Patterson v. Domino's Pizza: Franchisor Not Responsible for Acts of Franchisee's Employee

In Patterson v. Domino's Pizza, --- Cal.4th --- (8/28/14), an employee, Patterson, alleged that her supervisor subjected her to sexual harassment. She sued her direct employer, a franchisee of Domino's Pizza, as well as Domino's itself, the franchisor. Patterson alleged that Domino's was liable because it was her joint employer and because the franchisee was its agent. The trial court granted summary judgment for Domino's, the Court of Appeal reversed, and the California Supreme Court reversed the judgment of the Court of Appeal, holding as follows:

Potential liability of a franchisor depends upon whether it has "retained or assumed a general right of control over factors such as hiring, direction, supervision, discipline, discharge, and relevant day-to-day aspects of the workplace behavior of the franchisee‘s employees." Slip op. at 30-31.

Although Domino's "vigorously enforced" standards for general operations, it "lacked the general control of an 'employer' or 'principal' over relevant day-to-day aspects of the employment and workplace behavior" of the franchisee's employees. Slip op. at 33.

According to the testimonial evidence, [the franchisee] exercised sole control over selecting the individuals who worked in his store. He did not include Domino's in the application, interview, or hiring process. Nor did anyone attempt to intervene on Domino's behalf. It was [the franchisee's] decision to hire Patterson as a new employee and to otherwise retain the existing staff when he bought the franchise.

Slip op. at 35-36. The franchisee also controlled its own sexual harassment policies and training. Slip op. at 36. Evidence that Domino's told the franchisee to "get rid of" the alleged harasser did not raise an inference that Domino's was in charge of employment decisions. Slip op. at 38.

The opinion is available here.

Weaving v. City of Hillsboro: Police Officer's ADHD Did Not Constitute Disability Under ADA

In Weaving v. City of Hillsboro, ___ F.3d ___ (8/15/14), a police officer, Weaving, sued his police department and the City of Hillsboro (City), alleging that it terminated him in violation of the Americans with Disabilities Act (ADA) because of problems associated with his attention deficit hyperactivity disorder (ADHD). A jury returned a verdict in his favor, and the City appealed from the ensuing judgment. The Ninth Circuit reversed. 

The Court first reviewed the applicable law under the ADA: 

The ADA forbids discrimination against a “qualified individual on the basis of disability.” 42 U.S.C. § 12112(a). A disability is “a physical or mental impairment that substantially limits one or more major life activities of [the] individual [who claims the disability],” or “a record of such an impairment,” or “being regarded as having such an impairment.” Id. § 12102(1). The ADA provides a nonexhaustive list of “major life activities.” Such activities include “caring for oneself, performing manual tasks, seeing, hearing, eating, sleeping, walking, standing, lifting, bending, speaking, breathing, learning, reading, concentrating, thinking, communicating, and working.” Id. § 12102(2)(A).

Slip op. at 12-13. 

The Court then held that substantial evidence did not support the judgment. 

Weaving alleged that his ADA substantially limited both his working and his interacting with others. Although both working and interacting with others constitute "major life activities," Weaving did not present substantial evidence to show that his ADHD substantially limited either (1) his ability to work compared to “most people in the general population" or (2) his ability to interact with others. Slip op. at 14-18. Weaving's ADHD may have limited his ability to get along with others, but that did not mean that it limited ability to interact with others. Slip op. at 17.

The opinion is available here.

Hager v. County of Los Angeles: Court of Appeal Affirms Whistleblower Retaliation Judgment for Deputy Sheriff, Reverses on Damage Award

Hager v. County of Los Angeles (8/5/2014) concerns the standard for proving retaliation under Labor Code section 1102.5.

Plaintiff Darren Hager worked for the County of Los Angeles as a sheriff's deputy. He sued the County and Sheriff's Department (County) alleging that the County retaliated against him for reporting alleged unlawful conduct by another sheriff's deputy. After a jury reached a verdict for Hager, the County appealed from the judgment, and Hager appealed from a post-trial order denying his motion for attorney fees. The Court of Appeal affirmed in part and reversed in part, holding as follows:

In the context of public employment, neither Mize-Kurzman v. Marin Community College Dist. (2012) 202 Cal.App.4th 832, nor section 1102.5 supports a rule that only the first employee reporting alleged unlawful conduct is entitled to whistleblower protection. Slip op. at 10-15.

Whistleblower protection applies when the disclosure of information addresses the alleged wrongdoing of a fellow employee. Slip op. at 15-16.

