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Thursday, October 8, 2015

Governor Brown Signs Legislation Amending Fair Pay Act

On October 6, Governor Brown signed legislation amending the State's Fair Pay Act. Cal. Labor Code section 1197.5. Broadly speaking, the Fair Pay Act prohibits employers from paying their employees less than employees of the other sex for equal work in the same establishment and under similar working conditions, "except where the payment is made pursuant to a seniority system, a merit system, a system which measures earnings by quantity or quality of production, or a differential based on any bona fide factor other than sex."

The amended law changes some of these terms and provides protections for employees who complain of violations. It provides:
(a) An employer shall not pay any of its employees at wage rates less than the rates paid to employees of the opposite sex for substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions, except where the employer demonstrates: 
(1) The wage differential is based upon one or more of the following factors: 
(A) A seniority system. 
(B) A merit system. 
(C) A system that measures earnings by quantity or quality of production. 
(D) A bona fide factor other than sex, such as education, training, or experience. This factor shall apply only if the employer demonstrates that the factor is not based on or derived from a sex-based differential in compensation, is job related with respect to the position in question, and is consistent with a business necessity. For purposes of this subparagraph, “business necessity” means an overriding legitimate business purpose such that the factor relied upon effectively fulfills the business purpose it is supposed to serve. This defense shall not apply if the employee demonstrates that an alternative business practice exists that would serve the same business purpose without producing the wage differential. 
(2) Each factor relied upon is applied reasonably. 
(3) The one or more factors relied upon account for the entire wage differential.
The new law makes the following changes as well:

Employers must keep records of wages and other terms and conditions of employment for three years, rather than two;

Employers may not: (1) discriminate or retaliate against employees who take action to enforce the law; (2) prohibit employees from discussing their wages or the wages of others, or aiding or encouraging other employees from enforcing their rights under the law;

Employees discriminated or retaliated against may sue for reinstatement, lost wages and benefits, and equitable relief;

A civil action has a statute of limitations of "one year after the cause of action occurs."

Additional information, including the text of the bill and a red-lined version of section 1197.5, is available here.

Tuesday, October 6, 2015

Governor Signs Bill to Provide Employers Opportunity to Cure Certain Wage Statement Claims in PAGA Actions

On October 2, 2015, Governor Brown signed Assembly Bill 1506, which amends the Labor Code Private Attorneys General Act of 2004 (PAGA) to provide employers the opportunity to cure certain check stub violations before being sued. AB 1506 is urgency legislation that goes into effect immediately. Here's how it works:

Labor Code section 226 requires employers to provide certain information to their employees on their wage statements, including the inclusive dates of the pay period (section 226(a)(6)) and the name and address of the employer (section 226(a)(8)). PAGA allows employees to seek civil penalties for violations of section 226.

Under the existing Labor Code section 2699.3(c), employers may cure certain violations within the time frames provided. If the employer cures, the plaintiff may not sue under PAGA.

The new law adds Labor Code sections 226(a)(6) and (8) to the list of statutes that the employer may cure. For the wonks out there, it actually accomplishes this by deleting sections (6) and (8) from the list of statutes for which there is no opportunity to cure.

Amended section 2699(d) provides:
A violation of paragraph (6) or (8) of subdivision (a) of Section 226 shall only be considered cured upon a showing that the employer has provided a fully compliant, itemized wage statement to each aggrieved employee for each pay period for the three-year period prior to the date of the written notice sent pursuant to paragraph (1) of subdivision (c) of Section 2699.3.
Amended section 2699.3(c)(2)(B)(ii): provides:
No employer may avail himself or herself of the notice and cure provisions of this subdivision with respect to alleged violations of paragraph (6) or (8) of subdivision (a) of Section 226 more than once in a 12-month period for the same violation or violations contained in the notice, regardless of the location of the worksite.
Legislative Counsel’s digest is available here.

