The U.S. Supreme Court ruled today in Epic Systems Corp. v. Lewis, that employment arbitration agreements that bar class actions are enforceable.  The vote was 5 to 4 in upholding the use of arbitration agreements in the workplace.

The plaintiff in the case argued that employees could not waive their rights in an agreement to be a part of a class action to pursue employment claims because this waiver violated the National Labor Relations Act (“NLRA”) because these types of claims are “concerted activities” protected by § 7 of the NLRA.  This section guarantees employees “the right to self-organization, to form, join, or assist labor organizations, to bargain collectively . . ., and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.”

The Court disagreed with plaintiff’s reading of § 7, and held: “The NLRA secures to employees rights to organize unions and bargain collectively, but it says nothing about how judges and arbitrators must try legal disputes that leave the workplace and enter the courtroom or arbitral forum. This Court has never read a right to class actions into the NLRA – and for three quarters of a century neither did the National Labor Relations Board.”

In 2011, the Supreme Court issued a decision in AT&T Mobility v. Concepcion, upholding the enforceability of class action waivers in the consumer context, such as with cell phone providers, cable providers or services provided by internet companies.  The plaintiff in Epic Systems argued that the employment context was different because of the rights guaranteed to employees under the NLRA.  While many employers were using arbitration agreements with class action waivers, the ruling in Epic Systems confirms the enforceability of these agreements between employees and employers.

This decision resolves a split in authority between the Ninth Circuit Court of Appeals (Ernst & Young v. Morris), the Fifth Circuit Court of Appeals (National Labor Relations Board v. Murphy Oil USA, Inc.), and the Seventh Circuit Court of Appeals (Epic Systems Corp. v. Lewis).

See my prior post for additional background on the case and impact on California employers.

Chipotle had an $8 million verdict against it in a California court last week for a wrongful termination claim.  The verdict is a surprising huge amount and it should be a clear warning to employers about how important it is to document employee conduct, and then store and be able to access that evidence if ever needed to defend a lawsuit.  I posted my thoughts in the video below on Instagram:

I’ve started posting these shorter videos and thoughts on Instagram, so be sure to follow me at:

https://www.instagram.com/anthonyzaller/

On May 8, 2018, the court in Ibarra v. Wells Fargo Bank entered an order awarding Plaintiffs who filed a class action against the bank $97.2 million for rest break violations.  The original complaint alleged various wage and hour violations, and after the parties filed cross motions for summary judgment, all but the rest break claims were dismissed.  The claims were brought under Labor Code section 226.7 and derivative claims under California’s Unfair Competition Law (Business & Professions Code section 17200).  This Friday’s Five reviews five lessons employers should learn from this costly ruling for Wells Fargo:

1. Rest break obligations

As a review, in 2012 the California Supreme Court issued its monumental decision regarding meal and rest breaks under the California Labor Code in Brinker Restaurant Group v. Superior CourtIn terms of rest breaks, the Brinker Court held that, “[e]mployees are entitled to 10 minutes’ rest for shifts from three and one-half to six hours in length, 20 minutes for shifts of more than six hours up to 10 hours, 30 minutes for shifts of more than 10 hours up to 14 hours, and so on.”

This rule is set forth in this chart:

Regarding when rest breaks should be taken during the shift, the Court held that “the only constraint of timing is that rest breaks must fall in the middle of work periods ‘insofar as practicable.’” The Court in Brinker stopped short of explaining what qualifies as “insofar as practicable”, and employers should closely analyze whether they may deviate from this general principle.

2. Use caution on how to compensate piece-rate workers and activity based compensated employees for rest breaks

The California Wage Orders require employers to count “rest period time” as “hours worked for which there shall be no deduction from wages.”  (See Cal. Code Regs. tit. 8, § 11070, subd. 12(A), italics added.)  In Bluford v. Safeway Stores, Inc. (2013) 216 Cal.App.4th 864 the court interpreted this language to require employers to “separately compensate[ ]” employees for rest periods where the employer uses an “activity based compensation system” that does not directly compensate for rest periods.  (Id. at p. 872.)