The trial court did not abuse its discretion in excluding evidence of incidents in Hager's employment history unrelated to the County's stated reasons for terminating him or evidence as to previously undisclosed reasons for terminating him. Slip op. at 16-23. The trial court did not err in finding that such evidence had no probative value. Slip op. at 19-21. The trial court also did not err in finding that such evidence would be more prejudicial than probative under Evidence Code section 352. Slip op. at 21-23.

Even if evidence in the record would have supported a verdict in favor of the County, substantial evidence supported the jury's finding that the County terminated Hager in retaliation for reporting alleged misconduct. Slip op. at 24-26. Hager introduced evidence of inconsistencies and implausabilities in the County's stated reasons for terminating him, such that the jury could rationally find those reasons "unworthy of credence." Slip op. at 26.

Substantial evidence did not support the jury's award of lost earnings to Hager. In April 2003 -- prior to his termination -- Hager applied for and received medical disability retirement as a result of injuries suffered on the job. In light of this, Hager failed to introduce evidence at trial that he lost past wages as a result of the termination, and the evidence did not support the award of backpay. Slip op. at 27-30.

For the same reason, the jury's award of front pay was speculative. Hager failed to introduce evidence that he would have continued to earn his salary but for his termination. Slip op. at 30-31.

Finally, the trial court did not err in denying Hager's request for attorney fees under Code of Civil Procedure section 1021. 5. Slip op. at 39-42. Some actions benefit all public safety officers and the public at large, but Hager's action only benefited him and did not confer a significant benefit on the general public.

The opinion is available here.

Rhea v. General Atomics: Employer May Deduct Vacation Pay from Exempt Employee for Partial Day Absences

In Rhea v. General Atomics (7/21/14) --- Cal.App.4th ---, the plaintiff filed a putative class action challenging the employer's policy of requiring exempt employees to use annual leave hours to cover partial day absences from work. The plaintiff alleged that under this policy, exempt employees were not being paid on a salary basis for purposes of California law and could not be exempt.

The trial court granted summary judgment for the defendant, and the plaintiff appealed. The Court of Appeal affirmed, holding as follows:

California law on the issue is patterned after federal law, which allows employers to deduct from pay "for absences of one or more full days occasioned by sickness or disability." Slip op. at 8. Under both California and federal law, when an exempt employee is absent from work for a partial day, an employer is prohibited from deducting monetary pay from the employee. Slip op. at 9. In Conley v. Pacific Gas & Electric Co. (2005) 131 Cal.App.4th 260, the Court of Appeal held that under California law, an employer may deduct vacation pay for partial day absences without destroying the exemption. Slip op. at 10-11.

California's law prohibiting the forfeiture of earned wages does not prohibit an employer from deducting leave pay for partial day absences. Slip op. at 11-18. Although vacation pay constitutes wages under California law, and although California law prohibits the forfeiture of vacation pay, requiring employees to use vacation pay to cover partial day absences does not constitute the forfeiture of wages. Slip op. at 13-15. Instead, requiring such use of vacation pay simply "affords an employer the right to control the terms under which vacation time may be exercised by employees." Slip op. at 15.

The deduction policy also does not constitute an "impermissible shifting of wages that an employee has already earned (i.e., Annual Leave benefits) to cover [the employer's] duty to pay wages for the period of the employee's partial-day absence." Slip op. at 19-20. Requiring an employee to use vacation pay does not mean that an employer has failed to pay all of the wages that it is obligated to pay during an employee's partial-day absence. Slip op. at 20.

Finally, California law does not prohibit use of vacation pay wages when a partial day absence is for less than four hours. Slip op. at 21-22.

The opinion is available here.

Cochran v. Schwan’s Home Service: Employer Must Reimburse Employees for Work-Related Use of Cell Phones; Individual Questions as to Damages Do Not Justify Denial of Class Certification

In Cochran v. Schwan’s Home Service, Inc. (8/12/14) --- Cal.App.4th ---, the plaintiff filed a putative class action alleging that the defendant failed to reimburse its employees for expenses arising out of the work-related use of their cell phones. 

On the plaintiff's motion for class certification, the defendant argued that common issues did not predominate because some employees had unlimited data plans and thus did not incur additional expense from the use of their personal cell phones. The trial court agreed, holding that common issues did not predominate and a class action was not a superior method of resolving the dispute: 

The showing of an actionable expenditure or loss by . . . class member[s] pertains to [defendant's] liability, not to class members’ damages as it is set forth in . . . section 2802. If the class member[s] did not incur . . . loss[es], there can be no liability.” 