Saturday, October 3, 2015

Navarro v. Encino Motorcars: Ninth Circuit Defers to Federal Regulations, Holds that Car Dealership's "Service Advisors" Are Not Exempt from FLSA Overtime Requirement

A quick word on Navarro v. Encino Motorcars, ___ F.3d ___ (9th Cir. 3/24/15), which I missed earlier in the year. The plaintiffs worked as service advisors at a car dealership. Their job was to greet customers, evaluate service needs, suggest required services, and suggest additional services above and beyond those required to resolve the customers' complaints. They filed suit for payment of overtime wages under the Fair Labor Standards Act (FLSA). The district court dismissed their overtime claim, holding that they fell within the FLSA's exemption for "any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles." The Ninth Circuit reversed, holding as follows:

The FLSA requires covered employers to pay their employees minimum wage and overtime compensation. The FLSA exempts "any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles" from the overtime requirement. Federal regulations define these terms, and the parties agreed that the plaintiffs were not "salesmen, partsmen, or mechanics" as defined within the regulations. The question then was whether the Court should defer to the regulations.

First, the FLSA does not define the terms "salesman, partsman, or mechanic" and it is ambiguous as to their meaning. This is particularly so given that the exemptions are to be applied only to those "plainly and unmistakably within their terms and spirit."

Second, because the regulation was duly promulgated after a notice-and-comment period and has not changed since its promulgation in 1970, the Court reviewed the regulation under the "reasonableness" standard set forth in 
Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842 (1984). 

Third, the regulation represents a reasonable interpretation of the statute and is consistent with the presumption that the exemptions should be construed narrowly. The Court noted that "there are good arguments" supporting the defendant's reading of the exemption, "But where there are two reasonable ways to read the statutory text, and the agency has chosen one interpretation, we must defer to that choice."

The opinion is available here.

Friday, October 2, 2015

Decambre v. Rady Children's Hospital: Court Affirms in Part and Reverses in Part Order Granting Anti-SLAPP Motion in Doctor's Action for Discrimination, Harassment, Retaliation, and Defamation

Over the last month, we have seen two cases dealing with anti-SLAPP motions in the employment law context. In Park v. Board of Trustees (8/27/15) --- Cal.App.4th --- (discussed here), a discrimination action, the Court held that a University's decision to deny tenure arose from protected communicative activity. The Court then remanded to the trial court for a determination of the plaintiff's likelihood of success on the merits. In Barker v. Fox & Associates (9/10/15) --- Cal.App.4th --- (discussed here), a defamation action, the court reversed an order denying the defendant's anti-SLAPP motion, finding that the plaintiff had waived his argument that the alleged statements were not privileged, and that the plaintiff had failed to show a reasonable probability of success on the merits.

Decambre v. Rady Children's Hospital (3/11/15, mod. 4/2/15) --- Cal.App.4th ---, is a third such case, which I missed when it came down earlier this year. The plaintiff was a doctor who sued several defendants, including the hospital where she worked, alleging discrimination, harassment, retaliation, wrongful termination, defamation, intentional infliction of emotional distress (IIED), and other causes of action. The trial court granted the defendants' anti-SLAPP motion to strike, finding that the defendants' decision not to renew the plaintiff's contract arose from the hospital's peer review process, which was protected as an official proceeding. The Court of Appeal affirmed in part and reversed in part, holding as follows:

Under the anti-SLAPP statute, Code of Civil Procedure section 425.16, and Kibler v. Northern Inyo County Local Hospital Dist. (2006) 39 Cal.4th 192, hospital peer review proceedings constitute protected "official proceeding[s] authorized by law," and the defendants' decision not to renew the plaintiff's contract was the result of that process. The Court rejected the plaintiff's contention that there was no peer review because the defendants did not report their non-renewal to the Medical Board of California. The behavior that led to the decision not to renew did not involve a "medical disciplinary cause or reason," and no such report was required.

