NLRB v. Noel Canning: Supreme Court Will Decide Constitutionality of NLRB Recess Appointments

On January 4, 2012, President Obama used recess appointments to name three members to the National Labor Relations Board. On January 25, 2013, the Court of Appeals for the D.C. Circuit held that the President lacked constitutional authority to make these recess appointments. Noel Canning v. NLRB, 705 F.3d 490, (D.C. Cir., 1/25/13) (discussed here).

On June 24, the United States Supreme Court announced that it will review that decision in NLRB v. Noel Canning (Case No. 12-1115). The Supreme Court's web page for the case is here. SCOTUSblog's web page for it is here. 

Assuming that the Supreme Court agrees with the D.C. Circuit, Noel Canning would invalidate a host of NLRB rulings, including the one in In re DR Horton, Inc., 357 NLRB 184-2012 (discussed here). Although the NLRB decided Horton on January 3, 2012, the day before President Obama made the recess appointments at issue in Noel Canning, one of the three Board members who signed off on Horton, Craig Becker, was himself the subject of a recess appointment on March 27, 2010.

We have added Noel Canning to our Watch List of pending cases.

City of Los Angeles v. Superior Court: City Must Arbitrate Mandatory Furloughs for Civilian Employees

The California Supreme Court has issued its decision in City of Los Angeles v. Superior Court (Engineers and Architects Assn) (6/20/13) --- Cal.4th ---, holding that the City of Los Angeles must arbitrate its decision to furlough civilian employees: 

After declaring a fiscal emergency, a charter city adopted a mandatory furlough program for its civilian employees. Many employees represented by a union filed grievances against the city, arguing that the furloughs violated duly ratified memorandums of understanding (MOUs) governing the terms and conditions of their employment. When their grievances were denied, these employees requested arbitration, and when the city refused to arbitrate, their union petitioned the superior court for an order compelling the city to arbitrate the furloughs dispute. The superior court granted the union’s petition.  

The city then petitioned the Court of Appeal for a writ of mandate, asking it to overturn the superior court’s decision. After issuing an order to show cause, and setting the matter for a hearing, the Court of Appeal granted the city’s petition. Assuming, without deciding, that the employees’ grievances are subject to arbitration under the terms of the MOUs, the Court of Appeal concluded that the city could not be compelled to arbitrate because arbitration would constitute an unlawful delegation to the arbitrator of discretionary policymaking powers that the city’s charter vested in its city council.  

To address the important issues raised by the Court of Appeal’s decision, this court granted the union’s petition for review. The issue presented in that petition is whether a charter city may arbitrate disputes over collectively bargained wage and hour provisions without unlawfully delegating to the arbitrator its discretionary budgeting and salary-setting authority. At this court’s request, the parties also briefed another issue, which is whether, under the MOUs at issue here, the city has a contractual duty to arbitrate the employee furloughs dispute.  

We conclude, first, that arbitration of the dispute at issue here does not constitute an unlawful delegation of discretionary authority to the arbitrator and, second, that the city is contractually obligated to arbitrate the employee furloughs dispute. Thus, we reverse the Court of Appeal’s judgment. 

Slip op. at 1-2.  

The opinion is written by Justice Kennard, with Chief Justice Cantil-Sakauye and Justices Werdegar and Liu joining.  Justice Corrigan wrote in dissent, joined by Justices Baxter and Chin.  

The opinion is available here. 

Association of Orange County Deputy Sheriffs v. County of Orange: Sheriff May Prohibit Deputies Under Investigation From Accessing Their Investigative Files Until After Internal Affairs Interviews

A quick note on this case. 

In Association of Orange County Deputy Sheriffs v. County of Orange (6/12/13) --- Cal.App.4th ---, the Court of Appeal held that the Orange County Sheriff could prohibit any deputy who was under investigation for misconduct from accessing his or her internal affairs investigative file before being interviewed by an internal affairs investigator. The Court explained: 

We hold the Sheriff's order delaying access to the internal affairs investigative files until after the investigative interview was within her legal authority and not subject to meet-and-confer requirements [of the Meyers-Milias-Brown Act (MMBA), Cal. Gov. Code, § 3500 et seq.]... We also address a question the California Supreme Court expressly did not reach in [Pasadena Police Officers Assn. v. City of Pasadena (1990) 51 Cal.3d 564], and hold a long-standing past practice of preinvestigative interview access to the investigative file, alone, does not constitute a working condition within the meaning of the MMBA.   