In Vaquero v. Stoneledge Furniture LLC, the court explained that piece-rate compensation plans do not directly account for and pay for rest periods because the employee is not working during the rest period and therefore is not being paid.  The Wage Order requires employers to separately compensate employees for rest periods if an employer’s compensation plan does not already include a minimum hourly wage for such time.  The court set out in Stoneledge that Wage Orders apply “equally to commissioned employees, employees paid by piece rate, or any other compensation system that does not separately account for rest breaks and other nonproductive time.”

The compensation structure at issue in Wells Fargo involved advances against monthly draws, commissions, and other incentive bonuses.

3. Penalty for rest break violations

“If an employer fails to provide an employee a … rest … period[,] … the employer shall pay the employee one additional hour of pay at the employee’s regular rate of compensation for each workday that the … rest … period is not provided.” Cal. Lab. Code § 226.7(c); see also IWC Wage Order 4-2001 § 12(B).

In Wells Fargo, the court found that the company had not provided paid rest breaks for its employees, and therefore faced liability under California Labor Code section 226.7 and California Business & Professions Code section 17200 of one additional hour of pay per workday for the number of shifts in excess of 3.5 hours during the class period.  In Wells Fargo’s case, this amounted to 1,880,003 qualifying work shifts.

4. How to determine employees’ regular rates of pay

The major issue for the parties in the Wells Fargo litigation turned on the proper method of calculating the employees’ “regular rate of compensation” for rest break violations.  Wells Fargo maintained that this should only be calculated using the employee’s hourly rate that was listed on the employee’s wage statements.  If the court adopted this method, it would have resulted in damages of approximately $24.5 million.

Plaintiffs on the other hand argued that the “regular rate of compensation” should not only be the employee’s hourly rate, but should also include the employees’ commissions and other non-discretionary pay earned during the pay period.  The Plaintiffs argued that this total should then be divided by the total hours worked during the pay period.  According to this methodology, the damages equaled approximately $97.2 million.

In agreeing with the Plaintiffs, the court noted that the employees’ “normal compensation was not comprised solely or even primarily of pay calculated at an hourly rate. By definition, it included hourly pay, incentive pay, and overtime premiums, and the hourly pay was stated to be only an advance on commissions.”

5. But there is a disagreement among courts on how to calculate the “regular rate” for purposes of rest break violations

The court in Wells Fargo noted that other courts have come to the different conclusion that based on the language in Labor Code section 226.7 that items like commissions should not be included in the “regular rate” when calculating damages for rest break violations.  The court noted the following cases, but declined to follow their reasoning: Brum v. MarketSource, Inc., 2:17-cv-241-JAM-EFB, 2017 WL 2633414, at *3-5 (E.D. Cal. June 19, 2017); Wert v. U.S. Bancorp, No. 13-cv-3130-BAS (BLM), 2014 WL 7330891, at *3-5 (S.D. Cal. Dec. 18, 2014), reconsideration denied, 2015 WL 3617165 (S.D. Cal. June 9, 2015); Bradescu v. Hillstone Rest. Grp., Inc., No. SACV 13-1289-GW (RZx), 2014 WL 5312546, at *7-8 (C.D. Cal. Sept. 8, 2014), tentative ruling confirmed as final, 2014 WL 5312574 (C.D. Cal. Oct. 10, 2014).

Given the split in decisions, Wells Fargo is reported to have plans to appeal the ruling.

 

I just updated my Facebook settings to prohibit the software company from conducting facial recognition scans on my photos today due to a notification from Facebook that its software would be analyzing my likeness to automatically recognize me in photos posted on Facebook.  This was a coincidence because today I spoke at the American Bar Association’s National Symposium on Technology in Labor and Employment Law on the topic of biometrics in the workplace.  As I’ve written about previously, Facebook has been sued for violating Illinois’ Biometric Information Privacy Act (BIPA) for the analysis it performs on individual’s images that are uploaded to Facebook, and indeed other companies are dealing with legal issues arising from Illinois BIPA.  This Friday’s Five consists of my five ruminations about biometrics use in the workplace.

1.     Technology is developing faster than society’s perceptions of privacy and the law’s ability to keep up. 

 Technology is quickly developing rapidly on biometric gathering and analysis of the information.  As reported today, cameras will likely have the ability to gather data to understand how an individual is feeling and thinking.  We are not at the point of a Star Trek type of body scanner to determine in an individual is sick or injured, but it is not inconceivable that this will be possible in the near future. Current technology allows the collection of a lot of biometric information that most of the public probably does not know is possible, such as thermo-images, identification by your “ear print,” heartbeats and possibly EEGs. It raises the key question: is your ear print, heartbeat, heat signature, or EEG signals private information?

