Laffitte v. Robert Half Int'l: Supreme Court Approves Attorney Fees Calculated as Percentage of Common Fund Class Action Settlement

In Laffitte v. Robert Half International, Inc. (2016) 1 Cal.5th 480, the California Supreme Court upheld an award of common fund attorney fees in a class action settlement. The introduction to the opinion gives a good summary of the facts and holding:

A class action employment lawsuit settled before trial for $19 million, with the agreement that no more than a third of that recovery would go to class counsel as attorney fees. In seeking the trial court's approval of the settlement, class counsel sought the maximum fee amount, $6,333,333.33. After considering information from class counsel on the hours they had worked on the case, applicable hourly fees, the course of the pretrial litigation, and the potential recovery and litigation risks involved in the case, the trial court — over the objection of one class member — approved the settlement and awarded counsel the requested fee. 

The objecting class member contends the trial court's award of an attorney fee calculated as a percentage of the settlement amount violates a holding of this court in Serrano v. Priest (1977) 20 Cal.3d 25 (Serrano III), to the effect that every fee award must be calculated on the basis of time spent by the attorney or attorneys on the case. (See Serrano III, at p. 48, fn. 23.) We disagree. Our discussion in Serrano III of how a reasonable attorney fee is calculated was made in connection with an award under the "private attorney general" doctrine. (See id. at pp. 43-47.) We clarify today that when an attorney fee is awarded out of a common fund preserved or recovered by means of litigation (see Serrano III, supra, at p. 35), the award is not per se unreasonable merely because it is calculated as a percentage of the common fund.

The Court reasoned as follows:

Attorney fee awards in class actions are subject to an abuse of discretion standard of review.

Attorney fees may be calculated in one of two ways: the percentage method (a percentage of the common fund or settlement value); or the lodestar-multiplier method (reasonable hours multiplied by reasonable hourly rates multiplied by an amount more or less than 1.0 to account for factors such as the risks taken and results achieved). Each method is subject to criticism and each has been used more commonly than the other at various times.

Since the 1980s, a majority of courts have used the lodestar-multiplier method when one side must pay the other's fees and the percentage method when the fee is paid from a common fund generated by the litigation. Some courts in common fund cases start with the percentage analysis, then use the lodestar-multiplier method to cross-check whether the fee is reasonable.

In Serrano III, the California Supreme Court affirmed an award of attorney fees in a case affecting public school financing. The litigation had not resulted in creation of a monetary fund, and the Court held that fees could not be calculated using a percentage of common fund method. Instead, the Court approved use of the lodestar-multiplier method under a private attorney general theory because the case had vindicated Constitutional public policies and benefited a large number of Californians. Serrano III did not address common fund fees and does not prohibit use of the percentage method in common fund cases. While cases since Serrano III have expressed doubts regarding the percentage method, they do not establish any rule prohibiting its use.

The trial court did not abuse its discretion by calculating fees as a percentage of the common fund created by the litigation or by cross-checking that number using the lodestar-multiplier method. The benefits of using a lodestar-multiplier cross-check "likely outweigh" the problems it may raise in some cases. Courts may, but need not, scrutinize detailed time sheets to conduct lodestar cross-checks.

The Court's holding here may not apply "when there is no conventional common fund out of which the award is to be made but only a 'constructive common fund' created by the defendant's agreement to pay claims made by class members and, separately, to pay class counsel a reasonable fee as determined by the court, or when a settlement agreement establishes a fund but provides that portions not distributed in claims revert to the defendant or be distributed to a third party or the state, making the fund's value to the class depend on how many claims are made and allowed."

Justice Werdegar wrote the opinion, with all other justices joining. Justice Liu wrote separately "to suggest practices that may help to promote accuracy, transparency, and public confidence in the awarding of attorneys' fees in class action litigation." Chief among these is that class representatives and their counsel should negotiate a fee structure and submit that structure to the court for approval at the start of the litigation. 

The opinion is available here.

New Labor Code Section Targets Choice-of-Law, Choice-of-Venue Provisions

On September 25, 2016, Governor Brown signed into law Senate Bill 1241, enacting new Labor Code section 925. Effective January 1, 2017, section 925 provides as follows:

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

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

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

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

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

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

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

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

Legislative Counsel's Digest states: 

Existing law regulates the terms and conditions of labor contracts. Existing law prohibits an employer from requiring an employee or applicant for employment to agree, in writing, to any term or condition that is known by the employer to be illegal. Existing law creates the Division of Labor Standards Enforcement, which is under the direction of the Labor Commissioner, and generally commits to the commissioner the authority and responsibility for the enforcement of employment laws.  

This bill, for contracts entered into, modified, or extended on or after January 1, 2017, would prohibit an employer from requiring an employee who primarily resides and works in California, as a condition of employment, to agree to a provision that would require the employee to adjudicate outside of California a claim arising in California or deprive the employee of the substantive protection of California law with respect to a controversy arising in California. The bill would make any provision of a contract that violates these prohibitions voidable, upon request of the employee, and would require a dispute over a voided provision to be adjudicated in California under California law. The bill would specify that injunctive relief is available and would authorize a court to award reasonable attorney’s fees. The bill would provide that adjudication includes litigation and arbitration for purposes of these provisions. The bill would except from these provisions a contract with an employee who was represented by legal counsel, as specified. 

Sandquist v. Lebo Automotive: Under Arbitration Agreement at Issue, Arbitrator Decides Whether Class Arbitration is Available

The California Supreme Court has issued an important decision on the availability of class arbitration: Sandquist v. Lebo Automotive, Inc. (2016) 1 Cal.5th 233. 

Timothy Sandquist worked for Lebo Automotive, Inc., as a car salesman. On Sandquist's first day of employment, his manager gave him approximately 100 pages of forms to complete as a condition of his employment. Among those pages were three arbitration agreements.

Twelve years later, Sandquist sued Lebo individually and on behalf of others, alleging race discrimination against non-Caucasian workers. The trial court compelled individual arbitration, and, upon learning that all putative class members were subject to the same arbitration policies, dismissed the class allegations with prejudice. The Court of Appeal reversed in part, holding that the trial court should have allowed the arbitrator to decide whether class arbitration was available.

