State Bar Advanced Wage and Hour Conference: July 31, San Francisco

I am honored to be the principal organizer of the State Bar Labor and Employment Law Section's Third Annual Advanced Wage and Hour Conference, July 31, 2014, in San Francisco. This year's Conference will include:

Recent Developments Update 

Litigating and Resolving Cases Involving Insolvency Issues 

The Supreme Court of the United States and Its Impact on Wage and Hour Practice 

The View From 30,000 Feet: Where We’ve Been and Where We’re Headed  

A View From the Bench: Judges' Perspective on Wage and Hour Practice

More information will be available shortly on the Labor and Employment Law Section's web site. 

Vargas v. SAI Monrovia B, Inc.: Court Finds Arbitration Clause In Automobile Purchase Contract Unconscionable

In Vargas v. SAI Monrovia B, Inc. (6/4/13) --- Cal.App.4th ---, the Court of Appeal again addressed a standard automobile retail installment sales contract, finding that it was unconscionable and unenforceable:

In this appeal, we revisit our holding in Sanchez v. Valencia Holding Co., LLC (2012) 201 Cal.App.4th 74 (Sanchez), review granted March 21, 2012, S199119, that a “Retail Installment Sale Contract” used to purchase an automobile is unconscionable and unenforceable. Having considered the decisions of other California appellate courts handed down after Sanchez, we have refined our analysis and again conclude that the identical sale contract does not require the arbitration of disputes between a purchaser and a car dealer because it is permeated by unconscionability.  

Slip op. at 1. 

Is the Court of Appeal attempting to influence the Supreme Court's decision in Sanchez?  Perhaps.  In any case, I assume that the Supreme Court will grant review and hold Vargas pending Sanchez.  

Our discussion of Sanchez is available here. The opinion is Vargas v. SAI Monrovia B, Inc. is available here. 

Busk v. Integrity Staffing Solutions: Plaintiffs May Pursue Both FLSA Collective Action and State Law Class Action

Busk v. Integrity Staffing Solutions, Inc., ___ F. 3d ___ (9th Cir. 4/12/13), addresses an issue that has come up fairly frequently in the last few years, especially since passage of the Class Action Fairness Act (CAFA): whether a plaintiff can bring both a Rule 23 class action and a Fair Labor Standards Act (FLSA) collective action in the same case. According to Busk, the answer is yes.

The plaintiffs worked as hourly employees in warehouses in Nevada. They sued their employer, Integrity, for violations of both the FLSA and Nevada labor laws, alleging that required security screenings resulted in unpaid time. The district court granted Integrity's Rule 12(b)(6) motion to dismiss, and the plaintiffs appealed.

The Ninth Circuit reversed, holding that although FLSA collective actions utilize an opt-in procedure, while Rule 23 class actions utilize an opt-out procedure, "FLSA’s plain text does not suggest that a district court must dismiss a state law claim that would be certified using an opt-out procedure," and "a federal lawsuit combining state and federal wage and hour claims is consistent with FLSA." Slip op. at 7. Addressing the concern that allowing both classes to proceed simultaneously would confuse class members, the Court held that district courts "should be able to 'work[] out an adequate notice in this type of case.'" Slip op. at 9.

On the merits, the Court held that the district court erred in holding that the plaintiffs failed to state a claim under FLSA for passing through security clearances at the end of the day. The plaintiffs alleged that Integrity required the security screenings, which must be conducted at work, and which served to benefit Integrity by preventing employee theft. The Court held that such time, as alleged, was compensable under the FLSA. Slip op. at 9-12.

However, the district court did not err in dismissing the plaintiffs' claim for shortened lunch periods. The Court noted that the FLSA does not require compensation for an employee's lunch period, but that the employee must be "completely relieved from duty for the purposes of eating regular meals." It then held that the plaintiffs' allegation here -- that they were not relieved of duty because they had to clock out and then walk from the time clock to the lunch room -- did not state a claim for relief: "Walking to the lunchroom is not necessary to the plaintiffs’ principal work as warehouse employees." Slip op. at 13.

Busk v. Integrity Staffing Solutions, Inc., is available here. 