2.     Only 3 states have legislation regarding the collection and analysis of biometric information of individuals. 

A bit surprising to me, all but three states allow for the collection and analysis by employers or consumer companies of biometric information without any type of disclosures or notice to individuals. Illinois, Texas and Washington state have statues that require some type of notice and voluntary consent before biometric information is collected by a private company.  There is no restriction regarding law enforcement collection of biometric data.

On one hand it is not private – it is publicly shared and information that can be acquired through very unobtrusive means.  There does not have to be any contact (except for the EEG monitoring – which requires probes placed on the scalp) with the individual to obtain this information.  Indeed, this information can often be derived through taking a picture, with nothing more complicated than the camera found on most mobile phones.

On the other hand, the technology being developed can gather more intimate information about people beyond their identity.  Thermo-images, EEG scans, and carbon dioxide monitors can gather a lot more information than previously imaginable about an individual’s health and mood.  As this technology continues to develop, it will be able to derive even more detailed information about people’s health, propensities to become sick, likelihood of having cancer, or maybe even be able to detect cancer.

3.     Biometric information is useful in the employment context. 

Employers have already been using biometric information to track employees and for security issues, such as permitting access to certain areas based on fingerprint or retinal scans.  Employees are able to share passwords very easily to get around password safeguards, but it is harder (but not impossible) for them to share fingerprints or “earprints” (yes, you can be identified by your earprint, which are more reliable than fingerprints).

In the future, employers may be interested in tracking blood pressure, heartbeats, and the general anxiety level of employees for workers’ safety, workers comp claims, and productivity.  To the extent the employee asserts some accident or incident occurred on a certain day, it would be useful to have this biometric information for the same time period.  While it would be useful, does it violate an employee’s right to privacy?  While employees do have a reduced privacy rights a work as long as the employer provides notice to the employee that they may be monitored, California courts have also been clear in holding that employees do not forfeit all privacy rights while at work.

4.     If employers collect biometric information, is it simply creating a database that can be used by other third parties?

My libertarian tendencies cause an uneasy feeling in my stomach when realizing the current capabilities with biometric information.  This is partly while I opted out of Facebook’s facial recognition setting mentioned above.  I believe that many people have a concern that while an individual may consent that a company or an employer may collect and analyze their biometric information, it is unknown about what may happen to this information in the future.  This information is an asset that could be acquired by other companies through company purchases or mergers.  This would result in the individual’s biometric information being available to third-parties that the individual never anticipated would have access to the information.  There are currently no legal safeguards restricting who has access to biometric information, expect the couple of states mentioned above that have passed legislation on this issue.

5.     Once biometric data is hacked, it may be hard to identify people. 

Again, I recognize that employers and companies have legitimate uses for biometric information.  However, the type of information that is contained in biometric information under current technology and the information that will be able to be gathered by future technology is critical to an individual’s identity.  What if the data is hacked and used by a third-party to steal an individual’s identity?  How will one be able to prove that they are who they claim to be if their finger print data base has been changed by a hacker?  These are issues that will have to be resolved as this technology and area of the law are developing.

I’m conducting a poll of the readers to see if they believe biometric information is private or not.  Please vote and share your comments here, and I will report back the data.

The National Labor Relations Board issued a ruling this week that reverses the Board’s ruling issued under the Obama administration in regards to who can be held a “joint employer.”  The ruling is critical to businesses in the franchisee industry as well as businesses that use contract workers.  This Friday’s Five reviews five keys issues on the NLRB’s ruling in Hy-Brand Industrial Contractors and Brandt Construction Co. and the joint employer test for California employers:

1. The Hy-Brand decision overrules the NLRB’s prior holding in Browning-Ferris

In Browning-Ferris, the Board held that even when two entities have never exercised joint control over essential terms and conditions of employment, and even when any joint control is not “direct and immediate,” the two entities will still be joint employers based on: (1) the mere existence of “reserved” joint control, or (2) based on indirect control, or (3) control that is “limited and routine.”

The NLRB’s ruling in Hy-Brand stated, “We find the Browning-Ferris standard is a distortion of common law as interpreted by the Board and the courts, it is contrary to the Act, it is ill-advised as a matter of policy, and its application would prevent the Board from discharging one of its primary responsibilities under the Act, which is to foster stability in labor-management relations.”