The Supreme Court granted review and affirmed the Court of Appeal, holding as follows: 

No universal rule allocates the decision regarding the availability of class arbitration to either the court or the arbitrator. Instead, he parties' agreement determines who will decide. State law applies generally to disputed issues of contract interpretation and governs here, at least in the first instance. 

Each of the three arbitration policies at issue contained similar, comprehensive language. Each extended to all claims "arising from, related to, or having any relationship or connection whatsoever" with Sandquist's employment. Both Sandquist's substantive claims and the procedural question presented, whether he could pursue those claims in class arbitration, arose from his employment with Lebo. Clauses excluding certain issues from the arbitrator's purview did not prevent the arbitrator from deciding the availability of class arbitration. As a result, under state contract law, the parties' contract gave the issue to the arbitrator.

Existing California law does not establish a presumption that the question should be determined by the court, rather than by the arbitrator. California law does include a "strong presumption" that courts should determine the jurisdiction of arbitrators, but this does not mean that the court must determine the availability of class arbitration. Rather, it means that the court must decide the preliminary issue: Does the arbitrator have jurisdiction to decide whether class arbitration is available?

The Federal Arbitration Act (FAA) does not impose an "interpretive presumption that, as a matter of federal law, preempts state law rules of contract interpretation and alters the conclusion state law would otherwise reach here." The Unites States Supreme Court in Green Tree Financial Corp. v. Bazzle (2003) 539 U.S. 444 held that the arbitration agreement in that case allocated the class arbitration availability question to the arbitrator, "Green Tree contains no controlling view concerning what presumption, if any, the FAA requires when interpreting the parties' agreement as to who decides class arbitration availability."

In general, the FAA presumes that courts should decide gateway questions of arbitrability, "e.g., whether there is an enforceable arbitration agreement or whether it applies to the dispute at hand." On the other hand, the FAA presumes that questions regarding procedures to be applied in arbitration will be decided by the arbitrator. Availability of class arbitration is not a gateway question of arbitrability. It is a question of contract interpretation and procedure to which arbitrators are well suited.

Two further considerations weigh in favor of allowing the arbitrator to decide the question. First, doing so is more consistent with the desire for expeditious results in arbitration. Second, doubts concerning an arbitration agreement's scope are resolved in favor of arbitration. 

Justice Werdegar wrote the opinion, with Chief Justice Cantil-Sakauye and Justices Liu and Cuéllar joining. Justice Kruger dissented, arguing that under the FAA, the availability of class arbitration is a "gateway question of arbitrability" that is presumptively for the court to decide. Justices Chin and Corrigan joined in the dissent. 

The opinion is available here.

Augustus v. ABM Security Services: Cal. Supremes Hold that Labor Code Prohibits On-Duty and On-Call Rest Periods

Jennifer Augustus worked for ABM Security Services as a security guard. ABM required its guards to keep their pagers and radios on and to remain vigilant and responsive as needed during their rest periods. Augustus sued ABM in 2005 for violating California's rest period requirements. The trial court certified a class, granted summary judgment for Augustus, and entered judgment for $90 million. The Court of Appeal reversed, holding that the law does not require employers to provide off-duty rest periods, and moreover, "simply being on call" does not constitute performing work.

The Supreme Court reversed the Court of Appeal, holding as follows:

California law "requires employers to authorize off-duty rest periods — that is, time during which an employee is relieved from all work-related duties and free from employer control." This reading is consistent with existing law: Labor Code section 226.7, which prohibits employers from requiring any employee "to work during any rest or meal period..."; the requirement enunciated in Brinker v. Superior Court (discussed here) that employers must "relieve the employee of all duty and relinquish any employer control over the employee and how he or she spends the time" during meal periods; the provision of Wage order 5 that allows employers to keep certain employees on duty during their rest periods "only in starkly limited circumstances"; and the position taken by the Division of Labor Standards Enforcement (DLSE) in a number of opinion letters.

An employer cannot "satisfy its obligation to relieve employees from duties and employer control during rest periods when the employer nonetheless requires its employees to remain on call." 

Employees forced to remain on call during a 10-minute rest period must fulfill certain duties: carrying a device or otherwise making arrangements so the employer can reach the employee during a break, responding when the employer seeks contact with the employee, and performing other work if the employer so requests. These obligations are irreconcilable with employees' retention of freedom to use rest periods for their own purposes. 

Citing Morillion v. Royal Packing Co. (2000) 22 Cal.4th 575, 586. 

Employers may reschedule rest periods when necessary, but may not require employees to remain on duty or on call during those rest periods. Employers who cannot relieve their employees of all duties during rest periods may either (a) provide another rest period if one is interrupted or (b) pay the premium for missed rest periods. 

Justice Mariano-Florentino Cuéllar, who joined the Court in January, 2015, wrote the opinion, joined by Chief Justice Cantil-Sakauye and Justices Werdegar, Chin, Corrigan, and Liu. Justice Kruger wrote separately, agreeing that employers must provide off-duty rest periods, but dissenting from the portion of the opinion holding that on-call rest periods violate the law, and arguing that the record on appeal did not support the judgment. 

The opinion is available here. 

Blog Re-Boot for the New Year

If you read my blog regularly (or used to), you've noticed that I haven't written in quite a while. Other than recently advertising my Advanced Mediation Conference, I haven't posted at all since May.

Well, that's changing with the new year. My resolution is to get back to the business of keeping my blog up to date with the most recent and most important developments. To that end, I'm starting with a series of posts on the biggest developments of 2016. And I'll throw in newer cases and legislation as we go.

As always, I hope you find it useful.

Steve

Advanced Mediation Conference: Practical Skills for Experienced Employment Litigators

Even seasoned litigators sometimes feel lost in mediation, with questions such as where to open or how to move forward without giving too much away. And even seasoned litigators sometimes leave mediation feeling frustrated because a client left money on the table, or paid too much, or a case that should have settled did not.

With a faculty of leading mediators and attorneys, I've designed a unique, full-day course to address these issues and teach attorneys how to achieve better results in mediation. Instead, using individual and paired exercises, small group discussions, and panel discussions, we'll present concrete tools to resolve more cases, more quickly, with better bottom-line outcomes and greater client satisfaction.

