates, or causes to be violated, any provision regulating minimum wages or hours and days of work in any order of the Industrial Welfare Commission, or violates, or causes to be violated, Sections 203, 226, 226.7, 1193.6, 1194, or 2802, may be held liable as the employer for such violation.

In other words, directors, officers and managing agents of the employer can be personally liable for the failure to pay wages owed.  This new law may apply to any persons that have control over an employee’s wages, and will make it easier for employees to sue a variety of people to recover allegedly unpaid wages.  The move is seen as a strong tool in the effort to ensure employees are paid properly.  Unfortunately, in the wrong hands, it can also mean more individuals will be sued even when they were “just following orders.”

SB 588 also gives the Labor Commissioner the power to mail a notice of levy to anyone possessing any credits, money, or property belonging to the judgment debtor, or who owe any debt to the judgment debtor at the time they receive the notice of levy.  For example, if a customer owes the employer money, and the employer fails to pay the Labor Commissioner’s award, the customer could receive a notice of levy informing the customer to pay the Labor Commissioner instead of the employer.  If the customer fails or refuses to pay, the customer could be liable to the Labor Commissioner for the amount it should have turned over to the Labor Commissioner

If an employer fails to pay a Labor Commissioner judgment within 30 days, the employer can be prohibited from conducting business in California unless the employer obtains a bond equal to about 10 times the amount of the actual judgment. Failure to obtain a bond can result in a stop notice and, in the instance of a long-term care facility, result in denial of licensure.

SB 588 goes into effect on January 1st. The new law promises more liability for employee wages. In addition to reviewing your policies to ensure compliance with California law, employers should also consider Employer Practices Liability insurance and Directors and Officers Liability insurance to help defray the increasing costs of litigation.

Original article by Robert E. Nuddleman of Nuddleman Law Firm, P.C.

Feel free to suggest topics for the blog. We are happy to consider topics pertaining to general points of Labor and Employment Law, but we cannot answer questions about specific situations or provide legal advice. If you desire legal advice, you should contact an attorney.

Your use of this blog does not create an attorney-client relationship between you and Nuddleman Law Firm, P.C. The use of the Internet or this blog for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be posted in this blog and Nuddleman Law Firm, P.C. cannot guarantee the confidentiality of anything posted to this blog.

The Nuddleman Law Firm, P.C. represents employees and businesses throughout Silicon Valley and the greater San Francisco Bay Area including Pleasanton, Oakland, San Ramon, Hayward, Palo Alto, Menlo Park, Mountain View, Los Altos, San Jose, the South Bay Area, Campbell, Los Gatos, Cupertino, Morgan Hill, Gilroy, Sunnyvale, Santa Cruz, Saratoga, and Alameda, San Mateo, Santa Clara, San Benito, Mendocino, and Calaveras counties.

NLRB Expands Joint-Employer Status

Employers using third-party employers or placement agencies have a new case to worry about.  In a recent NLRB decision, the board expanded the test for joint-employer status, making it easier for employees and unions to allege multiple entities are actually joint employers under the National Labor Relations Act.

In Browning-Ferris Industries of California, Inc., (Case 32–RC–109684) the NLRB considered whether the Board should adhere to its current standard for assessing joint-employer status under the NLRA or whether that standard should be “revised to better effectuate the purposes of the Act, in the current economic landscape.” The issue in the case was whether BFI and Leadpoint were joint employers nunder the NLRA. The Regional Director issued a Decision and Direction of Election finding that Leadpoint was the sole employer. The Union filed a request for review and asked the Board to reconsider its standard for evaluating joint employer relationships.

The board held that while the current standard is ostensibly based on a Third Circuit Court of Appeals decision, (NLRB v. Browning-Ferris Industries of Pennsylvania, Inc., 691 F.2d 1117), recent board decisions have “since imposed additional requirements for finding joint-employer status, which have no clear basis in the Third Circuit’s decision, in the common law, or in the text or policies of the Act.”  According to the board:

these additional requirements—which serve to significantly and unjustifiably narrow the circumstances where a joint-employment relationship can be found—leave the Board’s joint-employment jurisprudence
increasingly out of step with changing economic circumstances, particularly the recent dramatic growth in contingent employment relationships.