2. Joint-employer relationship can only be established by “direct and immediate” control

In reverting back to its pre-Browing-Ferris test, the NLRB restores the joint-employer test that it set forth in Airborne Express, 338 NLRB at 597 fn. 1.  In Airborne Express the Board explained that, “[t]he essential element in [the joint-employer] analysis is whether a putative joint employer’s control over employment matters is direct and immediate.” A company’s right to approve hires is not enough to establish a joint-employer relationship, but instead, “[i]n assessing whether a joint employer relationship exists, the Board does not rely merely on the existence of such contractual provisions, but rather looks to the actual practice of the parties.”

3. The NLRB’s holding makes it consistent with Federal and some state courts’ test for joint-employer

The NLRB’s decision stated that its reversal of the standard use in finding a joint-employer makes its standard more consistent with Federal and state law court rulings on the issues.  For example, the NLRB cited the following cases: Doe I v. Wal-Mart Stores, Inc., 572 F.3d 677, 683 (9th Cir. 2009) holding that a “finding of the right to control employment requires . . . a comprehensive and immediate level of ‘day-to-day’ authority over employment decisions.”  Gulino v. N.Y. State Educ. Dep’t, 460 F.3d 361, 379 (2d Cir. 2006) (employment relationship must involve a “level of control that is direct, obvious and concrete, not merely indirect or abstract”); SEIU Local 32BJ v. NLRB, 647 F.3d 435, 442–443 (2d Cir. 2011) (“‘An essential element’ of any joint employer determination is ‘sufficient evidence of immediate control over the employees.’”)); Texas World Service Co. v. NLRB, 928 F.2d 1426, 1432 (5th Cir. 1991) (same); Pulitzer Publishing Co. v. NLRB, 618 F.2d 1275, 1280 (8th Cir. 1980) (holding that the Board erred in finding a joint-employer relationship, distinguishing cases “where the companies share direct supervision of the employees involved and control hiring, firing, and disciplining”); see also NLRB v. Denver Building & Construction Trades Council, 341 U.S. 675, 689–690 (1951) (holding that contractor’s supervision over subcontractor’s work “did not eliminate the status of each as an independent contractor or make the employees of one the employees of the other,” emphasizing that “[t]he business relationship between independent contractors is too well established in the law to be overridden without clear language doing so”).

4. California’s joint employer test

“[T]he basis of liability is the defendant’s knowledge of and failure to prevent the work from occurring.”  Martinez v. Combs, 49 Cal.App.4th 35, 70.  Therefore, to be an employer, the entity must have power to prevent the worker from performing work.  If there is no control to prevent the work, the entity cannot be held liable as a joint employer.

California’s Industrial Welfare Commission (IWC) also sets forth law regarding California’s wage and hour requirements.  The IWC definition also includes “any person … who directly or indirectly, or through an agent or any other person, employs or exercises control over the wages, hours, or working conditions of any person.”  The court in Martinez held that a joint employer relationship exists when one entity, which hires and pays workers, places the worker with another entity that supervises the work.  There are many factors that a court can look to in making this determination, and employers need to carefully analyze the facts particular to their situations.

5. Additional joint-employer liability for California employers under Labor Code section 2810.3

Effective January 1, 2015, Labor Code section 2810.3 expanded the liability of “client employers” that obtain workers through temporary agencies or other labor contractors.  The law requires that the client employer who obtains the workers through the agency must share in the liability for any wage and workers compensation issues.  The law also provides that a client employer cannot shift all of the liability for wage and workers’ compensation violations.  However, the law does provide that the client employer can seek indemnity from the labor contractor for violations.  Therefore, it is important for employers who are covered by Labor Code section 2810.3 and who are obtaining workers through a labor contractor to ensure the labor contractor is meeting all wage and workers compensation requirements, and negotiate an indemnity provision in the contact with the labor contractor should any liability arise.