The conference is presented by the State Bar's Labor and Employment Law Section on December 2 in Los Angeles. Please see below for more information and registration.

I hope you can join us.

Steve

REGISTER VIEW BROCHURE MORE INFORMATION Advanced Mediation Conference Practical Skills for Experienced Employment Litigators Attend this conference for an interactive day of practical lessons that you can apply to your next mediation. An affordable registration fee includes training, 6.5 Hours MCLE credit, comprehensive materials and morning refreshments and lunch. This unique, full-day course will teach attorneys how to achieve better results, allowing them to resolve cases more efficiently and with greater client satisfaction. Using individual and paired exercises, small group discussions, and panel discussions, our faculty will give lawyers the concrete tools to resolve more cases, more quickly, with better bottom-line outcomes. Registration is limited so sign up early.  Labor and Employment Law Section Members: $275 Non-Section Members: $370 (includes 2017 Section membership)  Register Online Now

Alvarado v. Dart Container Corp.: Cal. Supremes Grant Review to Decide Overtime Rate of Pay Issue

In Alvarado v. Dart Container Corporation of California (Cal.App. 1/14/16) (discussed here), the California Court of Appeal held: (1) California law does not provide a method of calculating overtime rates of pay where the employer pays its employees an hourly rate of pay, plus a flat sum daily attendance bonus; (2) the employer here properly followed the formula set forth in the Code of Federal Regulations for paying overtime.

The Supreme Court granted review on May 11. Alvarado is case no. S232607, and the Court's web page for it is here. 

Chen v. Allstate: Depositing Money into Escrow Account Does Not Moot Putative Class Action; Plaintiff Must Have "Fair Opportunity" to Move for Certification

In Campbell-Ewald Co. v. Gomez (SCOTUS 1/21/16) (discussed here), the Supreme Court of the United States held that an unaccepted offer to satisfy the named plaintiff ’s individual claim does not render a putative class action moot. The Court did not decide the following issue: 

We need not, and do not, now decide whether the result would be different if a defendant deposits the full amount of the plaintiff’s individual claim in an account payable to the plaintiff, and the court then enters judgment for the plaintiff in that amount. That question is appropriately reserved for a case in which it is not hypothetical.

Chen v. Allstate Insurance Company (9th Cir. 4/12/16) is that case. Two plaintiff filed a putative class action against Allstate for violation of the Telephone Consumer Protection Act (TCPA). Before the plaintiffs moved for class certification, Allstate made a Rule 68 offer of judgment to satisfy their individual monetary and non-monetary demands. One plaintiff accepted the offer, but the other, Pacleb, rejected. Allstate moved to dismiss the case, arguing that it was now moot, the district court denied the motion, and the Ninth Circuit gave Allstate permission to appeal. 

While the appeal was pending and shortly after the Supreme Court issued its decision in Campbell-Ewald, Allstate deposited $20,000 into an escrow account pending entry of an order or judgment granting full monetary and injunctive relief to Pacleb. Allstate then added this as a basis to reverse the district court's order. The Ninth Circuit declined to do so, holding as follows: 

The judgment that Allstate offered would afford Pacleb complete relief on his individual claims for damages and injunctive relief. Pacleb did not seek an admission of liability or declaratory relief, and an admission of liability is not required to afford him complete relief. And although Allstate's offer would not necessarily preclude Pacleb from obtaining nation-wide injunctive relief, Pacleb failed to show that injunctive relief limited to him personally would be inadequate. 

Regardless, "Even if, as Allstate proposes, the district court were to enter judgment providing complete relief on Pacleb's individual claims for damages and injunctive relief before class certification, fully satisfying those individual claims, Pacleb still would be entitled to seek certification." 

Pitts v. Terrible Herbst, 653 F.3d 1081 (2011) (discussed here), in which the Ninth Circuit held that an unaccepted offer in full satisfaction of a plaintiff's claims does not moot a putative class action, remains good law after Genesis Healthcare Corp. v. Symczyk, 133 S.Ct. 1523 (2013) (discussed here), in which the Supreme Court held that when a named plaintiff's individual claims are moot in a collective action under the Fair Labor Standards Act (FLSA), the action was no longer justiciable based solely on the collective action allegations made in the complaint. Genesis Healthcare is limited to FLSA collective actions, rather than Rule 23 class actions. 

Allstate did not afford any "actual relief" to Pacleb by placing $20,000 in an escrow account. Pacleb did not actually receive the money, and a court still could award him "effectual relief." Allstate did not deposit the money with the court or relinquish all interest in it. 

Assuming, without deciding, that "a court has authority in an appropriate case to enter judgment for complete relief on a plaintiff’s individual claims over the plaintiff’s objection," a court should not do so until the plaintiff has "a fair opportunity to show that certification is warranted." 

In conclusion:

We hold the judgment Allstate has consented to would afford Pacleb complete relief on his individual claims for damages and injunctive relief. To date, however, Pacleb has not actually received complete relief on those claims. Those claims, therefore, are not now moot. In addition, because “a would-be class representative with a live claim of her own must be accorded a fair opportunity to show that certification is warranted,” id., we will not, as Allstate urges, direct the district court to enter judgment on Pacleb’s individual claims before Pacleb has had a fair opportunity to move for class certification. Finally, even if Pacleb’s individual claims were otherwise fully satisfied, he could continue to seek class certification under Pitts.

The opinion is available here. 

Sheppard, Mullin, Richter & Hampton, LLP v. J-M Manufacturing: Cal. Supreme Court Grants Review in Attorney Fee Arbitration Battle

Sheppard, Mullin, Richter & Hampton, LLP v. J-M Manufacturing Co., Inc. (2016) 244 Cal.App.4th 590 is not an employment law case, but it raises an interesting arbitration issue that may end up having an impact on employment law practice. The California Supreme Court granted review on April 27, and the issues presented are listed as follows:

(1) May a court rely on non-legislative expressions of public policy to overturn an arbitration award on illegality grounds?  