Relationship Between BFI and Leadpoint

BFI owns and operates a recycling facility.  It employs about 60 people outside of the facility who move materials and prepare them to be sorted inside the facility.  Leadpoint provides BFI with employees who work inside the facility sorting the recycled material and cleaning the facility and the equipment.  BFI’s contract with Leadpoint specifies that Leadpoint is the sole employer.  The contract is terminable at-will upon 30 days notice.

The board examined several factors in its analysis, that it believed relevant to deciding whether BFI and Leadpoint were joint employers.

Management Structure

Each company employs their own supervisors and managers, with BFI managers supervising BFI employees, and Leadpoint managers supervising Leadpoint employees.  The companies have separate human resources departments, although only Leadpoint had an HR representative on site.

Hiring

Leadpoint was responsible for recruiting, interviewing, testing, selecting, and hiring personnel to perform work for BFI, but BFI retained the right to request that personnel supplied by Leadpoint “meet or exceed [BFI’s] own standard selection procedures and tests.”

Discipline and Termination

Although the Agreement provides that Leadpoint has sole responsibility to counsel, discipline, review, evaluate, and terminate personnel who are assigned to BFI, it also grants BFI the authority to “reject any Personnel, and . . . discontinue the use of any personnel for any or no reason.

Wages and Benefits

Although the Agreement provides that Leadpoint “solely determines the pay rates paid to its Personnel,” the Agreement includes a rate schedule that requires BFI to compensate Leadpoint for each worker’s wage plus a specified percentage mark-up.  Additionally, Leadpoint was not allowed, without BFI’s approval, to “pay a pay rate in excess of the pay rate for full-time employees of [BFI] who perform similar tasks.”

Scheduling and Hours

Although Leadpoint selects which employees will work each shift, Leadpoint cannot change the shifts set by BFI.  Leadpoint employees must obtain an authorized BFI representative’s signature on the employee time records.

Work Processes

When BFI’s managers identify job performance problems of Leadpoint employees, they communicate their concerns to a Leadpoint supervisor, who is expected to address those issues with the employees.

Training and Safety

Leadpoint provides orientation and job training to its employees, but BFI occasionally provides substantive training and counseling.

Other Terms

The Agreement also says Leadpoint employees are not to be assigned to work at a BFI facility for more than 6 months, but BFI never invoked that particular clause.

Following prior Board precedent, the Director determined BFI is not a joint-employer of the Leadpoint employees because it does not “share or codetermine [with Leadpoint] those matters governing the essential terms and conditions of employment” of the Leadpoint employees.

The Board analyzed the changes to the joint-employer analysis over the last 60+ years.  The Board believed that prior cases impermissibly narrowed the test for joint-employer status, and made it clear that “[i]n determining whether an employment relationship exists for purposes of the Act, the Board must follow the common-law agency test.”  As emphasized by the Supreme Court, a critical issue is “whether one statutory employer ‘possessed sufficient control over the work of the employees to qualify as a joint employer with’ another statutory employer.”

New Test for Joint-Employer Status

The board announced a new standard, that it believes is really a restatement of the original correct standard, for determining joint-employer status:

The Board may find that two or more entities are joint employers of a single work force if they are both employers within the meaning of the common law, and if they share or codetermine those matters governing the essential terms and conditions of employment. In evaluating the allocation and exercise of control in the workplace, we will consider the various ways in which joint employers may “share” control over terms and conditions of employment or “codetermine” them, as the Board and the courts have done in the past.

The new test eliminates the the previously-applied requirement of “actual and direct control over workers” to establish a joint-employment relationship. Browning-Ferris may appeal the decision to federal courts, so we don’t know if this decision will be the final word in this case.

Although this case arose from a union’s attempt to represent previously unrepresented employees, the decision is important for all employers.  State and federal agencies are cracking down on employee misclassifications.  California enacted legislation allowing workers to sue labor contractors and the end-clients without having to prove a joint-employer relationship.  Several class actions are pending throughout the nation alleging joint-employer relationships, even when the companies maintain entirely separate companies.  Employers have to be more cautious than ever when using third-party employers and placement agencies.

Original article by Robert E. Nuddleman of Nuddleman Law Firm, P.C.

Feel free to suggest topics for the blog. We are happy to consider topics pertaining to general points of Labor and Employment Law, but we cannot answer questions about specific situations or provide legal advice. If you desire legal advice, you should contact an attorney.

Your use of this blog does not create an attorney-client relationship between you and Nuddleman Law Firm, P.C. The use of the Internet or this blog for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be posted in this blog and Nuddleman Law Firm, P.C. cannot guarantee the confidentiality of anything posted to this blog.

