Pearl Law Firm Wins Summary Adjudication of Independent Contractor, Exemption Defenses in Nursing Case

On March 25, 2010, Los Angeles Superior Court judge Conrad R. Aragon granted summary adjudication in favor of two licensed vocational nurses (LVNs) represented by The Pearl Law Firm. The Court found that the undisputed evidence showed that the LVNs were neither independent contractors nor exempt employees.

The action alleges that the employer, a home health agency, failed to pay the LVNs overtime and missed meal and rest period compensation, failed to provide them with timely and accurate wage and hour statements, and failed to pay them all earned wages on separation. The defendant asserted in its answer that the LVNs were either independent contractors or exempt employees.

The Court first held that the LVNs were not independent contractors as a matter of law. The Court held that the employer had not only the right to control the LVN's work, but also the duty to do so under California's home health agency regulations. Further, the Court found that the employer exercised control over the LVNs "on a pervasive, continual basis throughout their employment." As such, the LVNs were employees, not independent contractors.

The Court also held that the exemption defense did not apply for several reasons. First, the employer paid the LVNs on an hourly basis, not a salary. Second, the Court held that the LVNs were not engaged in a "learned or artistic profession" within the meaning of the exemption. Instead, the Court found that the LVNs were "primarily engaged" in work that "either required no particular skill and knowledge, such as bathing and changing diapers, or that required only the limited education and clinical training of an LVN [high school diploma, plus one year of combined classroom instruction and clinical rotation]." Third, the LVNs did not "customarily and regularly exercise discretion and independent judgment" as defined in the regulations. Instead, they "applied [their] knowledge in following prescribed procedures." As such, they could not be exempt employees.

The Court's ruling on summary adjudication establishes liability against the employer. The case will now go to trial on damages.

United States Supreme Court Grants Certiorari in Ninth Circuit Arbitration Case

On January 15, 2010, the United States Supreme Court granted a writ of certiorari in Rent-A-Center, West, Inc. v. Jackson, 130 S.Ct. 1133, 78 USLW 3271, 78 USLW 3407, 78 USLW 3413. The Court placed the matter on an expedited briefing schedule. I did not blog the Ninth Circuit's underlying decision in Jackson v. Rent-A-Center, West, Inc. 581 F.3d 912 (C.A.9 (Nev.), 2009), which came down in September, just before I broke my leg. Here is a summary from Public Justice, which has filed an amicus brief on behalf of the respondent employee:

Antonio Jackson, an African-American man who worked for Rent-A-Center in Nevada, claims that the company discriminated against him on grounds of race when it repeatedly denied him promotions and promoted non-African-American employees with less experience. When he sued in federal court alleging violations of federal civil rights laws, Rent-A-Center moved to compel arbitration under a contract it had required Jackson to sign as a condition of working for the company. The clause provides that the arbitrator, not a court, has "exclusive authority" to resolve any dispute, including a dispute about whether the arbitration clause itself is valid. Jackson fought enforcement of the clause, arguing that several of its provisions -- including terms requiring him to pay half of the filing fees and arbitration costs and limiting the discovery he could take to prove his case -- were unconscionable under state law. He also argued that the clause was one-sided and unenforceable because it permitted Rent-A-Center, but not its employees, to pursue its own claims in court. The district court granted Rent-A-Center's motion, enforced the clause, and held that any challenges to its validity were for the arbitrator to decide.

The U.S. Court of Appeals for the Ninth Circuit reversed, holding that under U.S. Supreme Court precedent, courts -- not arbitrators -- must determine the threshold question of whether an arbitration clause is valid and enforceable. The court explained that, because "arbitration is a matter of contract," no party can be ordered to arbitrate before a judicial determination that the arbitration clause creates a contractual duty to arbitrate.

I am adding this case to our watch-list of pending appellate cases.

Department of Labor Wage and Hour Division Issues First Administrator Interpretation, Finds That Loan Officers Are Not Exempt under Federal Law

On March 24, 2010, the United States Department of Labor (DOL) Wage and Hour Division (WHD) announced that it would begin issuing "Administrator Interpretations" to address important issues. The WHD web site states:

In order to provide meaningful and comprehensive guidance and outreach to the broadest number of employers and employees, the Wage and Hour Administrator will issue Administrator Interpretations when determined, in the Administrator’s discretion, that further clarity regarding the proper interpretation of a statutory or regulatory issue is appropriate. Administrator Interpretations will set forth a general interpretation of the law and regulations, applicable across-the-board to all those affected by the provision in issue. Guidance in this form will be useful in clarifying the law as it relates to an entire industry, a category of employees, or to all employees. The Wage and Hour Division believes that this will be a much more efficient and productive use of resources than attempting to provide definitive opinion letters in response to fact-specific requests submitted by individuals and organizations, where a slight difference in the assumed facts may result in a different outcome. Requests for opinion letters generally will be responded to by providing references to statutes, regulations, interpretations and cases that are relevant to the specific request but without an analysis of the specific facts presented. In addition, requests for opinion letters will be retained for purposes of the Administrator’s ongoing assessment of what issues might need further interpretive guidance.

WHD also issued its first Administrative Interpretation (No. 2010-1), finding that mortgage loan officers typically do not qualify as bona fide administrative employees under the Federal Fair Labor Standards Act (FLSA) and should not be treated as exempt from the FLSA's minimum wage and overtime compensation requirements.