(2) Can a sophisticated consumer of legal services, represented by counsel, give its informed consent to an advance waiver of conflicts of interest?  

(3) Does a conflict of interest that undisputedly caused no damage to the client and did not affect the value or quality of an attorney’s work automatically (i) require the attorney to disgorge all previously paid fees, and (ii) preclude the attorney from recovering the reasonable value of the unpaid work?

The first issue obviously is of greatest interest for our purposes. Sheppard Mullin is case number S232946, and the Court's web page for it is here.

Espejo v. Southern California Permanente Med. Group: Defendants Properly Authenticated Electronically Signed Arbitration Agreement

In Espejo v. Southern California Permanente Medical Group (Cal.App. 4/22/16), Jay Espejo, M.D., sued Southern California Permanente Medical Group (SCPMG) and others for wrongful termination and whistleblower retaliation. The trial court denied defendants' motion to compel arbitration based on an electronically signed arbitration agreement. The Court of Appeal reversed, holding as follows: 

Defendants were not required to authenticate the arbitration agreement until Espejo challenged it. A party petitioning to compel arbitration must make a prima facie showing that an agreement exists, but not that it is enforceable. Only after the party opposing the petition challenges the agreement's authenticity does the petitioner bear the burden of proving it. As a result, the trial court erred in striking a supplemental declaration - not filed with the moving papers - that defendants used to authenticate the arbitration agreement. 

Defendants met their burden of authenticating Espejo's electronic signature on the arbitration agreement. 

[Defendants' declarant] detailed SCPMG’s security precautions regarding transmission and use of an applicant’s unique user name and password, as well as the steps an applicant would have to take to place his or her name on the signature line of the employment agreement and the [arbitration agreement]. Based on this procedure, she concluded that the “name Jay Baniaga Espejo could have only been placed on the signature pages of the employment agreement and the [arbitration agreement] by someone using Dr. Espejo’s unique user name and password. . . . [¶] Given this process for signing documents and protecting the privacy of the information with unique and private user names and passwords, the electronic signature was made by Dr. Espejo” on the employment agreement and the [arbitration agreement] at the date, time, and IP address listed on the documents.

The opinion is available here. 

Ling v. P.F. Chang's: Court Rules on Attorney Fee Award in Overtime and Meal Period Arbitration

In Ling v. P.F. Chang's China Bistro, Inc. (Cal.App. 3/25/16), Cynthia Ling sued P.F. Chang's for unpaid overtime and missed meal and rest periods, alleging that Chang's improperly classified her as an exempt employee while working as a floor manager. An arbitrator found that Ling was exempt as a floor manager, but also found that Chang's failed to provide her with meal periods during a brief training period. The arbitrator awarded Ling approximately $8,500 for missed meal periods and Labor Code section 203 waiting time penalties. Finding that Chang's was the prevailing party, the arbitrator awarded it $29,000 in costs under Code of Civil Procedure section 1032 and over $200,000 in attorney fees under Labor Code section 218.5.

The trial court corrected the award, holding that Ling was the prevailing party on her meal period claim and remanding to the arbitrator to award her fees, exclusive of those incurred solely in pursuing her unsuccessful overtime claim.

On remand, the arbitrator rejected Ling's fee request, relying on Kirby v. Immoos Fire Protection, Inc. (4/30/12) 53 Cal.4th 1244 (discussed here), but awarded Ling her costs as the prevailing party under CCP 1032(a)(4). The trial court confirmed the award, and both parties appealed. The Court of Appeal affirmed, holding as follows:

The trial court properly corrected the arbitrator's initial award because the arbitrator exceeded his powers by issuing an award that "contravened an explicit legislative expression of public policy."

Because plaintiff's missed meal periods claim (as it related to her service as a floor manager) and overtime claim required identical proof, the attorney's fees award for defending the 'factually inextricably intertwined' meal periods claim was effectively a fee award for defeating plaintiff's overtime claim, prohibited by section 1194.

The Court rejected Chang's argument that the Federal Arbitration Act (FAA) prohibited the trial court from remanding the attorney fee issue. Similar to the California Arbitration Act (CAA), the FAA provides for vacatur where an arbitrator exceeds his or her powers.

The Court rejected Ling's argument that the trial court should have vacated the initial award in its entirety, rather than merely correcting it. The trial court had no authority to vacate the award in its entirety and thus upset the arbitrator's ruling on the misclassification issue. 

The arbitrator did not exceed his authority in issuing his second award. 

The arbitrator was bound to follow Kirby and properly denied Ling attorney fees on her meal period claim. 

The arbitrator's denial of fees on the section 203 waiting time penalty claim did not deprive Ling of any unwaivable statutory right. An action for waiting time penalties based on failure to pay for missed meal periods is not an "action brought for the non-payment of wages" under section 218.5. 

Following Kirby, section 226.7 cannot support a section 203 penalty because section 203, subdivision (b) tethers the waiting time penalty to a separate action for wages. Because a section 203 claim is purely derivative of 'an action for the wages from which the penalties arise,' it cannot be the basis of a fee award when the underlying claim is not an action for wages.

The trial court erred in awarding Ling fees she incurred on her petition to vacate the first arbitration award. Neither the parties' agreement nor any statutory provision authorized any such award.

The opinion is available here. 

Kilby v. CVS Pharmacy: Cal. Supreme Court Issues Suitable Seating Opinion

In Kilby v. CVS Pharmacy, Inc. (Cal. 4/4/16), the California Supreme Court addressed a number of questions that arise under the "suitable seating" section of the Wage Orders, which provides: 

(A) All working employees shall be provided with suitable seats when the nature of the work reasonably permits the use of seats.  

(B) When employees are not engaged in the active duties of their employment and the nature of the work requires standing, an adequate number of suitable seats shall be placed in reasonable proximity to the work area and employees shall be permitted to use such seats when it does not interfere with the performance of their duties. 

Wage Orders 14 (agricultural occupations) and 16 (certain on-site occupations in the construction, drilling, logging, and mining industries) include a variant of subsection (A) above. Wage Order 17 (miscellaneous employees) does not include a suitable seating requirement. 