The trial court properly applied the test for determining whether an issue falls within the scope of representation under the MMBA as set forth by our Supreme Court.... For the reasons we will explain, the Sheriff's order did not significantly or adversely affect wages, hours, or other terms and conditions of employment within the meaning of the MMBA. Even if it did, the Sheriff's order fell outside the scope of representation because it was a fundamental managerial or policy decision that was not outweighed by the benefit to employer-employee relations that would result from bargaining about the decision. The Sheriff's order did not violate any express or implied term of the MOU. 

Slip op. at 2-3.  

The opinion is available here. 

Breaking News: United States Supreme Court Issues Pair of Title VII Cases

The Supreme Court of the United States is nearing the end of its October, 2012, term, and the opinions are coming at a very high pace. The Court this morning announced decisions in two cases that we've been watching:

Vance v. Ball State University, in which the Court limited Title VII discrimination claims by holding that an employee is a “supervisor” for purposes of vicarious liability under Title VII only if he or she is empowered by the employer to take "tangible employment actions" against the victim.

University of Texas Southwestern Medical Center v. Nassar, in which the Court limited Title VII retaliation claims by requiring plaintiffs to show but-for causation, rather than motivating factor causation.

In addition, the Court granted review in NLRB v. Noel Canning, which considers the President's use of "recess appointments" to fill vacancies on the National Labor Relations Board. 

I will have more on these decisions later this week.  

American Trucking Associations v. City of Los Angeles: SCOTUS Issues Another FAAAA Preemption Decision

American Trucking Associations, Inc. v. City of Los Angeles, 569 U.S. ___ (6/13/13) is not an employment case, but it deals with FAAAA preemption, which has become prominent in many wage and hour actions and is pending before the California Supreme Court. Unfortunately (or perhaps fortunately, depending on your perspective) the holding in American Trucking is very narrow and does not shed much light on the issue before the California Supreme Court in People ex rel. Harris v. Pac Anchor Transportation, Inc. (Case No. S194388) (discussed discussed here).

In American Trucking, the United States Supreme Court considered whether the Federal Aviation Administration Authorization Act of 1994 (FAAAA) preempts certain requirements imposed by the City of Los Angeles on the trucks that move cargo into and out of the Port of Los Angeles. The parties agreed that the requirements are "related to a price, route, or service of any motor carrier . . . with respect to the transportation of property," leaving the Court only one issue to determine: whether the requirements "have the force and effect of law" and are preempted by the FAAAA. The Court held unanimously that the requirements do "have the force and effect of law" and are preempted.  The American Trucking opinion and related documents are available from SCOTUSblog here.  

American Trucking follows closely on the heals of another FAAAA preemption decision, Dan’s City Used Cars, Inc., v. Pelkey, 569 U. S. ____ (5/13/13) (discussed here).  In Dan's City, the Court held that state law claims stemming from the storage and disposal of a towed vehicle were not preempted because they were "related to neither the transportation of property nor the service of a motor carrier." The question at issue before the California Supreme Court in Pac Anchor relates more closely to the one decided in Dan's City: whether an action alleging that a trucking company violated the UCL by classifying its drivers as independent contractors is "related to the price, route, or service" of the company and, therefore, preempted by the FAAAA.  Pac Anchor has been fully briefed for about a year and is awaiting hearing.  

American Express Co. v. Italian Colors Restaurant: SCOTUS Upholds Class Action Waiver In Antitrust Action

Over the last several years, as the Supreme Court has limited class actions through its arbitration jurisprudence, several lower courts have pushed back, attempting to find ways to invalidate class action waivers in arbitration agreements. A prime example is the Second Circuit Court of Appeals, which considered an antitrust case involving the fees that American Express charges its merchant clients. In re. American Express Merchants' Litigation. In three successive decisions (2009, 2011, and 2012), the Second Circuit held: (1) a class action waiver was unenforceable where "enforcement of the clause would effectively preclude any action seeking to vindicate the statutory rights asserted by the plaintiffs;" and (2) the Supreme Court's decisions in Stolt-Nielsen S.A. v. AnimalFeeds International Corp. (2010) 559 U.S. ___ and AT&T Mobility LLC v. Concepcion (2011) 563 U.S. ___ did not affect that conclusion. 