Negri v. Koning & Associates: Pay Based On Number of Hours Worked Is Not A "Salary" For Overtime Exemption Purposes

Negri v. Koning & Associates (5/16/13) --- Cal.App.4th ---, addresses "whether a compensation scheme based solely upon the number of hours worked, with no guaranteed minimum, can be considered a 'salary' within the meaning of the pertinent wage and hour laws" for purposes of determining whether an employee fits within one of the white collar exemptions. The answer is no.  

A salary is generally understood to be a fixed rate of pay as distinguished from an hourly wage. Thus, use of the word “salary” implies that an exempt employee's pay must be something other than an hourly wage. 

Slip op. at 4-5.  

Relying on the rule that state wage law must be at least as protective of employees as federal  wage law, the Court held: 

Since federal law requires that, in order to meet the salary basis test for exemption the employee would have to be paid a predetermined amount that is not subject to reduction based upon the number of hours worked, state law requirements must be at least as protective. 

Slip op. at 6.  

The unique factor here is that the defendant paid the plaintiff $29 per hour and never paid him for less than 40 hours in a week. Regardless, it stipulated in the trial court that it did not pay him a "guaranteed salary." In other words, it did not pay him "a predetermined amount" that "was not subject to reduction based upon the quantity of work performed." Slip op. at 9. No salary having been paid, the employer could not prove that the exemption applied. 

The opinion is available here. 

Advanced Strategies for Settling Discrimination & Harassment Claims

On Friday, June 14, I am presenting "Advanced Strategies for Settling Discrimination & Harassment Claims" with John Barber of Lewis Brisbois and Andrew Friedman of Helmer Friedman for Bridgeport Continuing Education. Our panel is part of Bridgeport's "Litigating Discrimination and Harassment Claims" program, being held this time at the Loews Hollywood Hotel.

Andrew and John are two top notch litigators who have very interesting insights on the settlement process. Their views sometimes clash, which makes it all the more fun. And Bridgeport runs some of the best continuing education events that I've attended, with consistently high quality speakers.

It should be an entertaining and valuable program. I hope to see you there.  

Barsegian v. Kessler & Kessler: Trial Court Did Not Err In Denying Arbitration Motion Where Certain Defendants Moved to Compel, But Others Did Not

In Barsegian v. Kessler & Kessler (4/15/13) --- Cal.App.4th ---, the plaintiff sued a number of defendants, some of whom moved to compel arbitration, and some of whom did not. The trial court denied the motion to compel on grounds, inter alia, that the litigation against the non-moving defendants, arising from the same transaction, created a possibility of conflicting rulings on common issues of law or fact. 

The Court of Appeal affirmed, holding that the trial court properly declined to compel arbitration under Code of Civil Procedure section 1281.2(c), which provides that a court shall grant a motion to compel, unless it finds that: "A party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact." 

The plaintiff's allegation that each defendant was the agent of the others was not a judicial admission that the non-moving defendants were not "third parties" under the statute. A judicial admission "is ordinarily a factual allegation by one party that is admitted by the opposing party." Because the moving defendants here did not admit that each defendant was the agent of the others and in fact planned to contest this allegation in arbitration, the allegation was not a judicial admission, and the moving defendants could not rely on it. Slip op. at 5-8. 

The opinion is available here. 

Oxford Health Plans LLC v. Sutter: SCOTUS Issues Decision on Arbitrator's Power to Order Class Arbitration

In Stolt-Nielsen S. A. v. AnimalFeeds Int’l Corp., 559 U. S. 662 (2010), the Supreme Court held that an arbitrator "may employ class procedures only if the parties have authorized them." The Supreme Court yesterday released its decision in Oxford Health Plans LLC v. Sutter, ___ U.S. ___ (6/10/13), in which it considered whether an arbitrator exceeded his authority by finding that the parties' agreement authorized class arbitration, even though it did not mention class arbitration.  Justice Kagan wrote the opinion for a unanimous Court. 