The opinion arises from two related appeals pending in the Ninth Circuit: Kilby v. CVS, in which the named plaintiff's duties included operating a cash register, straightening and stocking shelves, organizing products in front of and behind the sales counter, cleaning the register, vacuuming, gathering shopping baskets, and removing trash; and Henderson v. JPMorgan Chase Bank, in which the named plaintiff's duties included teller duties such as accepting deposits, cashing checks, handling withdrawals and other duties, such as escorting customers to safety deposit boxes, working at the drive-up teller window, and making sure that automatic teller machines were working properly. 

In an opinion by Justice Corrigan, a unanimous Court held as follows:

(1) The “nature of the work” refers to an employee's tasks performed at a given location for which a right to a suitable seat is claimed, rather than a “holistic” consideration of the entire range of an employee's duties anywhere on the jobsite during a complete shift. If the tasks being performed at a given location reasonably permit sitting, and provision of a seat would not interfere with performance of any other tasks that may require standing, a seat is called for. 

The Court rejected the defendants' argument that seating is required only where an employee's "sitting" duties outweigh her "standing" duties, such that the position would be classified as a "sitting" position. Such a test could deny a seat to an employee who spends a "substantial part of his workday at a single location performing tasks that could reasonably be done while seated, merely because his job duties include other tasks that must be done standing." It also could lead to different results for employees performing similar tasks because of other duties that they perform. 

The Court also rejected the plaintiffs' argument that seating is required any time that a single task, examined in isolation, "may reasonably be performed seated." This standard would ignore the reasonableness standard and the flexibility it is intended to provide to employers. 

Instead, courts must look at the tasks actually performed or reasonably expected to be performed at each location and determine whether it is feasible for an employee to perform those tasks while seated. 

The requirements of sections 14(A) and 14(B) are not mutually exclusive. Although they may not apply at the same time, they may apply at various times during a single shift.

(2) Whether the nature of the work reasonably permits sitting is a question to be determined objectively based on the totality of the circumstances. An employer's business judgment and the physical layout of the workplace are relevant but not dispositive factors. The inquiry focuses on the nature of the work, not an individual employee's characteristics. 

The Court rejected any bright-line rule, holding instead that courts should examine "all relevant factors," including "whether providing a seat would unduly interfere with other standing tasks, whether the frequency of transition from sitting to standing may interfere with the work, or whether seated work would impact the quality and effectiveness of overall job performance." The Court reiterated that the analysis must focus on the characteristics of each work location, rather than focusing on all of the tasks performed in a shift by a given employee. 

An employer's business judgment "largely determines" the employee's duties and tasks. "However, 'business judgment' in this sense does not encompass an employer's mere preference that particular tasks be performed while standing. The standard is an objective one." 

The physical layout of the workspace is a relevant factor in the totality of the circumstances inquiry. However, "an employer may not unreasonably design a workspace to further a preference for standing or to deny a seat that might otherwise be reasonably suited for the contemplated tasks." Reasonableness "remains the ultimate touchstone." 

The Court rejected the argument that the entitlement to a seat depends on the physical characteristics of each employee. The Wage Order focuses on the nature of the work, not the nature of the worker.

(3) The nature of the work aside, if an employer argues there is no suitable seat available, the burden is on the employer to prove unavailability. 

The Court rejected the argument that "even when 'the plaintiff can establish that the "nature" of her work would reasonably permit the use of a seat, she must still prove that a suitable seat exists but was not provided. The "suitable seat" requirement is an independent element of the regulation.'" If the nature of the work reasonably permits the use of seats, the employer "bears the burden of showing compliance is infeasible because no suitable seating exists." 

The opinion is available here. 

Baughn v. Department of Forestry: Court of Appeal Affirms Denial of Anti-SLAPP Motion

There has been an up-tick over the last year in employment cases raising anti-SLAPP issues. See Park v. Board of Trustees of the California State University (2015) 239 Cal.App.4th 1258 (discussed here), Barker v. Fox & Associates (2015) 240 Cal.App.4th 333 (discussed here), Decambre v. Rady Children's Hospital (2015) 235 Cal.App.4th 1 (discussed here).

Baughn v. Department of Forestry and Fire Protection (Cal.App. 3/11/16, pub. 4/6/16) is another of these cases. The Department of Forestry and Fire Protection (Cal Fire) terminated Corey Baughn after another employee accused him of sexual harassment. Baughn appealed his termination to the State Personnel Board (SPB), and the parties settled the matter. Baughn later obtained temporary employment with the Ukiah Valley Fire District (Ukiah Valley). Concerned that Baughn's employment with Ukiah Valley would result in him being present at Cal Fire facilities with the person who had accused him of harassment, Cal Fire hand delivered a letter to Ukiah Valley demanding that Baughn not be present at Cal Fire's facilities. This led Ukiah Valley to terminate Baughn. 

Baughn and his union sued Cal Fire for breach of the written settlement stipulation that ended the SPB case, breach of the implied covenant of good faith and fair dealing, and intentional and negligent interference with prospective economic advantage. Cal Fire filed an anti-SLAPP motion against the union, arguing that the action arose from protected speech and that the union was not likely to succeed on the merits. The trial court denied the motion, Cal Fire appealed, and the Court of Appeal affirmed, holding as follows: 

To prevail on an anti-SLAPP motion, the defendant must show: (1) that the cause of action arises from an act of defendant in furtherance of its right of petition or free speech in connection with a public issue; and (2) the plaintiff has not made a prima facie showing that he or she will succeed on the merits. Protected conduct includes "any other [1] conduct in furtherance of the exercise of the constitutional right of petition or the constitutional right of free speech [2] in connection with a public issue or an issue of public interest." Cal. Code Civ. Proc. 425.16(e)(4). 

Cal Fire failed to meet the first requirement because the decision to write and send the letter were not made “in connection with a public issue or an issue of public interest.” 

The issue raised in the letter did not concern a substantial number of people. It concerned the writer, the recipient, Baughn, and his earlier victim. At the very most, it concerned the defined set of Cal Fire firefighters who would use the same facility that Baughn would use in his employment with Ukiah Valley. This was a relatively small audience. 