On June 20, the Supreme Court issued its definitive response to the Second Circuit. In an opinion authored by Justice Scalia, with Chief Justice Roberts and Justices Kennedy, Thomas, and Alito joining, the Court held that "a contractual waiver of class arbitration is enforceable under the Federal Arbitration Act when the plaintiff ’s cost of individually arbitrating a federal statutory claim exceeds the potential recovery." Slip op. at 1. 

The Court explained its holding as follows: 

Arbitration is a matter of contract, and courts must "rigorously enforce" arbitration agreements according to their terms, even when parties allege a violation of federal law, unless Congress has evidenced an intent to override the FAA. Slip op. at 3-4.  

The Court found no "contrary Congressional command" that would require it to depart from the normal rules and invalidate the class action waiver here. Slip op. at 4-5. The antitrust laws "do not guarantee an affordable procedural path to the vindication of every claim." Slip op. at 4. "Nor does Congressional approval of Rule 23 establish an entitlement to class proceedings for the vindication of statutory rights." Slip op. at 5. 

The "effective vindication" theory -- that courts may invalidate arbitration agreements that "operate as a prospective waiver of a party’s right to pursue statutory remedies" -- also does not help the plaintiffs. Slip op. at 5-9. The class action waiver does not "forbid the assertion of statutory rights," or require payment of fees that are "so high as to make access to the forum impracticable." Slip op. at 6. It merely makes proving the statutory violation impractical, which "does not constitute the elimination of the right to pursue that remedy." Slip op. at 7 (ital. in original).  

Justice Thomas joined in the opinion and wrote a separate concurrence "to note that the result here is also required by the plain meaning of the Federal Arbitration Act," which "requires that an agreement to arbitrate be enforced unless a party successfully challenges the formation of the arbitration agreement, such as by proving fraud or duress.” Slip op. at 1. No such argument being made here, Thomas would find no grounds for revocation of the contract.  

Justice Kagan dissented, joined by Justices Ginsburg and Breyer: 

Here is the nutshell version of this case, unfortunately obscured in the Court’s decision. The owner of a small restaurant (Italian Colors) thinks that American Express (Amex) has used its monopoly power to force merchants to accept a form contract violating the antitrust laws. The restaurateur wants to challenge the allegedly unlawful provision (imposing a tying arrangement), but the same contract’s arbitration clause prevents him from doing so. That term imposes a variety of procedural bars that would make pursuit of the antitrust claim a fool’s errand. So if the arbitration clause is enforceable, Amex has insulated itself from antitrust liability—even if it has in fact violated the law. The monopolist gets to use its monopoly power to insist on a contract effectively depriving its victims of all legal recourse.   

And here is the nutshell version of today’s opinion, admirably flaunted rather than camouflaged: Too darn bad. 

Slip op. at 1. 

Justice Sotomayor sat on the Second Circuit panel that issued the 2009 decision case below and did not take part in the Supreme Court's decision. Her participation obviously would not have changed the outcome. 

The opinion is available here.  The SCOTUSblog has a page for the case here, including links to the opinion below, the Court's docket, and articles explaining the case.  

Do v. Regents: University of California Has "Quasi-Judicial Power" Over Its Own Employment Decisions, And Substantial Evidence Test Applies On Review

In Do v. The Regents of the University of California (5/13/13, pub. 6/11/13) --- Cal.App.4th ---, the Court of Appeal affirmed a trial court order denying an employee's petition for administrative mandamus challenging his termination from the University of California.

James Do worked for the University of California as an IT professional. A conflict developed between Do and his supervisor, Richard Fletcher. Do at one point told Fletcher to "get out of my face" because he "didn't want to deck him" and "it was better than getting violent." The University terminated Do for threatening Fletcher. Do received a Skelly hearing, but the University did not change the termination decision.

After appealing his dismissal through three levels of administrative review, Do filed a petition in Superior Court for a writ of administrative mandamus, seeking reinstatement and lost compensation. The trial court denied the petition, holding the substantial evidence supported the termination decision.