The U.S. Supreme Court heard oral arguments on October 2, 2017 in Epic System Corp. v. Lewis.  And while the case may not make headline news, it has very important ramifications for employers across the country.  At issue is whether employers can legally compel employees to enter into arbitration agreements which contain class action waivers.  The decision is likely to be decided by the U.S. Supreme Court this December.  Below are five issues regarding the Supreme Court’s decision and the impact it may have on employer’s businesses going into 2018:

1. There is a split in Circuit Courts regarding if arbitration agreements with class action waivers are enforceable

Many courts have been upholding arbitration agreements that contain class action waivers, including the California Supreme Court in Iskanian v. CLS Transportation Los Angeles, LLC.  That case held that class action waivers are enforceable, following the standards set forth by the U.S. Supreme Court in AT&T Mobility v. Concepcion.

However, the Ninth Circuit’s ruling in Morris v. Ernst & Young holding that a class action waiver in an arbitration agreement is unenforceable because the class action waiver is contrary to the rights provided to employees under the National Labor Relations Act (“NLRA”).  The arbitration agreements in the Morris case were mandatory, and they contained a “concerted action waiver” clause preventing employees from bringing a class action.  Plaintiffs claimed that the “separate proceedings” clause contravenes the NLRA, 29 U.S.C. §§ 151 et. seq.  The Ninth Circuit held:

This case turns on a well-established principle: employees have the right to pursue work-related legal claims together. 29 U.S.C. § 157; Eastex, Inc. v. NLRB, 437 U.S. 556, 566 (1978). Concerted activity—the right of employees to act together—is the essential, substantive right established by the NLRA. 29 U.S.C. § 157. Ernst & Young interfered with that right by requiring its employees to resolve all of their legal claims in “separate proceedings.” Accordingly, the concerted action waiver violates the NLRA and cannot be enforced.

This holding is contrary to the holdings in the Second, Fifth, and Eight Circuits that have concluded that the NLRA does not invalidate collective action waivers in arbitration agreements.  This split in circuit courts will be resolved by the U.S. Supreme Court’s holding in Epic System Corp. v. Lewis.

2. U.S. Department of Justice changed its position to support class action waivers

Under the Obama Administration, the DOJ supported the position taken by the NLRB that class action waivers found in arbitration agreements violated Section 7 of the NLRA.  However, under the Trump Administration, the DOJ has changed its view and in the summer of 2017 filed an amicus brief explaining it now does not believe class action waivers violate the NLRA.  This further adds to the split in authority that will be resolved by the U.S. Supreme Court’s ruling in Epic System Corp. v. Lewis.

3. Potential benefits of arbitration agreements for California employers

There are a number of benefits for California employers to have arbitration agreements.  One major benefit is the class action waiver discussed above.  For large employers this can be an effective bar from employees bringing class actions.  However, in California, employees still have rights to pursue “representative actions” under the Private Attorneys General Act (PAGA) as discussed below.  Moreover, the arbitration process can proceed faster than civil litigation, saving a lot of time and attorney’s fees in the process.  For example, often the discovery process moves faster in arbitration, and if there are any disputes, the parties can raise them with the arbitrator telephonically, instead of the lengthy and formal motion process required to resolve disputes in civil court.

The arbitration process is also confidential, so if there are private issues that must be litigated, these issues are not filed in the public records of the courts. The parties also have a say in deciding which arbitrator to use in deciding the case, whereas in civil court the parties are simply assigned a judge without any input into the decision. This is very helpful in employment cases, which often involves more complex issues, and it is beneficial to the parties to select an arbitrator with experience in employment law.

4. Potential drawbacks of arbitration agreements in California

While there are many benefits of arbitration agreements, they do not come without a few drawbacks. The primary drawback is that in California, the employer must pay all of the arbitrator’s fees in employment cases. Arbitration fees can easily be tens of thousands of dollars – a cost that employers do not need to pay in civil cases. However, if the company values the confidentiality and speed of process provided in arbitration, and potentially limiting class action liability exposure, this extra cost may well be worth it.

In addition, even if the U.S. Supreme Court rules in favor of employers in Epic System Corp. and upholds the use of class action waivers, the California Supreme Court held that employees may still bring representative actions under the Private Attorneys General Act (PAGA). Even though PAGA claims are limited to specific penalties under the law, and have a much shorter one-year statute of limitations than compared to potentially a four-year statute of limitations for most class actions brought for unpaid wages under the Labor Code, the potential penalties under PAGA can still be substantial for employers.

