arbitration agreements

With the start of 2019, it is a great time to audit employment policies and practices.  The next series of posts will be a review of a few practices California employers should review on a periodic basis.  The posts will cover the following topics: the hiring process, employment records (what should be kept and for how long), wage and hour issues, end of employment issues, and will conclude with training requirements for supervisors and employees.  Obviously, it is important to work with a qualified attorney to ensure compliance, but I wanted to highlight a few issues on these topics that employers can use to start a self-audit that then can be used to save time and money when reviewing with an attorney.

Five areas to audit regarding the hiring process in California:

1. Are applications seeking appropriate information?

2. Are new hires provided with required policies and notices?

3.  Are new hires provided and acknowledge recommended policies?

  • For example: meal period waivers for shifts less than six hours

4. Are hiring managers trained about the correct questions to ask during the interview?

5. Does the company provide new hires (and existing employees) with arbitration agreements?

Wishing you and your company the best in 2019!

[Update: AB 3080 was vetoed by the Governor on September 30, 2018, and will not become law.  Click here to see other bills that were approved by the Governor and will become law for California employers in 2019.]

California legislature passed AB 3080 which prohibits employers from entering into arbitration agreements with employees and now is waiting for Governor Brown’s signature.  It is uncertain whether the Governor will sign the bill into law, as in 2015 the Governor vetoed AB 465 that contained a similar prohibition on arbitration agreements in the workplace.  This Friday’s Five covers five aspects of the bill that California employers need to understand:

1. Bill bars confidential agreements regarding harassment.

AB 3080, if passed, would add Section 432.4 to the Labor Code, which would:

…prohibit any applicant for employment, employee, or independent contractor from disclosing to any person an instance of sexual harassment that the employee or independent contractor suffers, witnesses, or discovers in the workplace or in the performance of the contract, or otherwise opposing any unlawful practice, or from exercising any right or obligation or participating in any investigation or proceeding with respect to unlawful harassment or discrimination.

There is some question about whether this language would prohibit employers from entering into settlement agreements with employees that require confidentiality of its terms.  This practice is prevalent in employment litigation, not only in harassment claims, but in all aspects of employment litigation, such as when settling wage claims.  One rational for keeping a settlement agreement confidential is to be able to settle a claim and stop litigation without admitting liability.  If the amount of settlements are known, it may be viewed as an admission by other third-parties, which could increase the amount of litigation filed against the employer.  The ability to keep settlements confidential aids in settling cases, and if employers cannot confidentially resolve claims it could lead to longer and harder fought litigation.

2. Prohibits arbitration agreements for wage and hour claims, discrimination, harassment, and retaliation.

The bill would also add Section 432.6 to the Labor Code, prohibiting employers from entering into arbitration agreements with employees.  The bill provides that “a person shall not…require any applicant for employment or any employee to waive any right, forum, or procedure for a violation of any provision of the California Fair Employment and Housing Act” or the Labor Code.  This would bar arbitration agreements for claims of harassment, discrimination, or retaliation under the Fair Employment and Housing Act, in addition to barring arbitration agreements that cover wage and hour claims under the Labor Code.

3. Prohibits employers from taking any employment action against employees who refuse to enter into arbitration agreements.

The bill would make it illegal for an employer to:

…threaten, retaliate or discriminate against, or terminate any applicant for employment or any employee because of the refusal to consent to the waiver of any right, forum, or procedure for a violation of the California Fair Employment and Housing Act or [the Labor Code], including the right to file and pursue a civil action or a complaint with, or otherwise notify, any state agency, other public prosecutor, law enforcement agency, or any court or other governmental entity of any alleged violation.

4. Creates personal liability for violations.

The bill designates that “a person” shall not take the actions prohibited in the bill, opening the possibility for individual liability for anyone violating the requirements of the bill.

5. Likely legal challenges to AB 3080 if it is eventually signed into law.

In May 2018, the U.S. Supreme Court ruled 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.  If the bill is signed into law the by the Governor, it will likely be challenged on the grounds that is preempted by the Federal Arbitration Act.

Employers need to keep a close eye on this bill, and even if the bill is passed, there will likely be a lengthy legal challenge on its validity.  Employers should review whether arbitration agreements are appropriate for their workforce with counsel, and need to keep in contact with their attorneys regarding the use of confidentiality agreements and arbitration agreements in the workplace.