The Court of Appeal affirmed, holding:

[T]he California Constitution has granted the University quasi-judicial powers regarding matters falling within its broad powers to organize and govern the university, and this includes quasi-judicial adjudication of employment rights. Such University administrative decisions are subject to review under the substantial evidence rule. 

Slip op. at 14-15.  

"In short, the University functions in some ways like an independent sovereign, retaining a degree of control over the terms and scope of its own liability." Slip op. at 16, citing Miklosy v. Regents (2008) 44 Cal.4th 876, 890. 

The trial court properly applied a substantial evidence standard to the University's termination decision. Slip op. at 21-22. Substantial evidence supported the University's decision, and the trial court did not err in denying Do's petition for administrative mandamus. Slip op. at 22-26. 

Viewing the evidence in the light most favorable to the judgment, resolving conflicts and drawing inferences in support of the judgment, we conclude that although this was a close case, as the trial court frankly acknowledged, the University provided substantial evidence from which the hearing officer could reasonably conclude that the University's personnel policies were violated.

Slip op. at 25-26. 

The opinion is available here.

Compton v. Superior Court: California Supreme Court Issues Grant-and-Hold In Another Arbitration Case

In Compton v. Superior Court (American Management Services, LLC) (3/19/13) --- Cal.App.4th --- (discussed here), the Court of Appeal reversed a trial court order compelling individual arbitration in a putative wage and hour class action. The Court held that the arbitration agreement was unconscionable because it was unfairly one-sided: it required employees to arbitrate all claims; it imposed a one-year statute of limitations on employee claims, but did not impose the same period on employer claims for unfair competition and trade secret violations; and it gave the arbitrator discretion on attorney fees that would be mandatory in certain claims. The Court did not rely on the agreement's class action waiver for its finding of unconscionability.

I speculated that the California Supreme Court would grant review and hold pending its decision in Sanchez v. Valencia Holding Co., LLC (discussed here). The Court did exactly that on June 12, making me feel very smart indeed.

Now if I could just figure out how to get my kids to listen to me.  

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. 

Bluford v. Safeway: Court Holds that Employer Must Separately Compensate Piece Rate Employees for Rest Period Time; Reverses Denial of Class Certification

In Bluford v. Safeway Stores, Inc. (5/8/13, pub. 5/24/13) --- Cal.App.4th ---, Kenneth Bluford worked as a truck driver out of a distribution center operated by Safeway. He filed a putative class action, alleging that Safeway violated California's meal period, rest period, and wage statement laws. The trial court denied the class certification motion, holding that class members' individual reasons for missing meal or rest periods predominated over common issues and that the class members did not suffer any common injury from the alleged wage statement violations.  

The Court of Appeal reversed, but published only the general discussion of certification standards and the rest period certification issue. 

As to certification of the rest period class, the Court held that the plaintiff's theory of recovery was based on Safeway's uniform policies and procedures, and the trial court's denial of certification was not supported by substantial evidence. Common proof demonstrated that Safeway paid its drivers based on the miles driven and other factors and did not separately compensate them for their rest periods, as required.  

[U]nder the rule of Armenta v. Osmose, Inc. (2005) 135 Cal.App.4th 314, 323, rest periods must be separately compensated in a piece-rate system. Rest periods are considered hours worked and must be compensated. Under the California minimum wage law, employees must be compensated for each hour worked at either the legal minimum wage or the contractual hourly rate, and compliance cannot be determined by averaging hourly compensation.  

Thus, contrary to Safeway's argument, a piece-rate compensation formula that does not compensate separately for rest periods does not comply with California minimum wage law.  

There is no dispute that Safeway's activity based compensation system did not separately compensate drivers for their rest periods. Pay was calculated based on mileage rates applied according to the number of miles driven, the time when the trips were made, and the locations where the trips began and ended. None of these components directly compensated for rest periods. Driver pay was also based on fixed rates for certain tasks and hourly rates for other tasks and delays. There is no dispute that none of these fixed rates were applied to rest periods.

The only individual issue was damages, and the fact that damages would have to be calculated individually did not support denial of certification.  Slip op. at 7-10. 