Slip op. at 4-5. In addition, the trial court reasoned that there was a question as to “whether the cell phone charges [the plaintiff] allegedly incurred were incurred and paid for by him or by his live-in girlfriend.”  

The plaintiff appealed, and the Court of Appeal reversed, holding as follows:

When employees have to use their personal cell phones for work-related purposes, the employer must reimburse them for such use, whether the employees incurred an additional expense as a result of such use or not. "[T]o be in compliance with section 2802, the employer must pay some reasonable percentage of the employee’s cell phone bill. Because of the differences in cell phone plans and worked-related scenarios, the calculation of reimbursement must be left to the trial court and parties in each particular case." Slip op. at 6-7.

The trial court made erroneous legal assumptions when it denied certification based on its holding that section 2802 does not require reimbursement if the employee's cell phone charges were paid by a third person, or if the employee had an unlimited data plan. Slip op. at 7-8. 

The opinion is available here. 

Avila v. LAPD: Ninth Circuit Affirms FLSA Retaliation Award for LAPD Officer

In Avila v. Los Angeles Police Department, ___ F.3d ___ (9th Cir. 7/10/14), plaintiff Leonard Avila, a police officer, sued the Los Angeles Police Department and the City of Los Angeles (collectively, City) for retaliation under the Fair Labor Standards Act (FLSA), alleging the following facts: Avila periodically worked through his meal period but did not request overtime; Avila testified for another police officer, Maciel, in support of Maciel's claim that LAPD failed to compensate him for overtime hours worked; and LAPD terminated Avila after he testified, alleging that Avila was insubordinate for not claiming his own overtime. 

A jury found in favor of Avila on his FLSA anti-retaliation claim, and the City appealed. The Ninth Circuit affirmed, finding as follows:

The determination by the LAPD Board of Rights (BOR) that Avila was guilty of insubordination and should be fired was not entitled to preclusive effect. Slip op. at 7-8. The BOR did not decide whether Avila was terminated in in retaliation for testifying in the Maciel action, and Avila was entitled to have the issue determined in court. 

The district court properly instructed the jury on Avila's retaliation claim. Slip op. at 8-17. 

The district court properly refused to instruct the jury on the same decision defense because the uncontested evidence was that the City would not have fired Avila had he not testified. Slip op. at 10-11. Given this uncotested evidence, the court had no evidentiary foundation for giving a same decision instruction.

The district court did not err in refusing to instruct the jury that an employee who engages in protected activity is not immune from adverse employment action for violating workplace rules and is not immune from termination if the employee's conduct warrants termination. Slip op. at 11-17. These instructions would have supported the City's argument that it did not fire Avila because he testified, but rather because he failed to request overtime. As stated earlier, the City was not entitled to a same decision instruction, nor was it entitled to an instruction that it could fire Avila for not claiming overtime. 

[T]he only issue for the jury in this case was whether the City was telling the truth in claiming that it fired a model employee (who was hired by another police force even as the termination action was pending), for not seeking all the pay that he might have. The district court did not abuse its discretion in declining to give the requested supplemental instructions. 

Slip op. at 17. 

Finally, the district court did not abuse its discretion in awarding Avila his attorney fees and liquidated damages under the FLSA. Slip op. at 18-19. 

The opinion is available here. 

Anderson v. City and County of San Francisco: Ninth Circuit Rules on "Bona Fide Occupational Qualification" Exemption to Title VII Prohibition on Sex Discrimination

In Anderson v. City and County of San Francisco, ___ F.3d ___, (9th Cir. 7/2/14), the Ninth Circuit considered the "bona fide occupational qualification" (BFOQ) exception to Title VII's prohibition of sex discrimination. 

Plaintiffs, current and former deputies of the San Francisco Sheriff’s Department (“SFSD”), appeal the district court’s order granting summary judgment to the City and County of San Francisco (the “County”) on their challenge to SFSD’s policy prohibiting male deputies from supervising female inmates in the housing units of SFSD’s jails. The district court concluded that SFSD’s policy did not violate Title VII’s prohibition on sex discrimination because it fell within the statute’s “bona fide occupational qualification” exception, 42 U.S.C. § 2000e-2(e)(1). We reverse the district court’s grant of summary judgment to the County on the sex discrimination claims and vacate the denial of summary judgment to plaintiffs on those claims.

Slip op. at 5. 

Title VII permits employers to discriminate on the basis of sex where sex is a BFOQ. 