The Nuddleman Law Firm, P.C. represents employees and businesses throughout Silicon Valley and the greater San Francisco Bay Area including Pleasanton, Oakland, San Ramon, Hayward, Palo Alto, Menlo Park, Mountain View, Los Altos, San Jose, the South Bay Area, Campbell, Los Gatos, Cupertino, Morgan Hill, Gilroy, Sunnyvale, Santa Cruz, Saratoga, and Alameda, San Mateo, Santa Clara, San Benito, Mendocino, and Calaveras counties.

When can an employer require an employee to pay for training?

Some employers require employees to have certain training before hiring the employee, advancing the employee to a higher position or even to maintain employment.  In some instances, the training is required by law (e.g., state-mandated continuing education).  In other instances, the training is required by the employer, but not required by any statute or regulation.

Can an employer require an employee to pay for training?

In a recent decision by the Fourth Appellate District, In Re Acknowledgment Cases, the court held that the City of Los Angeles could not require police officers to reimburse the employer for training unless the training was legally required.

The City, requires that all newly hired police officers attend and graduate from the Los Angeles Police Academy.  Tired of providing the training only to have the officers leave to work for another police department, the City enacted LA Administrative Code section 4.1700, which provides that any police officer hired by the LAPD that does not remain employed with the LAPD for 60 months and goes to work for another law enforcement agency is required to reimburse the City a prorated portion of the cost of training at the academy.  The training consisted of state-mandated training as well as unique training for the LAPD.

Each applicant signed an agreement stating that he or she would reimburse the city for the direct and indirect costs of training if he or she leaves the LAPD within five years after graduation and becomes employed by another law enforcement agency within one year after leaving the LAPD.

43 former officers of the LAPD sued the LAPD claiming the agreement violated Labor Code sections 2802 and 2804. Labor Code section 2802 requires employers to indemnify employees for all necessary expenditures or losses incurred by the employee in direct consequence of discharging his or her duties, or at the direction of the employer.  Labor Code section 2804 says that an employee’s rights under Labor Code section 2802 may not be waived.  The officers contended that since the city required the employees to take training above and beyond state-mandated training, the city was required to bear the expense of that training, and requiring the employees to reimburse the employer for the cost of the additional training violates the Labor Code.

The City argued that because the officers did not pay for the training themselves, the officers did not incur any out-of-pocket expense, and therefore Labor Code section 2802 did not apply.  The court pointed out that the City’s argument contradicted the fact that the City sued the officers to recover the training costs.

The City also argued that Labor Code section 2802 did not apply because state law required training under the Peace Officer Standards and Training (POST) legislation.  The City ran into problems, however, because the LAPD required training above and beyond the state-mandated training.

In analyzing the issue, the court relied, in part, on a 1994 opinion letter from the Department of Labor Standards Enforcement, which says:

There is generally no requirement that an employer pay for training leading to licensure or the cost of licensure for an employee. While the license may be a requirement of the employment, it is not the type of cost encompassed by Labor Code [section] 2802. The most important aspect of licensure is that it is required by the state or locality as a result of public policy. It is the employee who must be licensed and unless there is a specific statute which requires the employer to assume part of the cost, the cost of licensing must be borne by the employee.

There may be situations, however, where licensure is not actually required by statute or ordinance but the employer requires either the training or the licensing (or both) simply as a requirement of employment. In that case, the provisions of Labor Code [section] 2802 would require the employer to reimburse the cost. (DLSE Op. Ltr. (Nov. 17, 1994) at p. 1, fn. omitted.)

The court also differentiated itself from a 2008 case, City of Oakland v. Hassey (2008) 163 Cal.App.4th 1477, because the employees in Hassey did not claim Labor Code 2802 as a defense—so the previous court never analyzed the issue—and the City of Oakland did not require its officers attend the additional training.

The court announced the following rule: where an individual must, as a matter of law, have a license to carry out the duties of his or her employment, the employee must bear the cost of obtaining the license. It is also consistent with this purpose to require an employer to bear the cost of training which is not required to obtain the license but is intended solely to enable the employee to discharge his or her duties.

To put it another way: If the law requires the training, an employer can require an employee to pay for training.  If the employer requires the training, the employer is responsible for the costs.