The trial court's conclusion that individual issues will predominate is not supported by substantial evidence. Plaintiff's theory of recovery does not concern the drivers' subjective reasons for taking or not taking a rest period. Rather, it concerns Safeway's compensation system and its failure to separately compensate drivers for their rest periods. All of the disputes on the merits of this claim involve common evidence and argument, and individual damages. The rest period subclass must be certified. 

 Slip op. at 10. 

This case has an interesting link to Cicairos v. Summit Logistics, Inc. (2005) 133 Cal.App.4th 949, which has figured prominently in the meal and rest period certification debate. In Cicairos, truck drivers working out of the same distribution center at issue here sued their employer, Summit Logistics, for meal period, rest period, and itemized wage statement violations. The trial court granted summary judgment for Summit Logistics, and the Court of Appeal reversed. Safeway took over operation of the distribution center in 2003 and apparently continued some of the same compensation policies at issue in Cicairos. 

Bluford v. Safeway Stores, Inc. is available here. 

Westendorf v. West Coast Contractors: Court Affirms In Part and Reverses In Part Summary Judgment For Employer In Title VII Action

In Westendorf v. West Coast Contractors of Nevada, Inc., ___ F.3d ___ (9th Cir. 4/1/13), Jennifer Westendorf sued her former employer, West Coast Contractors, under Title VII for sexual harassment and retaliatory discharge. Westendorf alleged that her supervisor and a co-worker made "offensive sexual comments" to her, including calling her work “girly work,” commenting on another woman's breasts, asking if she found the woman's breasts “intimidating,” asking whether women “got off” when they used a particular kind of tampon, telling her that “women were lucky because [they] got to have multiple orgasms,” and  telling her to clean the workplace while wearing a French maid’s costume. When Westendorf complained to the company's president, Mario Ramirez, her supervisor began to criticize her work and use profanity against her. Westendorf continued to complain to Martinez, who terminated her approximately four months after she first raised the issue. Slip op. at 4-7. The district court granted West Coast's motion for summary judgment, and Westendorf appealed.  

The Court of Appeals affirmed summary judgment on the hostile work environment claim, holding that Westendorf did not make out a prima facie case of sexual harassment.  

Although we certainly do not condone Mr. Ellis’s crude and offensive remarks, we note that Ms. Westendorf went to his workplace only once a week for three months and often did not stay an entire day. Other than his references to the French maid’s costume, Mr. Ellis reportedly made offensive sexual remarks to Ms. Westendorf on only about four occasions. Mr. Joslyn joined Mr. Ellis in the “Double D” comments but otherwise made no sexual remarks to Ms. Westendorf, and he quickly apologized for his “girly work” remark, which she did not deem serious enough to complain about. The harassment was not physical and Ms. Westendorf did not say that her work suffered because of it. Because we conclude that the evidence, viewed favorably to her, did not show sexual harassment that was sufficiently severe or pervasive to alter the terms of Ms. Westendorf’s employment and subject her to an abusive environment, we affirm the judgment for West Coast on her sexual harassment claim. 

Slip op. at 9.  

The Court reversed as to the claim that West Coast fired Westendorf in retaliation for complaining about sexual harassment. Although the conduct did not rise to the level of sexual harassment, the Court held that it “could support a reasonable belief that she was subjected to actionable sexual harassment, and that she had such a belief.” Slip op. at 10. Accordingly, her complaints constituted protected activity. 

To make out a retaliation claim, Westendorf “had to show that her protected conduct was a but-for cause — but not necessarily the only cause — of her termination.” Slip op. at 10.  

We conclude that the record evidence was sufficient to raise a material question of fact as to whether Ms. Westendorf’s July 14 complaints — which we have already said could be “protected activity” — were a but-for cause of her termination. We therefore believe that the district court erred in granting the summary judgment motion on the ground that she failed to make out a prima facie case of retaliation. 

Slip op. at 11-12.  

The opinion is available here. 

Brown v. Superior Court: Court Invalidates Arbitration Agreement's Waiver of PAGA Representative Action

In Brown v. Ralphs Grocery Co. (7/12/11) 197 Cal.App.4th 489, review denied 10/19/2011 (discussed here), the Court of Appeal held that the Federal Arbitration Act (FAA), as explained in AT&T Mobility LLC v. Concepcion (2011) 563 U.S. ___ (discussed here) does not preempt California law invalidating an employee's waiver of her right to bring an action under the Labor Code Private Attorneys General Act (PAGA). That's a mouthful, but in other words, even if an employee waives the right to bring a PAGA representative action, he or she can bring the action because the waiver is invalid.