The hot weather facing southern California has also brought a flurry of developments for California employers.  The beginning of July 2018 has been busy, and there is a lot of new developments potentially impacting California employers.  This Friday’s Five focuses on current topics facing California employers this past week:

 1. California’s new data privacy law.

While not directly employment law related, it is important enough to mention.  California enacted a sweeping new law to protect the data privacy of its citizens.  The law requires companies to comply with new regulations regarding how they obtain and share personal information.  Companies must comply with the new law by 2020, and there is a likelihood that the law will be modified prior to its implementation date.  Fast Company has a good overview for some of the impacts of the new law.  The entire bill can be read here.

Employers should continue to watch to see if this law is amended or if other similar laws are proposed that apply to employee information specifically.  As written about previously, biometric data is only regulated by three states, Illinois, Texas, and Washington state, which have laws requiring a notice and voluntary consent before biometric information is collected by private companies.  California’s new law will likely lead to many other states or the federal government to begin to regulate obligations companies have with respect to this information.

2. Parts of California’s new 2018 immigration laws put on hold by Federal District Court.

As previously written about on this blog, employers were put in a precocious position between the federal government’s position on immigration enforcement on one hand, and California’s position on immigration enforcement on the other hand.  Any misstep by employers could expose them to penalties on either side of the equation.  A Federal District Court recognized the difficult position facing employers under both laws, and put a temporary hold on California’s ability to enforce portions of new laws that private employers had to comply with as of January 1, 2018.  The court explained:

This Motion presents unique and novel constitutional issues. The Court must answer the complicated question of where the United States’ enumerated power over immigration ends and California’s reserved police power begins.  The Court must also resolve the issue of whether state sovereignty includes the power to forbid state agents and private citizens from voluntarily complying with a federal program.

The court enjoined California from enforcing Labor Code sections 7285.1 and 7285.2.  Therefore, for now (but subject to change), California employers cannot be prosecuted for consenting to immigration enforcement agents’ access to nonpublic areas or employment records.  The court also enjoined California from enforcing section 1019.2, which prohibited employers from re-verifying the employment eligibility of current employees.  This ruling is very early in the case based on the United States’ motion for preliminary injunction against the State of California.  The court will review the issues and made a final determination later in the case, so employers need to follow any developments.

The opinion in The United States of America v. State of California, can be read here.

3. Juarez v. Wash Depot Holding, Inc. – Holding that arbitration agreement is unenforceable.

This ruling (link to opinion here) is a good reminder to employers who implement arbitration agreements to have the agreements reviewed by counsel on a periodic basis and to ensure that any translations of the document are accurate.  Plaintiffs challenged the enforceability of the arbitration agreement in this case because it prohibited the employee from bringing a claim under California’s Private Attorney General Act (PAGA).  The English version of the arbitration agreement provided that the PAGA waiver was severable from the handbook if it was found to be invalid, but the Spanish version of the arbitration agreement provided that the PAGA waiver was not severable.  Based on these facts, the court held that the arbitration agreement was unenforceable as written.

4. Twitter defeats class certification in gender bias case.

Plaintiff Tina Huang sought to certify a class action lawsuit against Twitter on behalf of 135 women who worked at the company.  In applying the standards set by the U.S. Supreme Court in Wal-Mart Stores, Inc. v. Dukes (2011), the court held that the plaintiff failed “to demonstrate that Twitter’s managers employed a ‘common mode of exercising discretion’ or that Twitter had a ‘uniform employment practice’ that affected the way managers exercised discretion and resulted in disparate impact on women….”  The Dukes case set forth that in a disparate impact case, an employer’s policy of allowing managers discretion over promotion decisions cannot satisfy the commonality requirement for class certification, unless there is a “common mode of exercising discretion” or a “uniform employment practice” that serves as the “glue” for all of the class members’ claims.

5. New national origin regulations and local minimum wage increases took effect on July 1, 2018. 

New California regulations impact employment practices such as English-only policies, height and weight requirements, and documents applicants or employees may be required to provide for employment.  More information can be found here.

Many local cities and counties increased their minimum wage effective July 1, 2018.  More information can be found here.

 

Hope you are staying cool this weekend.

With the U.S. Supreme Court’s decision in Epic Systems Corp. v. Lewis this week, I thought it would be a good time to review the pros and cons of arbitration agreements in the workplace.  This this Friday’s Five is a video in which I cover five things you want to know about arbitration agreements, but were afraid to ask:

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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.