WHD begins by noting that the employee's job duties and compensation determine exempt status, rather than the job title. WHD then reviews the job duties typically performed by mortgage loan officers. WHD notes that minimum wage and overtime exemptions “are to be narrowly construed" against the employer and reviewed the requirements for the exemption:

1. The employee must be compensated on a salary or fee basis as defined in the regulations at a rate not less than $455 per week;
2. The employee’s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and
3. The employee’s primary duty must include the exercise of discretion and independent judgment with respect to matters of significance. 29 C.F.R. § 541.200.

WHD focuses on the second of these requirements. Using the "production vs. administrative dichotomy, WHD concludes that mortgage loan officers typically "have a primary duty of making sales," which is a production function, rather than administrative. In addition, WHD notes that loan officers typically are paid commissions based on sales, are trained in sales techniques, and that "many employers defending against FLSA lawsuits brought by mortgage loan officers argue that the employees are exempt under section 13(a)(1) as outside sales employees."

WHD goes on to conclude that "because homeowners [who interact with loan officers] do not have management or general business operations, a typical mortgage loan officer’s primary duty is not related to the management or general business operations of the employer's customers."

Finally, WHD clarifies a 2006 opinion letter, FLSA2006-31 (Sept. 8, 2006), which "appears to assume that the example provided in 29 C.F.R. § 541.203(b) creates an alternative standard for the administrative exemption for employees in the financial services industry." WHD clarifies that "the administrative exemption is only applicable to employees that meet the requirements set forth in 29 C.F.R. § 541.200. The regulation at 29 C.F.R. § 541.203(b) merely provides an example to help distinguish between those employees in the financial services industry whose primary duty is related to the management or general operations of the employer’s customers and those whose primary duty is selling the employer’s financial products."

Judge Orders Immediate End to Furloughs for Tens of Thousands of State Workers

The Los Angeles Times is reporting that Alameda County Superior Court judge Frank Roesch has ordered the state to end furloughs immediately for tens of thousands of state workers and that the Schwarzenegger administration intends to appeal the order.

If anyone has seen analysis of the point, I am interested in knowing whether and how this will impact Superior Court funding and lay-offs.

Lawyer Can't Sue Lawyer for Fraud Based on "Approval" of Agreement

This is not a wage and hour issue, but it struck me as being so ridiculous that I had to write about it.

The signature block on a contract bears an attorney signature under the legend “approved as to form and content.” Does that signature amount to an actionable representation to an opposing party's attorney? We conclude that it does not.

Thus starts the Second District Court of Appeal's decision in Freedman v. Brutzkus, ___ Cal. App. 4th ___, 2010 WL 820478 (March 11, 2010). Mr. Brutzkus represented a client in negotiating a trademark licensing agreement. Mr. Brutzkus and the other party's counsel, Mr. Freedman, executed the agreement under the line, "Approved as to Form and Content." After the agreement fell apart, Mr. Freedman sued Mr. Brutzkus, alleging that:

Brutzkus made an actionable representation to Freedman as to the accuracy of the agreement. Freedman pled causes of action for intentional misrepresentation, fraudulent concealment, and fraudulent inducement that rested on Brutzkus's alleged misrepresentation in approving the agreement “as to form and content.” The trial court sustained respondents' demurrer as to all causes of action without leave to amend, and entered judgment for respondents. Freedman filed a timely

appeal from the judgment.

Slip op. at 4.

We conclude that the only reasonable meaning to be given to a recital that counsel approves the agreement as to form and content, is that the attorney, in so stating, asserts that he or she is the attorney for his or her particular party, and that the document is in the proper form and embodies the deal that was made between the parties.

Slip op. at 5-6.

Even though the Court of Appeal came to the (obviously) correct conclusion, maybe it is time that we as lawyers reconsider "approving" our clients' agreements. What are we approving, anyway? I don't want to get into a Roseanne Roseannadanna-style rant, but what's the point? It's the parties' agreement, not the attorneys'. We as lawyers give our best advice, but at the end of the day, it's the client who has to decide whether to enter into a particular agreement or not. The lawyer's "approval" adds nothing.

Court of Appeal Affirms Class Cert Denial in Restaurant Manager Case

In Arenas v. El Torito Restaurants, Inc. (2010) 183 Cal.App.4th 723, the plaintiffs brought a mis-classification class action, alleging that defendant improperly designated certain employees as exempt from California's overtime requirements. The trial court denied the plaintiffs' motion for class certification, holding that individual questions predominated because of differences in individual restaurant operations. The Court of Appeal affirmed, holding that the trial court did not abuse its discretion.

Quote of the Week: Bobby Kennedy

It is from numberless diverse acts of courage such as these that the belief that human history is thus shaped. Each time a man stands up for an ideal, or acts to improve the lot of others, or strikes out against injustice, he sends forth a tiny ripple of hope, and crossing each other from a million different centers of energy and daring those ripples build a current which can sweep down the mightiest walls of oppression and resistance.

...

Few men are willing to brave the disapproval of their fellows, the censure of their colleagues, the wrath of their society. Moral courage is a rarer commodity than bravery in battle or great intelligence. Yet it is the one essential, vital quality for those who seek to change the world which yields most painfully to change.

Robert F. Kennedy, speaking at the University of Capetown on June 6, 1966.

I have seen this quote many times, but had never read the entire speech until today. It is a remarkable call to action. You can find it at the JFK Presidential Library web site.