Lane v. Francis Capital Management: Court Discusses Labor Code Section 229 Prohibition on Compelled Arbitration

In Lane v. Francis Capital Management (3/11/14) --- Cal.App.4th ---, the plaintiff filed suit against his former employer, FCM, alleging (1) wrongful termination in violation of public policy; (2) breach of oral contract; (3) failure to pay wages; (4) unpaid overtime wages; (5) unpaid meal period wages; (6) waiting time penalties; (7) itemized wage statement violations; and (8) unfair competition. The trial court denied FCM's motion to compel arbitration, and FCM appealed. The Court of Appeal affirmed in part and reversed in part, holding as follows: 

The arbitration agreement encompassed all of Lane's claims. Slip op. at 6-7. 

Labor Code section 229 prohibits enforcement of arbitration agreements in individual actions for non-payment of wages under Labor Code sections 200-244. Slip op. at 7-12. The third cause of action for failure to pay wages fell within the scope of section 229, and the defendant could not compel arbitration of that claim. The first, second, fourth, and eighth causes of action did not assert claims under sections 200-244. The fifth cause of action for unpaid meal and rest period compensation was not an action for wages, but one for a failure to provide mandated meal or rest breaks. (See Kirby v. Immoos Fire Protection, Inc. (2012) 53 Cal.4th 1244, 1256-1257 (discussed here). The sixth and seventh causes of action for waiting time and check stub penalties also did not seek payment of unpaid wages.

The defendant failed to meet its burden to show that the Federal Arbitration Act (FAA) -- and thus FAA preemption -- applied. Slip op. at 12-14.

The arbitration agreement was not unenforceable as unconscionable. Slip op. at 15-19. Although the agreement may have been a contract of adhesion, its provisions were "clearly within the reasonable expectations of the parties," and the required elements of oppression or surprise were not present. Further, the defendant's failure to attach a copy of the applicable arbitration rules did not render the agreement procedurally unconscionable.

The agreement also was not substantively unconscionable. Slip op. at 19-21. The fact that the agreement incorporated the arbitration rules by reference did not render it substantively unconscionable. Nor did the fact that it contained no express provision for discovery because such a right was set forth in the applicable arbitration rules.

The opinion is available here.

Ruiz v. Affinity Logistics: Ninth Circuit Finds that Delivery Drivers Are Employees, Not Independent Contractors

In Ruiz v. Affinity Logistics, ___F.3d ___ (9th Cir. 6/16/14), the plaintiff sued on behalf of a putative class of furniture delivery drivers, alleging a number of wage and hour violations against the defendant, Affinity. The district court held that the drivers were independent contractors under California law, and California's wage and hour laws thus did not apply. The plaintiff appealed, and the Ninth Circuit reversed, holding as follows:

“[U]nder California law, once a plaintiff comes forward with evidence that he provided services for an employer, the [plaintiff] has established a prima facie case that the relationship was one of employer/employee.” Narayan v. EGL, Inc., 616 F.3d 895, 900 (9th Cir. 2010). The burden then shifts to the employer to “prove, if it can, that the presumed employee was an independent contractor.” Id. (citing Cristler v. Express Messenger Sys., Inc., 89 Cal. Rptr. 3d 34, 43–44 (Cal. Ct. App. 2009)). Because Ruiz has shown that he provided services for Affinity, the burden shifts to Affinity to demonstrate, if it can, that Ruiz and the other drivers were independent contractors, not employees.

Slip op. at 12-13.

Under S.G. Borello & Sons, Inc. v. Dept. of Industrial Relations (1989) 48 Cal.3d 341, the primary factor in determining whether one is an employee or independent contractor is "whether the person to whom service is rendered has the right to control the manner and means of accomplishing the result desired." Slip op. at 13-14. A number of "secondary indicia" also bear on the analysis. Slip op. at 14.

Affinity had the right to control the details of the drivers’ work, and Affinity retained all necessary control over the drivers’ work. Slip op. at 15-20. Among other important facts that the Court considered, Affinity controlled the drivers’ rates, schedules, and routes, set their flat “per stop” rates of pay, decided the days drivers worked, and retained the discretion to deny drivers’ requests for days off. Slip op. at 15-16.

Most secondary factors also demonstrated that the drivers were employees. Slip op. at 20-23. Drivers did not operate distinct businesses, but were integrated into Affinity's business. Affinity closely monitored the work of the drivers; their jobs did not require substantial skill; Affinity provided their trucks, which were their main tools of work; although Affinity paid the drivers per delivery, in fact this payment plan resembled an hourly pay arrangement; and drivers often stayed with Affinity for years. On the contrary, the parties understood that they were engaged in an independent contractor relationship.

Ruiz v. Affinity Logistics is available here.

Lawson v. FMR LLC: Sarbanes-Oxley’s Whistleblower Protections Extend to Employees of Contractors of Public Companies

I wanted to mention this case from the Supreme Court of the United States. In Lawson v. FMR LLC, ___ U.S. ___ (3/4/14) the Supreme Court held that the whistleblower protections of the Sarbanes-Oxley Act (18 U. S. C. §1514A(a)) extend not only to employees of public companies, but also to employees of contractors and subcontractors of public companies.

