California Employment Law Report : Los Angeles Employment Lawyer & Attorney : Anthony Zaller Law Firm : California Employment Law Report

No – this is not an article about what type of policies you should have in place for your holiday party (a favorite topic for articles by employment lawyers during this time of year). However, as I have shifted all of my holiday shopping to Internet-based retails, the ManPower Blawg points out that many company employees have apparently made this shift as well. It reports about the Information Systems and Audit Control Association (ISACA) findings on employee use of computers for shopping:

• 63% of employees shop online using their work computers
• 55% of employers allow online shopping but don’t educate employees about potential risks
• 26% of employees shop online without adequately checking web site security
• employees between the ages of 18-24 spend the most time shopping online and take the most risks
• employers lose an average of $3,000+ in productivity per employee due to online shopping

Personally, as long as the job is getting done, I do not have much of a problem with employees shopping on-line, but it definitely can be abused. The employee who wants to waste his or her time at work will always be able to find ways to do so, and having a policy in place to prohibit this will probably not change their behavior. Also, having a policy strictly forbidding employee shopping on the internet probably hurts morale. 

But, with that said, your company’s IT infrastructure can be at risk. As the risk of infection is about five times greater for companies that allow Internet usage by staff, and surfing the internet is a greater risk than posed by email attachments. So a company's policy needs to be determined on a case-by-case basis.  But unlike a lot of my colleagues, given everyone's desire to be connected 24/7, I think a policy permitting internet use at work (given some boundaries) could be effectively implemented.

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Parties have an absolute right - even a constitutional right - to communicate freely with putative class member employees prior to a class action being certified. Two of the leading cases in California on this topic are Parris v. Superior Court (2003) 109 Cal.App.4th 285 and Atari, Inc. v. Superior Court (1985) 166 Cal.App.3d 867.

In Parris v. Superior Court, the court held that a blanket requirement of prior judicial approval for parties’ communication with potential class members in a wage and hour class action before certification of the class action is a prior restraint of free speech. In Parris, the plaintiff sought to mail a notice to potential class members, and the court held that it did not have to approve the communications between plaintiff and the class members.  The court stated:

In concluding that, absent specific evidence of abuse, an order prohibiting or limiting precertification communication with potential class members by the parties to a putative class action is an invalid prior restraint, we find persuasive the reasoning of the United States Court of Appeals for the Fifth Circuit, which has held an order "restricting communications by named plaintiffs and their counsel with actual and potential class members not formal parties to the suit ... violated the First Amendment to the Constitution."

The court noted that it could only intervene in exceptional cases, not merely because “fear of potential abuse” could occur from the communications.

Likewise, in Atari, Inc. v. Superior Court the court held that the trial court erred when it permitted plaintiffs to communicate with other potential class members, but at the same time, restricted the employer from communicating with the same employees. The Atari court stated:

We conclude that the evidence of record does not justify denying any party equal access to persons who potentially have an interest in or relevant knowledge of the subject of the action, but who are not yet parties.

The court said that absent the showing of threatened or potential abuse, both sides should be allowed to investigate the case fully, which necessarily entails speaking with witness-employees.

Underlying this issue is usually the Plaintiff's law firm motivation to spread their contact information to potential class members.  They will usually raise the objection that the employer is spreading false information about the lawsuit, and therefore a "neutral" notice should be mailed out to employees.  They always propose that this notice contain their firm's phone number.
 

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Laura Young was terminated after closing down a 24-hour service station for several hours, in violation of company policy, sued her employer and her supervisor, Angela Lopez (the station manager), alleging claims of harassment on the basis of mental disability, retaliation, and wrongful termination, among others.

The employer and supervisor won summary judgment, ending the case. Lopez, the supervisor personally sued by plaintiff, filed a motion for attorney fees under Government Code section 12965, contending that Exxon, on behalf of Lopez, incurred substantial attorney fees defending Young’s “unreasonable, frivolous, and meritless claims against Lopez individually.” Lopez sought $18,750 in attorney fees (which comprised ¼ of the total attorney’s fees in the case). The court agreed that plaintiff’s claims against the supervisor were frivolous, which entitled the supervisor reimbursement of attorney’s fees.  However, the trial court only awarded nominal attorney fees of $1.00. The supervisor appealed this ruling, seeking additional attorney’s fees.