The issue raised in the letter also did not concern a "written or oral statement or writing made in connection with an issue under consideration or review by a legislative, executive, or judicial body, or any other official proceeding authorized by law" under section 425.16(e)(2). Even if the letter concerned the SPB proceedings, those proceedings were no longer "under consideration" by the SPB or any other governmental entity. 

The trial court erred in awarding attorney fees to the union. A court may award attorney fees to a prevailing plaintiff only where it finds that the motion is frivolous or brought solely to cause delay. The trial court may no such finding here. The Court remanded for reconsideration of this issue. 

The opinion is available here.

Castro-Ramirez v. Dependable Highway Express: FEHA Requires Reasonable Accommodation of Employee's Need to Adjust Schedule to Care for Disabled Minor Child

In Castro-Ramirez v. Dependable Highway Express, Inc. (Cal.App. 4/4/16), the plaintiff sued his former employer, DHE, alleging disability discrimination, failure to prevent discrimination, retaliation, and wrongful termination in violation of public policy. Plaintiff, a truck driver, alleged as follows: 

Plaintiff’s son requires daily dialysis, and according to the evidence, plaintiff must be the one to administer the dialysis. For several years, plaintiff’s supervisors scheduled him so that he could be home at night for his son’s dialysis. That schedule accommodation changed when a new supervisor took over and ultimately terminated plaintiff for refusing to work a shift that did not permit him to be home in time for his son’s dialysis. The trial court granted defendant’s motion for summary judgment and denied plaintiff’s motion to tax costs.

The Court of Appeal reversed, holding as follows: 

The trial court erred in summarily adjudicating the disability discrimination cause of action. On an issue of first impression, employers have a duty under FEHA to provide reasonable accommodations to an applicant or employee who is associated with a disabled person. Association with a disabled person constitutes a disability under Government Code section 12926(o). Less stringent standards under the Americans with Disabilities Act do not control and should be distinguished. Rope v. Auto-Clor System of Washington, Inc. (2013) 220 Cal.App.4th 635 (discussed here and here) also should be distinguished because it relied on a gender and race discrimination case for its statement of the elements of a FEHA case, rather than a disability discrimination cause of action. 

On standards for discriminatory motive and pretext, Rope again is distinguishable because it relied on authority under the ADA, rather than the FEHA. Under the facts here, a jury could infer reasonably that plaintiff's association with his son was a substantial motivating factor in the decision to terminate and that DHE's reason for termination was pretextual. 

The trial court also erred in summarily adjudicating the disability discrimination cause of action. The law does not require employees to state that an employer's conduct constitutes discrimination or violates the FEHA. Employees need not use any legal terms or buzz words. Evidence that plaintiff complained to his supervisor -- and his supervisor -- about changes to his schedule and his need to give his son dialysis constituted opposition to the denial of a reasonable accommodation, a practice forbidden under the FEHA. 

The evidence also would permit a trier of fact to infer a causal link between plaintiff’s complaints and his termination. The temporal proximity between the two were enough to permit a trier of fact to infer causation. Rope is no longer good authority on this issue under amended section 12940(m)(2) (discussed here). 

The court erred in summarily adjudicating plaintiff's failure to prevent discrimination and wrongful termination causes of action for the reasons stated above. 

Because the trial court should not have granted DHE's motion, it also should not have denied plaintiff's motion to tax costs. 

Plaintiff was entitled to recover his costs on appeal. 

The opinion is available here.  

Davis v. Farmers Insurance Exchange: Same Decision Defense Applies to Common Law Wrongful Termination Claims; Trial Court Erred in Granting Directed Verdict on Illegal Deduction Claims

In Davis v. Farmers Insurance Exchange (Cal.App. 3/28/16, mod. 4/21/16), William Davis sued his former employer, alleging wage and hour violations based on independent contractor misclassification and common law wrongful termination in violation of public policy. The court granted Farmers' motion for directed verdict on the wage claims. On the wrongful termination claim, the court instructed the jury with CACI instructions amended to reflect the holding in Harris v. City of Santa Monica (2013) 56 Cal.4th 203. The jury found that Davis was an employee and that his age was a substantial motivating factor in his termination, but also found that Farmers would have made the same termination decision for legitimate business reasons. Davis appealed, and the Court of Appeal affirmed in part, holding as follows:

The trial court did not err in instructing the jury based on Harris: that Davis must prove that his age was a substantial motivating reason for his termination; that Farmers could use the same decision or mixed motive defense; and that a same decision finding would eliminate reinstatement, back pay, and damage remedies. Wrongful termination claims are analogous to FEHA claims, and the same standards apply in each. 

Davis did not seek declaratory or injunctive relief relevant to his wrongful termination claim. He did not state a cause of action for declaratory relief, and his request for injunctive relief in connection with his claim under the UCL addressed only his wage claims and was not sufficiently broad to cover his wrongful termination claim. Even if Davis had raised the injunctive relief claim, he did not demonstrate an imminent threat of continued age discrimination against him or any current Farmers employees. 

Davis could not recover his attorney fees. Although a plaintiff who proves that discrimination was a substantial motivating factor for an adverse employment action may recover fees in a FEHA action under Harris, Davis did not bring a FEHA action. 

Davis also could not recover his fees under Code of Civil Procedure section 1021.5, which allows an award of attorney fees when a plaintiff enforces important rights affecting the public interest without private gain. 

The trial court erred in granting a directed verdict on plaintiff's wage claims. Davis alleged that Farmers unlawfully deducted money from his compensation for items such as insurance premiums, operational expenses, loans, and advanced commissions. The jury found that Davis was an employee, rather than an independent contractor, and Davis made out a prima facie case that Farmers' deductions were not "clearly authorized by law."

The Court modified a number of parts of its opinion on April 21, 2016. The modified opinion is available here. The modifications do not change any of the Court's holdings. 