To justify discrimination under the BFOQ exception, an employer must “prove by a preponderance of the evidence: 1) that the job qualification justifying the discrimination is reasonably necessary to the essence of its business; and 2) that [sex] is a legitimate proxy for the qualification because (a) it has a substantial basis for believing that all or nearly all [men] lack the qualification, or . . . (b) it is impossible or highly impractical . . . to insure by individual testing that its  employees will have the necessary qualifications for the job.”

Slip op. at 13. 

While judgments by prison administrators are entitled to some deference in court, such decisions must be based on a “reasoned decision-making process, based on available information and experience.” A material issue of genuine fact arose as to whether the Sheriff's decision here met that standard. Slip op. at 14-18. 

The County set forth four rationales to justify its sex-based policy: (1) protecting female inmates from sexual misconduct by male deputies; (2) maintaining jail security; (3) protecting inmate privacy; and (4) preserving the ability of female inmates to rehabilitate. 

Each such rationale related to a job qualification "reasonably necessary to the essence of" operating SFSD's jails: (1) not posing a threat to the safety of female inmates due to a likelihood of perpetrating sexual misconduct against them; (2) not posing a threat to jail security; (3) not posing a threat to female inmates’ privacy; and (4) not posing a threat to female inmates’ ability to rehabilitate. Each such rationale thus satisfied the first prong of the BFOQ exemption test. Slip op. at 18-19. 

To satisfy the second prong of the exemption, the County would have to show that excluding all male deputies is a “legitimate proxy” for excluding deputies who lack one of these four qualifications. The County could do so by showing that there is: (a) “a substantial basis for believing that all or nearly all [men] lack the qualification”; or (b) “it is impossible or highly impractical . . . to insure by individual testing” whether or not a male deputy has the qualification. The County did not do so on the record before the Court. Slip op. at 20-25. 

The opinion is available here. 

People ex rel. Harris v. Pac Anchor Transportation: FAAAA Does Not Preempt UCL Action Based on State Insurance and Wage Law

The California Supreme Court has announced its decision in People ex rel. Harris v. Pac Anchor Transportation, Inc. (7/28/14) --- Cal.4th ---. In Harris, the State of California alleged that the defendants misclassified truck drivers as independent contractors, thus denying them protections that state insurance and wage laws provide to employees, including the right to itemized wage statements. The issue, as described by the Court, is as follows:

Whether an action under the Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.) (UCL) that is based on a trucking company’s alleged violation of state labor and insurance laws is “related to a price, route or service” (49 U.S.C. § 14501 (c)(1)) of the company and, therefore, preempted by the Federal Aviation Administration Authorization Act of 1994 (Pub.L. No. 103-305 (Aug. 23, 1994) 108 Stat. 1569) (FAAAA).

The defendants made two preemption arguments. First, they argued that the FAAAA facially preempts all UCL claims against motor carriers. Second, they argued that the particular UCL claims at issue were preempted as applied to this case.

The Court rejected both arguments on essentially the same grounds. The Court held that the FAAAA does not preempt an action based on a trucking company’s alleged general violations of state labor and insurance laws. Such state laws do not focus on motor carriers, but regulate employer practices generally. They are "laws of general application whose effects on carriers' prices, routes, and services is remote." Even IWC Wage Order No. 9, which regulates the transportation industry, is not preempted because any effect on prices, routes, or services is indirect.

The opinion is available here.

Johnmohammadi v. Bloomingdales’s: Where Employee Has Opportunity to Opt Out of Arbitration Agreement, Employer Does Not Violate Norris-LaGuardia Act or National Labor Relations Act

A quick word on Johnmohammadi v. Bloomingdales’s, Inc., ___ F.3d ___ (9th Cir. 6/23/14), in which a putative class representative plaintiff appealed from the district court's order granting the defendant's motion to compel individual arbitration of her California wage and hour claims. The Ninth Circuit affirmed, holding as follows:

Where an employer gives an employee thirty days to opt out of an arbitration policy that forbids class-wide arbitration, the employer does not violate either the Norris-LaGuardia Act, 29 U.S.C. § 101 et seq., or the National Labor Relations Act, 29 U.S.C. § 151 et seq. Such a policy does not interfere with, restrain, or coerce the employee in the exercise of her right to file a class action. As the Court stated:

If [the employee] wanted to retain [the right to file a class action], nothing stopped her from opting out of the arbitration agreement. [The employer] merely offered her a choice: resolve future employment-related disputes in court, in which case she would be free to pursue her claims on a collective basis; or resolve such disputes through arbitration, in which case she would be limited to pursuing her claims on an individual basis. In the absence of any coercion influencing the decision, we fail to see how asking employees to choose between those two options can be viewed as interfering with or restraining their right to do anything.

Slip op. at 9. 