The opinion is available here.

Kim v. Konad USA: Exhaustion of FEHA Remedies Need Not Be Proven at Trial

In Kim v. Konad USA Distribution, Inc. (June 12, 2014) --- Cal.App.4th ---, the plaintiff prevailed in a bench trial on claims of quid pro quo sexual harassment, hostile work environment harassment, and wrongful termination. After trial, the defendants objected to the court's statement of decision, arguing that the court lacked subject matter jurisdiction because the plaintiff had failed to prove that she exhausted her remedies under FEHA and that the defendant had at least fie employees at the time of the alleged acts. The trial court entered judgment, and the defendants appealed.

The Court of Appeal affirmed, holding as follows:

Exhaustion of administrative remedies does not affect the fundamental subject matter jurisdiction of the trial court. Further, the defendants forfeited any right to a judgment of dismissal on the FEHA causes of action by failing to request dismissal of the FEHA causes of action before submitting the matter for decision. Slip op. at 12-13.

Although FEHA applies only to employers with five or more employees, a sexual harassment plaintiff need not prove that the defendant had five or more employees in order to prevail on a claim for wrongful termination in violation of public policy. Slip op. at 14-17. 

Even if the employee references FEHA as one source of the public policy at issue, the employer need not have five or more employees because "all employers (not just those with five or more employees) accused of harassment (based on sex or some other classification listed in Gov. Code, § 12940, subd. (j)(1)) are subject to a FEHA harassment claim." Slip op. at 16. Further, the plaintiff here based her claim on policies found in both FEHA and the California Constitution. Ibid.

Finally, the individual defendant could not be held liable for wrongful termination because he was not the plaintiff's employer. Slip op. at 17-18.

The opinion is available here.

Laguna v. Coverall: Ninth Circuit Issues Class Action Attorney Fee Decision

In Laguna v. Coverall North America, Inc., ___ F.3d ___ (9th Cir. June 3, 2014), the Ninth Circuit affirmed a district court's approval of a pre-certification class action settlement in an independent contractor wage and hour action. The Ninth Circuit held as follows:

The district court did not abuse its discretion in awarding fees based on the lodestar method because the lodestar method is most appropriate where the relief sought is “primarily injunctive in nature,” and a fee-shifting statute authorizes “the award of fees to ensure compensation for counsel undertaking socially beneficial litigation.” Slip op. at 6-7. The award of approximately $1 million in fees was reasonable where the injunctive relief provided in the settlement likely exceeded a value of $4 million. Slip op. at 7-8.

With regard to the settlement as a whole, the district court did not err in considering the difficulty of certifying the class, the defendant's poor financial health, the experience of class counsel, and the fact that only two settlement class members opted out of the settlement. Slip op. at 8-10.

The district court did not abuse its discretion in approving the settlement term that objectors be available for depositions. Slip op. at 14-15.

Finally, the district court did not abuse its discretion when it approved the settlement agreement consistent with the notice requirements contained within the Class Action Fairness Act (“CAFA”). 28 U.S.C. § 1715(b) and (d). Slip op. at 15.

The opinion is available here.

Duran Lawyers to Speak at LA County Bar Dinner

As you all know, the California Supreme Court has issued its opinion in Duran v. U.S. Bank on June 18, 2014, the Los Angeles County Bar Association will host a continuing education program with the lawyers who tried Duran and argued it in the California Supreme Court.

Edward J. Wynne, who represented the plaintiffs, and Timothy M. Freudenberger, who represented the defendant, will provide a lively discussion of the Court's opinion and the guidance it offers on these and other issues critical to the trial of wage and hour class actions.

"Duran v. US Bank: Trying Wage-Hour Class Actions" will take place at the Millennium Biltmore Hotel at 7:00 p.m. on Wednesday, June 18, 2014. Additional information is available here. 

Litwin v. iRenew: Class Member Objecting to Settlement Need Not Be Present at Final Approval Hearing

In Litwin v. iRenew Bio Energy Solutions, LLC (5/28/14) --- Cal. App. 4th ---, the parties settled a nationwide consumer class action and sent notice to the members of the settlement class. The notice of settlement required any class member who objected to the settlement to appear at the final approval hearing. Slip op. at 3-4.

A class member from outside of California objected that the settlement fund, after deduction of costs and attorney fees, was not sufficient. He also objected that requiring objectors appear at the final approval hearing violated their due process rights. The trial court overruled Chapa's objections. 

The Court of Appeal affirmed in part and reversed in part, holding as follows: 

The requested attorney fees and costs to plaintiffs' counsel were reasonsable. Slip op. at 5-7. First, counsel's lodestar exceeded the amount of the fee request. Second, the fees constituted 31% of the amount claimed by class members, which is close to the average award of one third of the common fund. 

The requirement that objectors attend the final approval hearing violated their due process rights. Slip op. at 7-9. Procedural due process requires that affected parties be provided with “the right to be heard at a meaningful time and in a meaningful manner," and the procedure used here deprived the class members of that right. 

The opinion is available here.