On June 4, the Court of Appeal issued another Brown case on the same issue: Brown v. Superior Court (Morgan Tire & Auto, LLC) (6/4/13) --- Cal.App.4th ---. The Court reversed in part a trial court order compelling individual arbitration of wage claims, again holding that the FAA does not preempt California law prohibiting waiver of an employee's right to bring a PAGA representative action.  

A plaintiff suing for PAGA civil penalties is suing as a proxy for the State. A PAGA claim is necessarily a representative action intended to advance a predominately public purpose. When applied to the PAGA, a private agreement purporting to waive the right to take representative action is unenforceable because it wholly precludes the exercise of this unwaivable statutory right. AT&T Mobility LLC v. Concepcion (2011) 131 S.Ct. 1740, does not require otherwise. 

Slip op. at 1-2.  

The Court held as follows: 

The defendant did not waive its right to compel arbitration by litigating the case in court for ten months before the U.S. Supreme Court issued its decision in Concepcion. In light of Gentry v. Superior Court (2007) 42 Cal.4th 443, it was reasonable for the defendant to believe that bringing a motion to compel individual arbitration would have been futile. Slip op. at 7-12. 

The National Labor Relations Board (NLRB) incorrectly decided D.R. Horton, Inc. (2012) 357 NLRB No. 184 (discussed here), and the National Labor Relations Act (NLRA) did not make the representative action waiver unenforceable. Citing Truly Nolen of America v. Superior Court (2012) 208 Cal.App.4th 487, 514-515 (discussed here) and Nelsen v. Legacy Partners Residential, Inc. (2012) 207 Cal.App.4th 1115, 1132-1135, review denied 11/2/12 (discussed here). Slip op. at 12-13. 

The FAA does not require "enforcement of a private agreement that wholly prevents the exercise of a statutory right intended for a predominantly public purpose." Slip op. at 16. The Court held that all PAGA actions are representative actions: 

The obvious public purpose of the law suggests that it is necessarily a representative action. Law enforcement does not take place on an individual basis. The PAGA does not give an employee any substantive rights. The PAGA merely allows the employee to act on behalf of the state when the employer violates other sections of the Labor Code. 

Slip op. at 17. 

The Court held that the portion of the agreement waiving the employee's right to bring a PAGA representative action was invalid, but the remainder of the agreement was valid, and the trial court should have compelled individual arbitration of the plaintiff's non-PAGA claims: 

It follows that the PAGA claim must be excluded from the order compelling arbitration and stayed pending resolution of the arbitration. 

Slip op. at 20. 

Even though the California Supreme Court denied review of Brown v. Ralphs Grocery back in 2011, I assume that it will grant review of this Brown decision and hold pending its decision in Iskanian v. CLS Transportation L.A., LLC (6/4/12) 206 Cal.App.4th 949, review granted 9/19/12 (discussed here). 

Brown v. Superior Court is available here.  

Harris v. Bingham McCutchen: Court Enforces Massachuetts Choice-of-Law Provision, Affirms Order Denying Motion to Compel Arbitration of Discrimination Claims

Harris v. Bingham McCutchen (3/29/13) --- Cal.App.4th ---, is an unusual arbitration decision that I will note briefly.

Hartwell Harris sued her former employer and others (Bingham) for discrimination and wrongful termination. Bingham moved to compel arbitration under an agreement to apply "the internal substantive laws of The Commonwealth of Massachusetts." The trial court denied the motion, and the Court of Appeal affirmed, holding: 

Massachusetts law governed questions of arbitrability.  Bingham created the arbitration agreement, including the Massachusetts choice-of-law provision, and it could not now attack that provision. Slip op. at 3-5. 

Under Massachusetts law, an agreement to arbitrate must "state in clear and unmistakable terms that plaintiff was waiving or limiting any statutory antidiscrimination rights." This rule applies to claims under California antidiscrimination law, as well as claims under Massachusetts antidiscrimination law. The agreement here did not meet this standard, and Bingham could not compel Harris to arbitrate.  Slip op. at 5-7. 