In only allowing Lopez to recover $1.00 in attorney’s fees, the trial court noted that an award to Lopez “would actually be an award to Exxon, which does not claim [Young’s] claims against it were frivolous.” The trial court concluded this “does not seem right,” and awarded nominal attorney fees of $1.00.

The appellate court here up held the trial court’s nominal attorney fee award of $1.00. The court stated:

In actions under the FEHA, the court, in its discretion, may award reasonable attorney fees to the prevailing party. (Gov. Code, § 12965, subd. (b).) California courts have followed federal law, and hold that, in exercising its discretion, a trial court should ordinarily award attorney fees to a prevailing plaintiff, unless special circumstances would render an award of fees unjust. A prevailing defendant, however, should be awarded fees under the FEHA only “in the rare case in which the plaintiff’s action was frivolous, unreasonable, or without foundation.” (Rosenman v. Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro (2001) 91 Cal.App.4th 859, 864 (Rosenman).) Rosenman cites the high court’s observation that the strong equitable considerations supporting an attorney fee award to a prevailing plaintiff – including that fees are being awarded against a violator of federal law, and that the federal policy being vindicated by the plaintiff is of the highest priority – are not present in the case of a prevailing defendant. (Id. at p. 865, citing Christiansburg Garment Co. v. EEOC (1978) 434 U.S. 412, 418-419 (Christiansburg).)

The appellate court approved that the trial court has discretion to set the amount of attorney's fees recoverable to a prevailing defendant, providing the following four reasons:

1. That the Rosenman case sets the standard by which to measure the exercise of the trial court’s discretion in awarding attorney fees to a prevailing defendant in an FEHA case: namely, only in the “rare case” in which the plaintiff’s action was frivolous, unreasonable or without foundation.
2. As Exxon argued, there are many cases in which the courts have awarded attorney fees to prevailing parties who, like Lopez, are not actually liable for or have not incurred or paid fees. But in all those cases, the attorney fee award actually benefits the prevailing party or an entity which has provided the services and would otherwise not be compensated for them.
3. There was no evidence that Exxon incurred fees on Lopez’s behalf that it would not have incurred had Lopez not been named as a defendant.
4. As the Rosenman case instructs, the trial courts should “make findings as to the plaintiff’s ability to pay attorney fees, and how large the award should be in light of the plaintiff’s financial situation.”

The case, Young v. Exxon Mobil Corporation, can be downloaded from the court’s website here.
 

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While severance is not required under the law, many employers who are terminating or laying employees off voluntarily offer severance to employees. Usually, the severance is tied to a release of claims that the employee may have against the employer.

I am often asked about the amounts appropriate amounts of severance. The Connecticut Employment Law Blog recently quoted a study about the average weeks of severance for every year of employment offered to employees:

Voluntarily Separated:

• Top Executives - 2.76 weeks
• Senior Executives - 2.23 weeks
• Department Heads/Managers - 1.55 weeks
• Professional/Technical - 1.39 weeks
• All other employees - 1.23 weeks

Involuntarily Separated:

• Top Executives - 3.04 weeks
• Senior Executives - 2.49 weeks
• Department Heads/Managers - 1.78 weeks
• Professional/Technical - 1.60 weeks
• All other employees - 1.44 weeks

Also, employers in California usually ask the employee for a release of any known and unknown claims the employee may have against the employer. Under California Civil Code section 1542, an employee must specifically waive their right under section 1542 in order to be a valid release of unknown claims.  The agreement itself must recite Civil Code section 1542 and that the employee is waiving their right under this section.  It is also important that the document clearly specify the extent of the release.  For example, does it apply to the employment relationship or to specific claims the employee has asserted against the employer?
 

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The Ohio Employer's Law Blog notes that businesses are using very clever advertisements to fight the passage of the Employee Free Choice Act: 

The ad was created by UnionFacts.com, a non-profit union watchdog group. The Ohio Employer's Law Blog (written by Jon Hyman) has a series of posts I highly recommend that explains management's view of the Employee Free Choice Act.