5. Impact on employers

Employers who utilize arbitration agreements will need to monitor the Supreme Court’s decision in Epic System Corp.  If the Supreme Court rules that class action waivers violate Section 7 of the NLRA, employers will need to review and potentially modify any arbitration agreements with class action waivers.  Such a ruling could spur many more class actions.  With that said, employers should always be auditing their wage and hour policies and practices to ensure compliance with Federal and state laws.

If the Supreme Court holds that arbitration agreements with class action waivers do not violate Section 7 of the NLRA, it is likely that employers can continue to implement the agreements with employees.  However, as mentioned above, California employers still must remain vigilant about their wage and hour practices, as there is still substantial liability under representative actions under PAGA.

Two cases decided in the last two months have further clarified the scope of discovery and plaintiff’s ability to pursue damages in addition to individual damages under California’s Private Attorneys General Act (PAGA).  The holdings are a bit of a mixed bag for employers, but they offer some clarification into PAGA.  This Friday’s Five is a summary of five issues employers need to understand about PAGA and the new decisions setting out the rights plaintiffs have to pursue representative actions under the statute:

1. PAGA representative actions are different than class actions.

California’s Private Attorneys General Act (PAGA) was designed by the California Legislature to offer financial incentives for private individuals to enforce state labor laws. At the time PAGA became law, the state’s labor law enforcement agencies did not have enough resources or staffing necessary to keep up with the rapid growth of California’s workforce. Therefore, PAGA allows aggrieved employees to sue as a proxy or agent of California’s state labor law enforcement agencies in collecting civil penalties for Labor Code violations. The employee must give 75 percent of the collected penalties to the Labor and Workforce Development Agency, and the remaining 25 percent is to be distributed among the employees affected by the violations.

First, because the plaintiff under PAGA is seeking penalties and not other forms of damages, a one year statute of limitations applies. This varies drastically from the four year statute of limitations that apply to most wage and hour class actions when a Business and Professions Code section 17200 cause of action is alleged.

Second, in Arias v. Superior Court, the California Supreme Court held that a plaintiff does not have to certify a class under PAGA to recover damages on behalf of all the other employees in the representative action.  However, as set forth below, courts are still deciding the scope of PAGA representative actions in terms of discovery rights and manageability issues.

2. Arbitration agreements with class action waivers are enforceable, but representative actions brought under the Private Attorneys General Act are not subject to arbitration and cannot be waived.

Many courts have been upholding arbitration agreements that contain class action waivers, including the California Supreme Court in Iskanian v. CLS Transportation Los Angeles, LLC.  That case held that class action waivers are enforceable, following the standards set forth by the U.S. Supreme Court in AT&T Mobility v. Concepcion.  However, in Iskanian, the California Supreme Court held that PAGA representative actions cannot be waived by employees and cannot be compelled to arbitration.  The Court held that, “we conclude that an arbitration agreement requiring an employee as a condition of employment to give up the right to bring representative PAGA actions in any forum is contrary to public policy.”

3. PAGA penalties are separate from individual damages.

In August 2017, a California appellate court held in Esparza v. KS Industries that PAGA representative actions can only seek “civil penalties” permitted by PAGA.  As set forth above, the civil penalties recovered by a PAGA claim 75 percent must be allocated to the Labor and Workforce Development Agency and 25 percent to the aggrieved employees in the representative action.  The court found that PAGA civil penalties do not include unpaid wages sought by the individual plaintiff.

4. Employers defending PAGA claims must require plaintiffs to explicitly state whether they are pursuing individual damages (which must be arbitrated) or PAGA civil penalties (which cannot be arbitrated).

As the court noticed in Esparza, PAGA representative claims for civil penalties are not subject to arbitration, but claims for unpaid wages based on Labor code section 558 are not civil penalties and can be compelled to arbitration.

If the employee wants to pursue both, the employer should compel arbitration of the plaintiff’s individual claims and stay the PAGA case pending the resolution of the individual claims.

5. Employers facing PAGA cases must consider filing a motion to sequence discovery early in the case.

In Williams v. Superior Court, a case decided in July 2017, the plaintiff sought to obtain the contact information for fellow California employees who worked for defendant, Marshalls of CA, LLC.  Defendant refused to provide the contact information for the other employees, and plaintiff filed a motion to compel.  The trial court limited the ability of plaintiff to obtain contact information to the store where the plaintiff worked, but denied it as to every other California store, subject to change after plaintiff sat for his deposition and made a showing of some merit to the underlying action.