The court held that section 4.1700 and the agreements were void to the extent they required officers to reimburse training other than statutorily mandated basic “POST” training.  The court concluded that basic POST training is not employer-mandated training and is not an expense of discharging the duties of employment. Therefore, the individual officers could be forced to pay for the state-mandated POST training.  To the extent a City required training beyond the legally-required training, such “department required” training is for the benefit of the employer” and an employer cannot require an employee to bear that cost.

I have handled several cases against an employer that uses a very similar scheme in order to keep employees from leaving their employment within one year of being hired.  Although I made the Labor Code section 2802 argument, there were no reported cases directly on point, and the cases all resolved before trial.  With this new case, that particular employer’s policies are clearly void, and could subject the company to significant liability.  Employers should carefully review their expense reimbursement and training reimbursement policies to ensure they do not violate Labor Code section 2802 and 2804.

Original article by Robert E. Nuddleman of Nuddleman Law Firm, P.C.

Feel free to suggest topics for the blog. We are happy to consider topics pertaining to general points of Labor and Employment Law, but we cannot answer questions about specific situations or provide legal advice. If you desire legal advice, you should contact an attorney.

Your use of this blog does not create an attorney-client relationship between you and Nuddleman Law Firm, P.C. The use of the Internet or this blog for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be posted in this blog and Nuddleman Law Firm, P.C. cannot guarantee the confidentiality of anything posted to this blog.

The Nuddleman Law Firm, P.C. represents employees and businesses throughout Silicon Valley and the greater San Francisco Bay Area including Pleasanton, Oakland, San Ramon, Hayward, Palo Alto, Menlo Park, Mountain View, Los Altos, San Jose, the South Bay Area, Campbell, Los Gatos, Cupertino, Morgan Hill, Gilroy, Sunnyvale, Santa Cruz, Saratoga, and Alameda, San Mateo, Santa Clara, San Benito, Mendocino, and Calaveras counties.

 

 

New Paid Sick Leave Law Causes Anxiety for Employers

California workers are often faced with a difficult decision: I don’t feel well and I don’t want to go to work where I will get other people sick, but I can’t afford to miss any work. In order to remedy this malady, the California legislature passed AB 1522 creating the Healthy Workplaces, Healthy Families Act of 2014, which requires all employers to provide at least 24 hours of annual paid sick leave to all employees. Unfortunately, the new law was poorly drafted, causing confusion. The Labor Commissioner set up a FAQ page that helped a little, but still didn’t answer important questions.

Just about every employer client I have called me in the weeks leading up July 1st with questions about what they needed to do to comply with the law, and the answers were not always simple. Then, 13 days after employers were required to begin providing paid sick leave, governor Brown signed AB 304 modifying the statute. Although I suspect the purpose of the amendment was to clarify the law, California’s Healthy Workplaces, Healthy Families Act of 2014 leaves the most ardent HR professionals lightheaded.

HEADACHES

For employers that did not previously offer any type of paid time off, the new law seems fairly simple: Employers must provide at least 24 hours of paid sick leave every year. Simple, right? But what about employees working in San Francisco, Oakland, Emeryville, San Diego or any other city that has passed its own local ordinances requiring a hiring amount of paid sick leave?

If a company has employees working in different cities, even if the employees perform as little as two hours per week in one of the cities that has passed its own paid sick leave ordinance, the employer has to either adopt the highest city requirement and apply that across the board, or have different policies for different employees depending on how much time they spend in each different city. Now an employer has different accrual rates and leave caps for different employees. No chance an employer will make a mistake, right?

HOURLY EMPLOYEES

At what rate must employer’s pay out the paid sick leave? For hourly employees, you would assume the hourly rate is the employee’s regular rate of pay. In fact, the original statute defined “Paid sick days” as “time that is compensated at the same wage as the employee normally earns during regular work hours.” Section 246(k) also says, “[t]he rate of pay shall be the employee’s hourly wage.” Simple, right? It was until the legislature amended subsection k.

Now, the employer has three different methods to choose from:

(k) For the purposes of this section, an employer shall calculate paid sick leave using any of the following calculations:
(1) Paid sick time for nonexempt employees shall be calculated in the same manner as the regular rate of pay for the workweek in which the employee uses paid sick time, whether or not the employee actually works overtime in that workweek.
(2) Paid sick time for nonexempt employees shall be calculated by dividing the employee’s total wages, not including overtime premium pay, by the employee’s total hours worked in the full pay periods of the prior 90 days of employment.
(3) Paid sick time for exempt employees shall be calculated in the same manner as the employer calculates wages for other forms of paid leave time.