The defendants failed to meet their burden to show that the plaintiff's harassment, IIED, and defamation claims arose from protected activity. "The 'principal thrust or gravamen' of the plaintiff's claim determines whether section 425.16 applies," and the court must examine the alleged wrongful conduct, rather than the alleged damages, to determine that issue. Here, the trial court erred in looking to the plaintiff's alleged damages, rather than the defendants' conduct. Some of the conduct underlying the harassment and IIED claims occurred before the peer review process even began, and none of that conduct "occurred within the context of, or in furtherance of, the peer review proceedings." Similarly, the conduct underlying her defamation claim arose after the non-renewal decision and was not part of the peer review proceedings.

In contrast, the defendants did show that the plaintiff's discrimination, failure to prevent discrimination, retaliation, and wrongful termination claims all arose from the peer review process. The wrongful termination claim cannot succeed absent a termination -- the Court did not distinguish between a termination and a non-renewal -- and the FEHA claims cannot succeed absent an adverse employment action. The only adverse employment action alleged here was the non-renewal decision. The defendants' motive, even if discriminatory, did not change the fact that the alleged conduct arose from protected activity.

The defendant having shown that the conduct at issue arose from protected activity, the burden shifted to the plaintiff to show probable success on the merits. The plaintiff failed show that defendants' asserted reasons for the non-renewal were pretextual. She did not refute the defendants' reasons for non-renewal. Instead, she asserted that she "could establish sufficient facts" to prove her claims, and this was not sufficient 
to meet her burden. 

The plaintiff also asserted claims for violation of the Unfair Competition Law and the Cartwright Act, but I will not address those claims here. I also will not address the Court's holding on the trial court's order sustaining the defendants' demurrer to certain causes of action.

The opinion is available here

Tellez v. Rich Voss Trucking: Order Denying Class Certification Reversed where Trial Court States No Reasons for Ruling

Just a quick word on this one. In Tellez v. Rich Voss Trucking (9/30/15) --- Cal.App.4th ---, the trial court denied the plaintiff's motion for class certification, but did not give any reasons for doing so. The Court of Appeal reversed and remanded, holding as follows:

While trial courts generally have broad discretion on motions for class certification,

“appellate review of orders denying class certification differs from ordinary appellate review. Under ordinary appellate review, we do not address the trial court’s reasoning and consider only whether the result was correct. [Citation.] But when denying class certification, the trial court must state its reasons, and we must review those reasons for correctness. [Citation.]” 

“The right result is an inadequate substitute for an incorrect process. Thus the appellate scrutiny should be on the reasons expressed by the trial court in the context of counsel’s arguments, not merely whether the trial court reached a result [that] can be justified by implication.” 
The Court remanded for the trial court to explain its reasons for denying the motion.

The opinion is available here.

Thursday, October 1, 2015

Bridewell-Sledge v. Blue Cross: District Court Erred in Treating Consolidated Class Actions as Separate for Purposes of Determining Federal Jurisdiction under the Class Action Fairness Act's "Local Controversy" Exception

Bridewell-Sledge v. Blue Cross of California (8/20/15) --- Cal.App.4th --- presents a novel legal issue regarding federal diversity jurisdiction under the Class Action Fairness Act and its "local controversy" exception. If you're not familiar with it, the local controversy exception provides roughly as follows: 

The district court shall decline jurisdiction over class actions when: more than two thirds of the class members are citizens of the State where the action was filed; at least one "significant" defendant is a citizen of that State; the principal injuries alleged were incurred in that State; and no similar class action has been filed against any of the defendants in the prior three years.

Plaintiff Bridewell-Sledge filed a putative class action against the defendants for failing to pay African American and female employees at a wage rate equal to white or male employees working in the same establishment and performing equal work. 14 minutes later, plaintiff Crowder filed a putative class action against the same defendants for failing to promote African-American and female employees because of their race and gender. The superior court consolidated the actions for all purposes.

Defendants removed the consolidated actions, and the district court again consolidated them for all purposes. After an OSC re. jurisdiction, district court retained jurisdiction over Bridewell-Sledge, finding that the local controversy exception applied, but remanded Crowder, finding that the local controversy exception did not apply because Bridewell-Sledge was a similar action and was filed in the three years prior to Crowder.