John Sutter filed a putative class action in state court against Oxford Health Plans, alleging that it failed to make full payment to him and other physicians, in violation of their agreements and state law. The court granted Oxford’s motion to compel arbitration, relying on the following clause in their contract: 

No civil action concerning any dispute arising under this Agreement shall be instituted before any court, and all such disputes shall be submitted to final and binding arbitration in New Jersey, pursuant to the rules of the American Arbitration Association with one arbitrator. 

The parties agreed that the arbitrator should decide whether the contract authorized class arbitration, and he determined that it did. He reasoned that the arbitration clause sent to arbitration “the same universal class of disputes” that it barred the parties from bringing “as civil actions” in court, including class claims.  

Oxford moved in federal court to vacate the arbitrator’s decision on the ground that he had “exceeded [his] powers” under §10(a)(4) of the FAA. The District Court denied the motion, and the Third Circuit Court of Appeals affirmed.  

Oxford asked the arbitrator to reconsider his decision on class arbitration after the Supreme Court issued Stolt-Nielsen. He issued a new opinion holding that Stolt-Nielsen had no effect. Unlike in Stolt-Nielsen, the arbitrator explained, the parties here disputed the meaning of their contract; he had therefore been required “to construe the arbitration clause in the ordinary way to glean the parties’ intent,” and had “found that the arbitration clause unambiguously evinced an intention to allow class arbitration.” 

Oxford made a renewed motion in district court to vacate the arbitrator’s decision under the FAA. The district court again denied the motion, and the Third Circuit again affirmed. The Supreme Court granted certiorari to address a circuit split on whether §10(a)(4) allows a court to vacate an arbitral award in similar circumstances. It held unanimously that it does not.  

The Court focused on the limited scope of review allowed in such circumstances. A party arguing that an arbitrator has "exceeded his powers" bears a heavy burden: 

“It is not enough . . . to show that the [arbitrator] committed an error—or even a serious error.” Because the parties “bargained for the arbitrator’s construction of their agreement,” an arbitral decision “even arguably construing or applying the contract” must stand, regardless of a court’s view of its (de)merits... [T]he sole question for us is whether the arbitrator (even arguably) interpreted the parties’ contract, not whether he got its meaning right or wrong.

Slip op. at 4-5 (citations omitted). 

The Court then held that the arbitrator had twice done what the parties requested and what the law required. "He considered their contract and decided whether it reflected an agreement to permit class proceedings. That suffices to show that the arbitrator did not 'exceed[ ] [his] powers.'" Slip op. at 6. 

The Court distinguished Stolt-Nielsen on grounds that the parties there had entered into an "unusual stipulation that they had never reached an agreement on class arbitration." Given that stipulation, the arbitrators in Stolt-Nielsen could not have concluded that the parties' agreement authorized class arbitration. "So in setting aside the arbitrators’ decision, we found not that they had misinterpreted the contract, but that they had abandoned their interpretive role." Slip op. at 6-7. 

The Court then addressed Oxford's argument that the arbitrator had misinterpreted the arbitration agreement: 

We reject this argument because, and only because, it is not properly addressed to a court. Nothing we say in this opinion should be taken to reflect any agreement with the arbitrator’s contract interpretation, or any quarrel with Oxford’s contrary reading. All we say is that convincing a court of an arbitrator’s error—even his grave error—is not enough. So long as the arbitrator was “arguably construing” the contract—which this one was—a court may not correct his mistakes under §10(a)(4). 

Slip op. at 8.  

In his concurring opinion, Justice Alito, joined by Justice Thomas, points out that the Court's opinion "follows directly from petitioner’s concession and the narrow judicial review that federal law allows in arbitration cases." He goes on to state that if the Court were reviewing the arbitrator's decision de novo, "we would have little trouble concluding that he improperly inferred '[a]n implicit agreement to authorize class-action arbitration . . . from the fact of the parties' agreement to arbitrate.'"  Slip op. at 1. 

I have to admit that I am surprised by the result here.  I thought that the Court would extend Stolt-Nielsen and invalidate the arbitrator's decision to allow class arbitration. And I certainly did not think that an opinion affirming the arbitrator's decision would be a unanimous one. All very interesting. 

The opinion is available here.