Radcliffe v. Experian: District Court Did Not Err in Rejecting Effort to Disqualify Class Counsel after Court Found Conflict of Interest between Class Representatives and Class Members

In Radcliffe v. Experian Information Solutions Inc., 715 F.3d 1157 (9th Cir. 2013), the Ninth Circuit reversed a district court order approving the $45 million settlement of an action under the Fair Credit Reporting Act where: (a) the class representatives' enhancement awards were conditioned on their support of the settlement, creating a conflict of interest between them and the absent class members; and (b) the conditional incentive awards of $5,000 "significantly exceeded in amount what absent class members could expect to get upon settlement approval." The Court held that the settling class representatives ("Hernandez") and their attorneys ("Hernandez Counsel") did not represent adequately the absent class members in negotiating the settlement. The Court remanded to the district court to determine when the conflict arose, whether it would continue under any future settlement, and the extent to which Hernandez Counsel would be entitled to fees under any future settlement. 

In a new decision, Radcliffe v. Experian Information Solutions Inc. (9th Cir. 3/28/16), the Ninth Circuit revisited the case, holding that the district court did not err in refusing to disqualify Hernandez Counsel on remand. 

In this appeal, as they did in the district court, White Counsel contend that under California law, any conflict of interest in the representation of a class mandates automatic disqualification. Generally, California requires per se disqualification when an attorney has been shown to possess a simultaneous conflict of interest in her representation of multiple clients, regardless of that attorney’s motives or the actual impact of the conflict. The central question is whether this remains true in class actions. For the reasons set forth below, we conclude that California law does not require automatic disqualification in class action cases, and affirm.

The opinion is available here.

Baltazar v. Forever 21: Clause Allowing Parties to Seek Preliminary Injunctive Relief in Court Does Not Render Arbitration Agreement Unconscionable

In Baltazar v. Forever 21, Inc. (12/20/12) 212 Cal.App.4th 221 (discussed here), an individual discrimination, harassment, and constructive discharge action, the trial court denied the defendants' motion to compel arbitration, and the Court of Appeal reversed, holding:

• Unconscionability analysis survives Concepcion. 
• The defendant did not show that the agreement evidenced "a transaction involving commerce," so the California Arbitration Act (CAA) applied, rather than the Federal Arbitration Act (FAA). 
• Because the CAA allows parties to seek provisional remedies in court, an arbitration agreement allowing parties to do so was not substantively unconscionable. 

The California Supreme Court granted review and issued its opinion on Monday. In a unanimous opinion written by Justice Leondra Kruger, the Court affirmed, holding as follows: 

The arbitration agreement was contained within a contract of adhesion, but there was no element of surprise or duress, and the fact that Forever 21 did not give Baltazar a copy of the AAA arbitration rules did not lead to heightened scrutiny of the agreement's substantive terms.

The clause in the arbitration agreement allowing parties to seek preliminary injunctive relief in court is not unconscionable. Even if employers are more likely to seek such relief, the clause merely reiterates a provision of the CAA. Cal. Code Civ. Proc. section 1281.8(b). The Court disapproved Trivedi v. Curexo Technology Corp., 189 Cal.App.4th 387 (discussed here) to the extent it suggests otherwise.

The agreement required both parties to arbitrate all employment-related claims. The fact that it listed as examples the types claims typically brought by employees did not create confusion as to whether the clause required Forever 21 to arbitrate any employment-related claims that it may have against an employee.

The agreement's provision that "all necessary steps will be taken to protect from public disclosure [Forever 21's] trade secrets and proprietary and confidential information" did not render the agreement unconscionable. 

The opinion is available here. 

I believe that this is the first majority opinion written by Justice Kruger in an employment law case. I am very interested to see the impact that she and the Court's other newest member, Justice Mariano-Florentino Cuéllar, will have on the Court's employment law rulings. Both began serving in January, 2015. 

Friedrichs v. California Teachers Association: U.S. Supreme Court Deadlocks on Constitutionality of Public Employee Union "Agency Fees"

Just a quick word on Friedrichs v. California Teachers Association (SCOTUS 3/29/16), in which the U.S. Supreme Court appeared set to hold that forcing a public employee to pay for a union's non-political activities, such as collective bargaining, violates the employee's First Amendment rights. 

The death of Justic Scalia in February changed the calculus, and the Court announced on Monday that it is equally divided on the issue. In that situation, which we undoubtedly will see more of until Justice Scalia is replaced, the decision of the lower court stands. In Friedrichs, the Ninth Circuit held that under existing U.S. Supreme Court precedent, forcing public employees to pay such agency fees does not violate their First Amendment rights. 

The Court's per curiam opinion is here, but I'll save you the trouble of clicking on it. It reads, in its entirety: 

The judgment is affirmed by an equally divided Court.

As the poet said, "Strange days indeed." 

The SCOTUSblog page for Friedrichs is here. 

Tyson Foods v. Bouaphakeo: U.S. Supreme Court Affirms Judgment for Employees in Wage and Hour Class Action

In Tyson Foods, Inc. v. Bouaphakeo (SCOTUS 3/22/16), many, including me, expected the U.S. Supreme Court to place further limits on the use of class actions. Instead, both Justice Kennedy, who authored the opinion, and Chief Justice Roberts joined the Court's four liberals in affirming a district court judgment in favor of a class of employees.

The plaintiffs filed a putative collective action under the Fair Labor Standards Act (FLSA) and class action under Iowa state law, seeking overtime compensation for time spent donning and doffing protective gear. The district court certified both the collective action under the FLSA (29 U.S.C. section 216) and the class action under F.R.C.P. Rule 23.

At trial, the parties stipulated that Tyson owed the plaintiffs for donning and doffing certain gear, but left other liability and damage questions for the jury. The plaintiffs introduced anecdotal evidence, video recordings of employees donning and doffing, and an expert's testimony regarding his study of the average time spent donning and doffing. A second expert analyzed Tyson's records of time worked and amounts paid and calculated amounts owed.

The jury found for the plaintiffs and awarded $2.9 million of the $6.7 million requested. Tyson appealed, and the Eighth Circuit Court of Appeals affirmed. The Supreme Court also affirmed, holding as follows:

Assuming, without holding, that a section 216 collective action is no more difficult to certify than a Rule 23 class action, certification of both actions can be analyzed under Rule 23 standards.