The Ninth Circuit reversed, holding that the district court should not have treated Bridewell-Sledge and Crowder as separate actions for CAFA purposes. By consolidating the two actions, the state court "destroy[ed] the identity of each suit and merge[d] them into one."
Under California law, when two actions are consolidated “for all purposes,” “the two actions are merged into a single proceeding under one case number and result in only one verdict or set of findings and one judgment.”
CAFA's legislative history supports this result. The purpose of the local controversy exception was “to ensure that state courts can continue to adjudicate truly local controversies in which some of the defendants are out-of-state corporations.” Remanding the consolidated cases to state court would accomplish this purpose.

The opinion is available here

Tuesday, September 29, 2015

Sakkab v. Luxottica: Ninth Circuit Holds that Federal Arbitration Act Does Not Preempt Iskanian Holding that PAGA Representative Action Waivers Are Unenforceable

In Sakkab v. Luxottica Retail North America, Inc. (9th Cir. 9/28/15) ___ F.3d ___, the Ninth Circuit has held that the Federal Arbitration Act (FAA) does not preempt the holding of Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal. 4th 348 (2014) that agreements to waive representative claims under the Labor Code Private Attorneys General Act of 2004 (PAGA) are not enforceable.

Plaintiff Shukri Sakkab filed a class and PAGA representative action against Luxottica, accusing it of misclassifying supervisors in its Lenscrafters stores as exempt employees. The district court granted Luxottica's motion to compel arbitration of all claims and dismissed Sakkab's complaint. Sakkab appealed, arguing that the waiver of his PAGA claims was not enforceable. The Ninth Circuit reversed, holding as follows:

The FAA provides that an agreement to arbitrate "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." The FAA preempts state law "to the extent that it 'stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.'" However, under its "savings clause," the FAA does not preempt "generally applicable contract defenses, such as fraud, duress, or unconscionability."

The FAA does not preempt Iskanian, which held that that pre-dispute agreements to waive PAGA claims are unenforceable. First, the Iskanian rule is a "generally applicable contract defense" that bars any waiver of PAGA claims, "regardless of whether the waiver appears in an arbitration agreement or a non-arbitration agreement."

Second, the rule does not conflict with the FAA's purposes: overcoming judicial hostility toward arbitration, and ensuring enforcement of the terms of arbitration agreements. 

Iskanian does not evidence judicial hostility toward arbitration. It does not prohibit arbitration of PAGA claims. "It provides only that representative PAGA claims may not be waived outright." 

Iskanian does not conflict with the FAA's goal of ensuring enforcement of the terms of arbitration agreements. In AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 321, the Supreme Court considered California's Discover Bank rule, which invalidated agreements to waive class claims in certain consumer cases. Concepcion held that the alternative to such a waiver, class arbitration, would sacrifice the principal advantages of arbitration: informality, speed, and efficiency. The Court thus held that the Discover Bank rule interfered with the parties' selection of the arbitral forum.

In contrast, because class actions and representative PAGA actions differ fundamentally, the Iskanian rule prohibiting waiver of representative PAGA claims "does not diminish parties’ freedom to select informal arbitration procedures."

Because a PAGA action is a statutory action for penalties brought as a proxy for the state, rather than a procedure for resolving the claims of other employees, there is no need to protect absent employees’ due process rights in PAGA arbitrations.... Because representative PAGA claims do not require any special procedures, prohibiting waiver of such claims does not diminish parties’ freedom to select the arbitration procedures that best suit their needs. Nothing prevents parties from agreeing to use informal procedures to arbitrate representative PAGA claims.
Finally, the Court's conclusion that the FAA does not preempt the Iskanian rule is bolstered by the fact that PAGA is part of California's legislative scheme for enforcing its labor laws, and such legislation falls within California's police powers. A PAGA action is a form of qui tam action, and the FAA was not intended to preclude states from authorizing qui tam actions. 

Given the Court's holding that the PAGA waiver is invalid, the Court remanded to the district court to determine whether the PAGA claims should be arbitrated or litigated in court. 

The opinion is available here.