The opinion is available here.

Rebolledo v. Tilly’s: Court Properly Denied Arbitration Where Agreement Excluded Statutory Labor Code Claims from its Scope

In Rebolledo v. Tilly’s Inc. (8/6/14) --- Cal.App.4th ---, the plaintiff filed a putative class action and representative PAGA action alleging a number of wage and hour violations. The defendants moved to compel arbitration and dismiss class claims. The trial court denied the motion, and the defendants appealed.

The Court of Appeal affirmed, holding as follows:

The defendants' 2001 arbitration agreement expressly excluded from its scope "any matter within the jurisdiction of the California Labor Commissioner." Plaintiff's statutory wage claims fell within the jurisdiction of the Labor Commissioner, who "may enforce the provisions of [the Labor Code] and all labor laws of the state the enforcement of which is not specifically vested in any other officer, board or commission." Slip op. at 12-16.

The Court rejected the defendant's argument that the arbitration agreement intended to exclude only the claims actually filed before the Labor Commissioner, rather than any claims that could have been filed before the Labor Commissioner. If the defendants had intended to exclude only those claims actually filed before the Labor Commissioner, it could have said so in the operative arbitration agreement. Slip op. at 16-22.

To the extent that the defendants' 2005 arbitration agreement modified the terms of the 2001 arbitration agreement, such modification was not effective because the 2001 document stated that it could be modified only with the signatures of the President, Senior Vice President and Director of Human Resources. The defendants did not provide evidence that all three such executives executed the 2005 document and they could not enforce it. Slip op. at 22-26.

The opinion is available here.  

Davis v. Nordstrom: Employee Is Bound By New Handbook When Employer Gives Notice

Davis v. Nordstrom, Inc., ___ F.3d ___ (9th Cir. 6/23/14). 

After AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), defendant Nordstrom, revised its employee handbook to preclude class actions. Weeks later, the plaintiff filed a wage and hour class action, and Nordstom moved to compel individual arbitration. The district court denied the motion, holding that the revision was not valid.

The Ninth Circuit reversed, holding that Nordstrom provided sufficient notice of the change by mailing the revised handbook to its employees and giving them thirty days to decide whether to remain employed by Nordstrom. Under California contract law, the revised handbook constituted a binding agreement between the parties. The law did not require Nordstrom to list the policy revisions in the cover letter that it sent with the revised handbook. Nor did the law require Nordstrom to advise its employees that their continued employment constituted acceptance of the revised policy.

Davis v. Nordstrom is available here. 

Malone v. Superior Court: Court of Appeal Upholds Arbitration "Delegation Clause"

In Malone v. Superior Court (California Bank & Trust) (6/17/14) --- Cal.App.4th ---, the Court considered whether a delegation clause -- one that delegates to the arbitrator issues regarding the enforceability of the arbitration clause -- is unconscionable. Malone a predates the California Supreme Court's decision in Iskanian, but it still is worth noting. 

The defendant in a wage and hour class action, CB&T, moved to compel arbitration, and the plaintiff opposed on unconscionability grounds. The defendant argued that the arbitration agreement's delegation clause required the arbitrator to decide the issue, and the plaintiff argued that the delegation clause itself was unconscionable. The trial court found that the delegation clause was not unconscionable and compelled arbitration. The plaintiff took a writ, which the Court of Appeal denied, holding as follows:

If a party challenges the enforceability of a delegation clause alone, the court determines the issue. If a party challenges the enforceability of the arbitration agreement in its entirety, the arbitrator determines the issue. Slip op. at 8-9.

To be enforceable, a delegation clause must be clear and unmistakable. Slip op. at 9-10.

Earlier cases held that delegation clauses were substantively unconscionable on three grounds: (1) such clauses are outside the reasonable expectation of the parties; (2) such clauses are not bilateral; and (3) the arbitrator has a self-interest in finding arbitration agreements enforceable. Slip op. at 10-15.

The delegation clause here was bilateral in that either party may challenge the enforceability of the agreement, and any such challenge would be referred to an arbitrator. Slip op. at 15-16.

The Federal Arbitration Act (FAA) preempts any finding that a delegation clause is substantively unconscionable because the clause raises an inference of bias on the part of arbitrators purportedly acting in their own financial interests. Slip op. at 16-24. Any such finding would be "nothing more than an expression of a judicial hostility to arbitration, based on the assumption that a paid decisionmaker cannot be unbiased...." Slip op. at 23.

The arbitration clause at issue was not "outside the reasonable expectations of the parties." Slip op. at 24-25.

The opinion is available here.