You’ll notice that there are two different calculations an employer can choose from for nonexempt employees:

  1. the employee’s regular rate of pay; OR
  2. divide the employee’s total wages, not including overtime premium pay, by the employee’s total hours worked in the previous 90 days.

What does that second option mean? It’s a bit confusing, so let’s use an example. Alice’s regular rate of pay is $12.00 per hour, and she typically works 50 hours per week—40 regular hours and 50 overtime hours. Her regular weekly paycheck is $660.00 [($12 x 40) + ($18 x 10) = $660].

Under the amended statute, the employer is only supposed to include “full pay periods of the prior 90 days of employment.” Let’s assume Alice is paid every week. That would mean that, at most, there are 12 full pay periods in the 90 days prior to the intended sick leave. So, Alice earned $7,920 in those 12 full pay periods ($660 x 12 = $7,920).

The statute then directs us to divide the employee’s total wages “not including overtime premium pay” by the total hours worked. Alice worked 600 hours in the 12 pay periods (50 per week x 12 weeks = 600). When you divide her total wages not including overtime ($5,760) by her total hours worked (600) her paid sick leave rate would be $9.60—$2.40 less than her regular hourly rate. So, if an employee regularly works overtime, the employer can actually pay less than the employee’s regular hourly rate if the employer chooses to use the (k)(2) method of calculating the paid sick leave rate of pay. Maybe the lower rate under (k)(2) rewards employers that are willing to “do the math,” but I don’t see many employers using this alternative calculation.

I’d give an example of what happens when you pay different rates for shift differentials, but it looks like my calculator has a headache.

COMMISSIONS, SALARIES AND PIECE RATES

But what about employees paid commissions, salaries or on a piece rate basis? Well, for salaried employees, the regular rate of pay is presumably the weekly salary divided by 40, as dictated by Labor Code section 515(d)(2). Employees receiving commissions or paid on a piece rate basis are more complicated. Get out your calculators.

There are typically two types of commissioned employees: inside sales and outside sales. While outside salespeople are exempt from overtime laws, inside sales people are only exempt if they are covered by either wage order 4 or wage order 7, more than 50% of their wages are paid in the form of commissions, AND the employee earns at least 1.5 times the current minimum wage. Although the Paid Sick Leave law has rules for employees exempt from overtime under the administrative, professional and executive exemption, it does not have rules for other exempt employees (some inside sales, outside sales, sheepherders, irrigators, etc.).

The Labor Commissioner says “If an employee is paid commission or piece rate, then divide total compensation for previous 90 calendar days by number of hours worked and pay this rate.” But, do you use the compensation earned or the compensation paid? Commissions are oftentimes earned before they are paid. Hopefully the employer’s commission agreements clearly identify when the commission is earned versus when it is paid, but neither the Labor Commissioner nor the statute answer this question.

For piece rate employees it is a little bit easier, divide the total amount earned in the previous 90 days by the total hours worked. If the employer is reporting the pieces and hours worked on the pay stubs as required by Labor Code section 226, then this shouldn’t be a problem. On the bright side, employers that were not previously tracking hours worked for their piece rate workers have a good excuse to change their policies so they can properly track paid sick leave.

WHAT IS A YEAR?

There are still other decisions that have to be made. What constitutes a year? The law became effective January 1st, but employers were not required to provide the paid sick leave until July 1st. Should the employer use a calendar year? A year based on the employee’s start date? A year beginning when the paid sick leave requirement became effective? Choosing the right “year” alters how the employer tracks accrued paid sick leave.

CAN I USE MY EXISTING PTO POLICY?

Will your existing PTO policy satisfy the requirements? In most cases, no, because most employees typically do not begin accruing paid sick leave on their first day of employment. Although employers can prohibit an employee from using the paid sick leave during the first 90 days of employment, the employee begins accruing the paid sick leave from day 1. Keep in mind, if an employer modifies its PTO policy to allow the employee to begin accruing PTO from day 1, and that employee stops working in the first 90 days, the employer has to pay out the unused PTO. If the employer decides to keep Paid Sick Leave separate from other paid leave, the employer would not have to pay out the Paid Sick Leave upon termination.