The California Supreme Court reversed the trial court’s ruling and required defendant to provide the contact information for all California employees:

Our prior decisions and those of the Courts of Appeal firmly establish that in non-PAGA class actions, the contact information of those a plaintiff purports to represent is routinely discoverable as an essential prerequisite to effectively seeking group relief, without any requirement that the plaintiff first show good cause.  Nothing in the characteristics of a PAGA suit, essentially a qui tam action filed on behalf of the state to assist it with labor law enforcement, affords a basis for restricting discovery more narrowly.

The Court was clear, however, that upon a defendant’s motion showing good cause, a trial court can ordered sequenced discovery.   The Court explained:

Marshalls reasons instead that the trial court’s imposition of a merits requirement can be justified under Code of Civil Procedure section 2019.020.  That provision sets out the general rule that the various tools of discovery may be used by each party in any order, and one party’s discovery “shall not operate to delay the discovery of any other party.”  (Id., subd. (a).)  However, if a party shows “good cause,” the trial court “may establish the sequence and timing of discovery for the convenience of parties and witnesses and in the interests of justice.”  (Id., subd. (b).)  But Marshalls did not file a section 2019.020 motion, and we thus have no occasion to decide what showing might suffice to warrant a court order sequencing discovery.

In this Friday’s Five I discuss:

  • new case decision on vacation pay and policies (Minnick v. Automotive Creations)
  • PAGA decision allowing contact information for other employees (Williams v. Superior Court),
  • new Form I-9 released and employers must start using by September 17, 2017 (download here)
  • new Notice of Rights for Victims of Domestic Violence/sexual assault/stalking required to be provided to California employees effective July 1, 2017 (download here), and
  • new law signed by Governor Brown prohibiting inquiries into litigant’s immigration status.

In Augustus v. ABM Security Services, Inc., the California Supreme Court issued a ruling on employer’s obligations to permit employees to take “off-duty” rest periods.  The Court’s ruling ends 2016 with a major ruling on issues surrounding rest periods under California law.

The plaintiffs worked as security guards for defendant ABM.  The employer required to the guards to keep their pagers and radio phones on at all times, even during rest periods, and to potentially respond to calls when needed.   The guards’ duties included when a building tenant wished to be escorted to the parking lot, a building manager had to be notified of a mechanical problem, or the occurrence of emergency situations.

The trial court “reasoned that a rest period subject to such control was indistinguishable from the rest of a workday; in other words, an on-duty or on-call break is no break at all,” and granted Plaintiff’s motion for summary judgment.  The trial court awarded approximately $90 million in statutory damages, interest, and penalties.    ABM appealed the trial court’s ruling, and was successful in having the trial court overturned, but the California Supreme Court granted review of the case.

The company argued that it provided the required rest breaks under California law because it only required that the guards keep their radios and pagers on in case they were needed to respond to a call.  For the last Friday’s Five article of 2016, here are five key lessons for California employers from the Supreme Court’s decision:

1. Generally, what are employer’s obligations to provide rest breaks under California law?

Employer’s obligations to provide rest breaks is found in Labor Code section 226.7, enacted in 2000.  As enacted, subdivision (a) provided:  “No employer shall require any employee to work during any meal or rest period mandated by an applicable order of the Industrial Welfare Commission.”  The Wage Orders generally require that employers must provide a 10-minute rest period per every four hours worked and the break should, whenever practicable, fall in the middle of the work period. (See Wage Order 4, subd. 12(A).  The rest period must also be paid, and the law does not require that employers record when the employee takes the rest period (unlike an employer’s obligation to record when 30-minute meal breaks are taken).

2. Does California law require employers to authorize off-duty rest periods? 

Yes.  The Supreme Court held that employers must provide employees with a paid rest break in which the employee is relieved from all work-related duties and free from employer control.  The Court examined the wage order at issue in the case, Wage Order 4, which provides, “Every employer shall authorize and permit all employees to take rest periods…. Authorized rest period time shall be counted, as hours worked for which there shall be no deduction from wages.”

The Court ruled that:

The most reasonable inference we can draw from the wage order and its context is instead that we should give the term its most common understanding – a reading consistent with requiring that employers authorize off-duty rest periods…. So, ordinarily, a reasonable reader would understand ‘rest period’ to mean an interval of time free from labor, work, or any other employment-related duties.