"Representative evidence," including statistical sampling, may be introduced in class actions, as in other actions, to establish or defend against liability. Admissibility depends not on whether the case is a class action, but on whether the evidence is "reliable in proving or disproving the elements of the relevant cause of action." The representative evidence here filled a gap left by Tyson's failure to keep records of donning and doffing time and was a permissible means of proving each employee's individual damages. Use of such evidence did not deprive Tyson of its ability to litigate individual defenses.

Wal-Mart Stores, Inc. v. Dukes, 564 U. S. 338 (2011), "does not stand for the broad proposition that a representative sample is an impermissible means of establishing classwide liability." Certification in Dukes failed because the plaintiffs could not show any common policy of discrimination. The plaintiffs could not use representative evidence to show such a policy in a class action any more than they could have used it to show discrimination in an individual action. In contrast, the representative evidence offered here would be admissible in an individual action to prove liability.

Representative evidence is subject to challenge under Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U. S. 579 (1993) as being "statistically inadequate or based on implausible assumptions," but Tyson did not raise such a challenge in the district court.

The Court declined to issue "broad and categorical rules" regarding the use of representative and statistical evidence.

In FLSA actions, inferring the hours an employee has worked from a study such as Mericle’s has been permitted by the Court so long as the study is otherwise admissible. Mt. Clemens, supra, at 687; see also Fed. Rules Evid. 402 and 702. The fairness and utility of statistical methods in contexts other than those presented here will depend on facts and circumstances particular to those cases.

The Court did not address the argument, raised in the petition for certiorari but not briefed, that a class may not be certified if it contains class members who suffered no damages.

The Court also did not address Tyson's alternate argument that the plaintiffs cannot ensure that no damages are paid to class members who were not injured. The question is not yet ripe because the damages have not been disbursed, nor has the district court indicated how they will be disbursed. The Court remanded for the district court to determine this issue. The Court also noted that the plaintiffs requested bifurcation of liability and damages in order to ensure that uninjured class members did not recover, and Tyson "argued against that option and now seeks to profit from the difficulty it caused."

Chief Justice Roberts concurred in the opinion in full and wrote separately, expressing skepticism that the district court can devise a means of disbursing funds only to injured class members. Because the court cannot tell how the jury arrived at the $2.9 million verdict, it cannot determine which class members the jury found to have suffered actual injury. Without such a means, the verdict cannot stand, as Article III would not permit a court to award damages to one who did not suffer an injury. Justice Alito joined in this portion of the concurring opinion.

Justice Alito also joined in the dissenting opinion authored by Justice Thomas. Justice Thomas would have held as follows: 

Before class-action plaintiffs can use representative evidence [as common proof of an otherwise individualized issue], district courts must undertake a rigorous analysis to ensure that such evidence is sufficiently probative of the individual issue to make it susceptible to classwide proof. The District Court did not satisfy that obligation here, and its failure to do so prejudiced defendant Tyson Foods at trial. The majority reaches a contrary conclusion by redefining class-action requirements and devising an unsound special evidentiary rule for cases under the [FLSA].

Whether any particular employee worked more than 40 hours in a given workweek is an individual issue, and the district court erred in failing to analyze whether this individual issue would be susceptible of common proof. Plaintiffs' evidence demonstrated that the donning and doffing for each employee varied, that individual issues predominated, and that class certification was not appropriate. 

The opinion is available here.  

Safeway v. Superior Court: Class Certification Appropriate in Action Alleging that Employer Uniformly Failed to Compensate Employees for Missed Meal Periods "When Required"

In Safeway v. Superior Court (7/22/15) --- Cal.App.4th ---, the plaintiffs alleged that the defendants had a uniform practice of failing to compensate employees for missed meal periods, among other wage and hour violations. The trial court certified a class under the Unfair Competition Law, Business and Professions Code section 17200 (UCL) on the theory that the defendants had a practice of failing to pay for missed meal periods when required. The defendants filed a petition for writ of mandate to reverse the order, and the Court of Appeal denied the petition, holding as follows:

The legal viability of the plaintiffs' theory of recovery is not at issue on the motion for class certification, unless the merits are enmeshed with class action requirements. "Nonetheless, that determination may be proper when the defendants cannot attack the claim by demurrer or summary judgment following certification, or the parties jointly request a merits determination." The defendants did not show that either of these conditions applied.

The plaintiffs' theory of liability -- that the defendants had a system-wide practice of failing to pay meal break premium wages when required -- was capable of common proof. A UCL claim may be predicated on a practice of not paying premium wages for missed, shortened, or delayed meal periods "attributable to the employer’s instructions or undue pressure, and unaccompanied by a suitable employee waiver or agreement." Although an employer's failure to pay accrued meal period premiums, standing alone, does not violate section 226.7, nothing in the law "clearly permits" an employer to fail to pay meal period premiums. A UCL claim for failure to pay meal period premiums when required may stand even in the absence of an underlying claim for failure to provide meal periods.

The plaintiffs demonstrated that they could prove the alleged systemic unlawful practice and the damage caused thereby on a class-wide basis. The plaintiffs "did not seek accrued meal break premium wages owed to individual class members, but rather the loss of the 'compensation guarantee and enhanced enforcement' implemented by section 226.7." 

In our view, real parties demonstrated that the existence of the practice and the fact of damage were matters suitable for class treatment. Real parties’ evidence supports the reasonable inference that in the context of a class action, they could establish that petitioners engaged in the alleged practice, that is, they never paid meal break premium wages, even though a significant number of employees accrued them. Furthermore, in view of real parties’ theory of restitution, those facts would also suffice to demonstrate the fact of damage. Under that theory, the fact of damage does not require a showing that all -- or virtually all -- class members accrued unpaid meal break premium wages, but only that on a system-wide basis, petitioners denied the class members the benefits of the compensation guarantee and enhanced enforcement implemented by section 226.7.

The plaintiffs' proposed method of determining the amount of restitution did not create a barrier to certification. The plaintiffs argued that they could recover the "market value" of the loss of their statutory protections, rather than the value of the meal periods themselves. Although not entirely clear, it appears that the plaintiffs would measure this market value by the amounts that defendant paid when it began paying its employees meal period premiums. This measure did not require litigation of issues unsuitable for class treatment.

The opinion is available here.