In order for a PTO policy to satisfy the Paid Sick Leave requirements, the PTO has to have the same 30:1 accrual rate required by the Health Workplaces, Healthy Families Act. Although an employer can cap the Paid Sick Leave at 48 hours, the 30:1 accrual rate would actually give the employee about 66 hours of Paid Sick Leave in a year (assuming the employee works 40 hours a day, 50 weeks per year). If you have a PTO policy that allows an employee to accrue 48 hours of PTO per year, the accrual rate is actually lower than the 30:1 Paid Sick Leave requirements.

The July 13th amendment provided a small safe harbor. If an employer had a pre-existing PTO policy that allowed the employee to accrue at least 8 hours of PTO within the first 3 months of employment and at least 24 hours of PTO within the first 9 months of employment, the employer can use the existing PTO policy to satisfy the Paid Sick Leave requirements. However, if the employer ever alters the accrual method used in that policy, then the employer has to default to the 30:1 accrual rate. This applies even if the employer provides a more generous PTO accrual rate than it previously provided.

Rob’s prediction? Litigation.

Although I don’t know that the value of a paid sick leave violation claim would justify a single-plaintiff lawsuit, you can bet there are class action attorneys waiting file suit when an employer makes a mistake. Keep in mind that the Health Workplaces, Healthy Families Act of 2014 is part of the Labor Code. That means an employee can sue under the Labor Code Private Attorney General Act (PAGA) and bypass the class action requirements. Even though the individual employee’s recovery may be minimal, even small errors can create significant liability given that the penalties will accrue every pay period for all employees.

BROAD RETALIATION PROVISION

I also predict we will see litigation regarding employers who ask employees for proof that the leave was for a qualifying reason. The Act has a very broad anti-retaliation provision:
An employer shall not deny an employee the right to use accrued sick days, discharge, threaten to discharge, demote, suspend, or in any manner discriminate against an employee for using accrued sick days, attempting to exercise the right to use accrued sick days, filing a complaint with the department or alleging a violation of this article, cooperating in an investigation or prosecution of an alleged violation of this article, or opposing any policy or practice or act that is prohibited by this article

There is a rebuttable presumption of retaliation for a variety of actions, including “if an employer denies an employee the right to use accrued sick days, discharges, threatens to discharge, demotes, suspends, or in any manner discriminates against an employee within 30 days of … (c) [o]pposition by the employee to a policy, practice, or act that is prohibited by this article.”

The Labor Commissioner has told employers that it is illegal to “deny sick leave due to a failure to provide details” regarding the need for the paid sick leave. The Act is silent as to whether an employer can require an employee to provide a doctor’s note for the absence, but the Labor Commissioner seems to be taking the position that if an employer asks an employee for the details of the leave (e.g., “Why do you need to take paid sick leave?”), and the employee refuses to provide the details, the employer must still pay the employee to take the time off work.

To be safe, employers should only ask for doctors’ notes once an employee has used the full 24 hours of paid sick leave.

Employment attorneys helping companies comply with the law have been inundated with phone calls and emails from clients that want to comply with the law. California’s new paid sick leave requirements confuse even the most seasoned HR professionals. I am glad the legislature took a stance on this important issue. Sick workers should not be forced to choose between paying rent or showing up to work where they can get other people sick. The idea behind the statute is good and honorable. Unfortunately, as is often the case, the legislature’s method is blemished.

Having thought this all through, I’m starting to feel a bit queasy myself. I think I need to take a sick day.

 

Original article by Robert E. Nuddleman of Nuddleman Law Firm, P.C.

Feel free to suggest topics for the blog. We are happy to consider topics pertaining to general points of Labor and Employment Law, but we cannot answer questions about specific situations or provide legal advice. If you desire legal advice, you should contact an attorney.

Your use of this blog does not create an attorney-client relationship between you and Nuddleman Law Firm, P.C. The use of the Internet or this blog for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be posted in this blog and Nuddleman Law Firm, P.C. cannot guarantee the confidentiality of anything posted to this blog.

The Nuddleman Law Firm, P.C. represents employees and businesses throughout Silicon Valley and the greater San Francisco Bay Area including Pleasanton, Oakland, San Ramon, Hayward, Palo Alto, Menlo Park, Mountain View, Los Altos, San Jose, the South Bay Area, Campbell, Los Gatos, Cupertino, Morgan Hill, Gilroy, Sunnyvale, Santa Cruz, Saratoga, and Alameda, San Mateo, Santa Clara, San Benito, Mendocino, and Calaveras counties.