Massachusetts law is not preempted by the Federal Arbitration Act (FAA) because it is not inconsistent with the FAA's purposes, as articulated by the Supreme Court of the United States in Concepcion.  Slip op. at 7-9.  

In addition, we note that the Concepcion opinion itself contains language supportive of the Warfield court's conclusion on the preemption issue. Footnote six of Justice Scalia's majority opinion reads as follows: "Of course states remain free to take steps addressing the concerns that attend contracts of adhesion – for example, requiring class-action-waiver provisions in adhesive arbitration agreements to be highlighted. Such steps cannot, however, conflict with the FAA or frustrate its purpose to ensure that private arbitration agreements are enforced according to their terms." (Concepcion, supra, 131 S. Ct. at p. 1750.) This language suggests the Supreme Court would approve of the requirement at issue here, that contractual waivers of statutory antidiscrimination litigation rights must be expressly stated to be enforceable. 

Slip op. at 9.  I'm not sure that Justice Scalia would agree, but I suppose that is a question for another day.  

In the meantime, the opinion is available here. 

Leyva v. Medline Industries: Ninth Circuit Holds that Individual Damage Calculations Do Not Defeat Certification

In Leyva v. Medline Industries, Inc., ___ F.3d ___ (9th Cir. 5/28/13), the plaintiffs sued their employer, alleging that it failed to compensate its hourly employees for all hours worked, failed to calculate their overtime rates of compensation properly, failed to pay all earned wages on separation, and failed to provide timely and accurate wage statements.  The district court denied certification, and the Ninth Circuit reversed, holding that the district court abused its discretion in concluding that (1) individual questions predominated over common questions, and (2) class certification was not superior to other means of resolving the dispute. 

The district court applied the wrong legal standard by concluding that individual questions predominate over common questions. The only individualized factor that the district court identified was the amount of pay owed. “In this circuit, however, damage calculations alone cannot defeat certification.” 

Slip op. at 7-9.  

The district court incorrectly held that class certification was not the superior method of adjudication because of the difficulty of managing the approximately 500 member class and determining the putative class members' damages.  The district court failed to suggest any other means for putative class members to adjudicate their claims, and the Ninth Circuit held, "it appears that none exist."  

In light of the small size of the putative class members’ potential individual monetary recovery, class certification may be the only feasible means for them to adjudicate their claims. 

Slip op. at 9-11.

The opinion is available here.  

Serpa v. California Surety Investigations: Court Reverses Order Denying Motion to Compel Arbitration

Serpa v. California Surety Investigations, Inc. (3/21/13, pub. 4/19/13) --- Cal.App.4th ---, is an interesting arbitration decision that I missed in April. 

Valerie Serpa sued her former employer (CSI) for sexual harassment, discrimination, retaliation, and related claims. The trial court denied CSI's motion to compel arbitration, holding that the arbitration agreement was unconscionable and unenforceable because it lacked mutuality and any obligation to arbitrate by CSI was illusory.  The Court of Appeal reversed, holding: 

The arbitration agreement was a contract of adhesion and presented only a low level of procedural unconscionability. Slip op. at 8-9.  

Although the agreement, when read in isolation, appeared unilateral because it did not impose an obligation to arbitrate on CSI, the agreement's incorporation into the employee handbook "salvages the agreement by establishing an unmistakable mutual obligation on the part of CSI and Serpa to arbitrate 'any dispute' arising out of her employment." Slip op. at 9-10. 

Although CSI reserved the right to alter the terms of any policy contained in the handbook at its sole discretion and without notice, the implied covenant of good faith and fair dealing imposed a "fundamental limit" on CSI's ability to alter the agreement, and the agreement was not illusory.  Slip op. at 10-14. 

The arbitration agreement was substantively unconscionable because it required the parties to bear their own attorney fees, depriving Serpa of her unwaivable statutory right to recover fees if she prevailed on her claims under the FEHA.  However, because the agreement was not "otherwise permeated by unconscionability," the proper remedy was to sever this one clause and enforce the remainder.  Slip op. at 14-16. 

The clause stating that Serpa would submit her claims to arbitration if the dispute "cannot be resolved through informal internal efforts" did not shock the conscience and was not substantively unconscionable. Slip op. at 16-17. 

The opinion is available here.