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Wal-Mart settled another wage and hour class action in Minnesota for $54 million. The class includes as many as 100,000 employees who worked from September1998 to November 2008. The judge found that Wal-Mart had violated Minnesota's Fair Labor Standards Act more than 2 million times. This settlement is similar to a 2005 verdict in California for $172 million for violations of California’s meal and rest break requirements and another case in Pennsylvania where Wal-Mart workers received $78.5 million.

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Plaintiff filed a petition for review to the California Supreme Court in Brinkley v. Public Storage, Inc.  Shortly after the Supreme Court granted review of Brinker v. Superior Court, the Brinkley decision was issued by a lower appellate court (click here to read the opinion in Brinkley v. Public Storage, Inc.).  The appellate court in Brinkley held that:

• Meal periods need not be provided within the first five hours of the shift.
• Defendant must provide meal periods but need not ensure that they are actually taken.
• Defendant did not violate Labor Code section 226.7 because defendant made rest periods available.

This ruling basically agrees with the appellate court's decision in Brinker. The holdings in Brinkley and Brinker definitely make plaintiff's attempt to certify class actions in meal and rest break cases much more difficult.  If the standard is that employers only need to provide (and not ensure) meal breaks, then the inquiry into why employees did not take meal breaks becomes more individualized, which means a court probably cannot make these determinations on a class-wide basis.  For example, the court would have to determine if employees voluntarily worked through meal breaks, as opposed to whether the employee was required to work through the breaks. 

I expect the California Supreme Court will issue a grant and hold in Brinkley, making it non-binding on California trial courts until a final ruling is issued by the Supreme Court on similar issues in Brinker v. Superior Court.

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Christine Brewer, a longtime waitress employed at the Cottonwood Golf Club restaurant, quit her job in March 2005. Shortly thereafter, Brewer filed this action against her employer, Premier Golf Properties, LP, dba Cottonwood Golf Club alleging a causes of action for age discrimination, for meal and rest break violations (among other Labor Code violations), sought compensatory and punitive damages, and attorney fees.

The jury returned special verdicts in favor of Brewer on most of her Labor Code violations, and allowed Brewer to recover attorney fees and costs pursuant to section 218.5 and costs pursuant to Code of Civil Procedure section 1032.

The issue in this case is that the jury also granted plaintiff punitive damages for $195,000. In order for there to be punitive damages, the defendant must act with fraud, oppression or malice toward Brewer. The jury found that the defendant had acted with malice, but only in regards to the Labor Code violations and not on the conduct underlying Brewer's age discrimination claim.

The court held that Labor Code violations alone could not support the finding for punitive damages:

We are convinced, both by application of the "new right-exclusive remedy" doctrine and under more general principles that bar punitive damages awards absent breach of an obligation not arising from contract, punitive damages are not recoverable when liability is premised solely on the employer's violation of the Labor Code statutes that regulate meal and rest breaks, pay stubs, and minimum wage laws.

The “New Right-exclusive Remedy” Doctrine Bars Punitive Damages for Labor Code Violations

The court explained that the “new right-exclusive remedy” doctrine provides that "[w]here a statute creates new rights and obligations not previously existing in the common law, the express statutory remedy is deemed to be the exclusive remedy available for statutory violations, unless it is inadequate." The court acknowledged that meal and rest break provisions of the Labor Code created new rights that were not already provided under common law (i.e., meal and rest break requirements) and that the statutes provided an adequate remedy (i.e., premium wage of one hour of pay at the employee’s regular rate of pay for a violation). Therefore, because the right to meal and rest breaks is created by a statute that provides for adequate remedies, an employee could not add punitive damages to his or her claim.

Punitive Damages Not Available For Obligations Arising From Breach Of Contract

The court also found that, even were the remedies provided by the statutory scheme not the exclusive remedies for the new rights, punitive damages would not be available in this case because punitive damages can only be recovered "for the breach of an obligation not arising from contract." (Civ. Code, § 3294) The court stated that Brewer's claims for unpaid wages and missed meal and rest breaks all arise from her “employment contract” and, therefore, punitive damages were not available for this additional reason.

The case, Brewer v. Premier Golf Properties, LP, can be read from the court's website in Word or PDF. 

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Perhaps one of the most misunderstood and improperly applied issues in California is how to treat commissioned sales people. Here are some of the most common mistakes I’ve encountered that can create substantial liability for employers.