We accordingly conclude that the construction of Wage Order 4, subdivision 12(A) that best effectuates the order’s purpose and remains true to its provisions is one that obligates employers to permit –– and authorizes employees to take –– off-duty rest periods.  That is, during rest periods employers must relieve employees of all duties and relinquish control over how employees spend their time.

3. Can employers satisfy the obligation to relieve employees from duties and control during rest periods if the employer requires the employee to remain on call? 

No.  The Court ruled that “one cannot square the practice of compelling employees to remain at the ready, tethered by time and policy to particular locations or communications devices, with the requirement to relieve employees of all work duties and employer control during 10-minute rest periods.”  The Court made clear that the employee must be “free from labor, work, or any other employment-related duties.  And employees must not only be relieved of work duties, but also freed from employer control over how they spend their time.”

4. If employees are required to carry a pager or phone during a rest break and must monitor the device during the rest break, is the employee provided a compliant rest break? 

No.  If an employee “must fulfill certain duties [such as] 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,” the employee does not have the freedom to use the rest period for their own purpose.  The court used examples that employees should be permitted to take “a brief walk – five minutes out, five minutes back,” take care of personal matters like “pumping breast milk… or completing a phone call to arrange child care.”

5. Is there some flexibility for employers to reschedule rest breaks when needed?

Yes.  The Court provided, “[n]othing in our holding circumscribes an employer’s ability to reasonably reschedule a rest period when the need arises.”  However, the Court failed to provide any other clarification of what is reasonable in rescheduling a rest period.  The Court did explain, however, that employers have “several options” when employers find it burdensome to relieve their employees of all duties during rest periods.  As examples of these options, the Court stated that employers can provide employees with another rest period to replace the one that was interrupted, or pay the premium pay of one hour at the employee’s regular rate of pay for missing the rest period.

Looking for more information about California employers obligations to provide rest and meal periods?  See my prior post on five reminders about rest breaks here, and the timing of meal and rest breaks under California law here.

I hope everyone is having a great Thanksgiving weekend.  This Friday’s Five is about five common questions I’m receiving from California employers at the close of 2016.

1. Does the legalization of recreational use of marijuana in California with the passage of proposition 64 change employer’s rights to prohibit it in the workplace?

No.  Proposition 64 expressly provides that employers may prohibit marijuana in the workplace, and will not be required to accommodate an employee’s use of marijuana.  This is also consistent with the California Supreme Court’s holding in Ross v. Ragingwire Telecommunications, Inc.  In that case the court examined the conflict between California’s Compassionate Use Act, (which gives a person who uses marijuana for medical purposes on a physician’s recommendation a defense to certain state criminal charges and permission to possess the drug) and Federal law (which prohibits the drug’s possession, even by medical users).  The court held that the Compassionate Use Act did not intend to address the rights and obligation of employers and employees, and further noted that the possession and use of marijuana could not be a protected activity because it is still illegal under federal law.

2. Does Trump’s win change any laws facing employers in 2017?

While it is hard to predict the effect President-elect Trump will have on California employers, I previously wrote about potential impacts in immigration and E-verify issues, paid family leave, and the expansion of even more additional local laws.

3. When is the new Form I-9 required to be used by employers?

Employers must begin using the new Form I-9 by January 22, 2017.  It is important to note that employees already hired with the older version of the Form I-9 do not have to complete the new version.  More information about the revised Form I-9 can be read here.

4. What new laws in California do employers need to understand for 2017?

New laws that will impact many California employers include:

  • Prohibition on asking or taking into consideration juvenile convictions when hiring
  • Expansion of wage discrimination laws based on gender, race or ethnicity.
  • Employers with 25 or more employees are required to provide written notice to employees about rights provided to domestic violence victims under California law.
  • Employers are prohibited from requiring employees who primarily reside and work in California to agree to adjudicate claims outside of California or apply another state’s laws in arbitration agreements.

My prior post contains more information about the laws facing California employers in 2017.

5. When are you conducting your next webinar?

Join me on December 13, at 11:00 a.m. Pacific time for a webinar: “Employment law update: Essential issues facing California employers in 2017.” (I had to throw this self-promoting question in the line-up.)  You can register for the webinar here.