Mistake: Treating all commissioned sales people as exempt employees (i.e. paying them a straight salary). 

Usually there are two exemptions that sales people could qualify for: outside sales exemption or inside sales exemption under California law. If the employee meets one of these exemptions, it only means the employee is not entitled to overtime pay – all other wage and hour laws still apply. 

Outside Sales Exemption

To qualify for the outside sales exemption, as the name implies, the employee must work outside of the office for more than 50% of their working time. 

Inside Sales Exemption

To qualify for the inside sales exemption, the employee must (1) earn more than one-and-one-half times the minimum wage (as of November 2008 the minimum wage is $8.00/hr in California) and (2) more than one-half of the employee’s compensation is from commissions. Employers have to be careful because there is no equivalent exemption to the inside sales exemption under Federal law –and even though an employee may qualify to be exempt under California law for overtime, they still may have to pay overtime under Federal law. 

It is possible that the employee may qualify for another exemption, such as professional, administrative, or executive, but the two exemptions discuss above most often apply to sales personnel.

Mistake: Making illegal deductions from the employee’s pay for orders that were cancelled.

There have been several court decisions that significantly restrict an employer’s ability to take an offset against an employee’s wages.  Cases have held that employers may not make deductions from employees’ commissions when the customer returns the sold items under certain circumstances. Also, another case held that the requirement that the employee make a “balloon payment” for the entire remaining balance of outstanding loan owed to the employer when the employee leaves employment is an unlawful deduction - even where the employee authorized such payment in writing. Finally, another case held that it was unlawful for employers to deduct from an employee’s current payroll for past salary advances that were in error. As these cases illustrate, employers need to be very careful when deducting from an employee’s pay. Even though the deduction may seem innocent, it could possibly violate California law.

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Below is my Slideshare.net slide show on my previous post about the top 10 stupidest ideas California employers could have:

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Lorraine Henderson, the director of the Port of Boston, was charged with hiring illegal immigrants to clean her home. "She’s supposed to be deporting aliens, not hiring them," said Assistant US Attorney Brian T. Kelly, chief of the public corruption unit.

The housecleaner wore a wire during conversations with Henderson. The article reports that Henderson counseled the housekeeper about how to avoid being caught:

"You have to be careful 'cause they will deport you. Be careful," Henderson told the housekeeper in a conversation Sept. 9, 2008, that was recorded on the wire. "Wow, wow, if you leave they won't let you back … you can't leave, don't leave … 'cause once you leave you will never be back."

Not sure which category to post this entry under - but thought it was worth a laugh.
 

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 Today marks the official introduction of the California Employment Law Report.

Why start another blog about California employment law? I’ve been continually blogging about California employment law since about the middle of 2005 in various forms. This blog is my “excuse” to keep up-to-date, think about law in different creative ways that sometimes practicing does now allow for, and to keep the practice of employment law fun. Yes, I said fun. For lawyers out there who are burnt-out on the practice of law, and who are ready to turn to a new profession, I recommend that you start your own law firm and a blog. As my own boss, I can now see how rewarding the practice of law truly is, and it took having to not worry about whether I am an hour or two short on my billables or stuck litigating a strategy I do not believe is the best for the client. I hope that this independent voice will come through on this blog, and will add to the discussion about California employment law. 

The technology that allows for blogs is quickly changing our world. This is very similar to (if not to a greater extent) the changes the printing press had on society. I cannot state the importance of the Internet’s role in almost every aspect of life today. The Internet has changed, and will continue to change, the practice of law and lawyers need to keep up. There are a few still out there trying to fight this change, but it is all too apparent that we live in a new world (and have been living in it for some time now). In addition to employment law, this blog will also focus on how technology affects the employer-employee relationship and the practice of employment law from a litigation perspective. 

Adapting to these great developments in technology, I am conducting webinars on new developments in employment law, and will occasionally post the audio of the webinars here. I also will post my podcasts, which can be subscribed to through iTunes. I can also be followed on Twitter at @Anthonyzaller. I am sure there will be many new ways I will be able to communicate with anyone who is interested in the near future – and I will try my best to keep up. 

I am looking forward to the discussion…

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