Earlier this week I attended Restaurant Day at the State Capitol with the California Restaurant Association.  It is great to work with restaurant owners and operators in communicating the issues and realities of running a business in California.  If you have never participated in meeting with your local, state, or federal legislator, I highly recommend doing so.  It is a great learning experience, and even though the legislator may not agree with your position, it is a great process to engage your representative and to support your positions.  Given the recent experience, this Friday’s Five focuses on five proposed bills on employment that California businesses must be aware of (and a link at the bottom on how to contact your state representative):

1. AB 2841 (Gonzalez Fletcher) proposes to increase paid sick leave from 24 hours/3 days to 40 hours/5days of paid time off.

California currently requires employers to provide at least 24 hours/three days of paid sick leave to employees (click here for a prior article about California’s paid sick leave requirements).  This proposed bill would increase the amount of paid sick leave days to 5 days/40 hours of paid sick leave. Also, don’t forget about local county and city requirements that may differ from the state requirement.

2. AB 2613 (Burk) proposes to make employers and officers personally liable for additional penalties for wage violations.

The bill proposes to make employers and their officers personally liable for an additional penalty of $200 per employee, per pay period for wages that are not paid on time.  The bill makes it clear that these proposed penalties “are in addition to, and entirely independent and apart from, any other damages or penalties provided for under this code.”

3. AB 2069 (Bonta) proposes to make medical marijuana card holders a protected class under the Fair Employment and Housing Act

This proposed bill would make it unlawful for an employer to discriminate against a person if the discrimination is based upon the person’s status as a qualified patient or person with an identification card entitled to the protections of the Compassionate Use Act of 1996 or the use of cannabis for medical purposes.

The bill makes the medical use of marijuana a protected disability under state law: “When used to treat a known physical or mental disability or known medical condition, the medical use of cannabis by a qualified patient or person with an identification card, as those terms are defined in Section 11362.7 of the Health and Safety Code, shall be subject to reasonable accommodation, including the use of the interactive process.”

Many employers are concerned that providing protections to employees who use marijuana will lead to safety issues at work whereby employees under the influence hurt other employees, customers, or by standards.  Currently, the use of marijuana is not a protected category, as it is still illegal to use under federal law.

4. AB 3080 (Gonzalez Fletcher) proposes to ban employers from restricting employees from disclosing any sexual harassment settlements and bars the use of arbitration agreements in the employment context.

AB 3080 would prohibit employers from entering into contracts that do not allow the employee from disclosing “an instance of sexual harassment that the employee “suffers, witnesses, or discovers in the workplace.”

The bill also prohibits the use of mandatory arbitration agreements in the workplace.  Many employers are utilizing arbitration agreements as a quicker and less costly method of resolving workplace disputes.  The bill, in its current form, would still allow the use of voluntary arbitration agreements.  However, opponents to the bill argue that banning the use of arbitration agreements would run afoul of the Federal Arbitration Act, would be preempted by this federal law.

5. SB 1284 (Jackson) proposes to require companies to disclose pay data reports to the state.

SB 1284 would require employers with 100 or more employees to submit a pay data report to the Department of Industrial Relations.  The report would need to include information such as the number of employees by race, ethnicity, and sex listed by their job categories, and the number of employees “whose annual earnings fall within each of the pay bands used by the United State Bureau of Labor Statistics in the Occupation Employment Statistics survey.”

There are other employment law bills being debated, but I thought these were the top five that employers should be aware of as of April 2018.  Please check back for updates.

Click here for information about how to locate and contact your state representative.

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.

Quick video on the five things California employers need to pay attention to in 2017.

(Sorry for the wind noise in the video.)

I briefly discuss the following five issues:

1) Augustus v. ABM Security Services: A new California Supreme Court decision about whether rest breaks during which security guards were required to monitor a pager for a call actually counts as a rest break under California law.  Short answer: No.  The Court held that the guards had to be completely relieved of all duties during the rest break.  I’ll write more about this decision in the coming weeks.

2) Local ordinances banning criminal history inquiries, such as Los Angeles’ new prohibitions staring in 2017.

3) Local paid sick leave requirements (such as San Diego and Los Angeles).

4) Local minimum wage ordinances.

5) Arbitration agreements and class action waivers.

Happy holidays!

This Friday’s Five is a bit of everything: news, new California employment laws, and reminders about October 1 deadlines for the City of San Diego:

 1. House moves to delay DOL overtime rule implementation.

There is a great article by Lisa Jennings from Nation’s Restaurant News summarizing the House’s move to delay the overtime rule implementation, which is set to go into place on December 1, 2016.  The White House has already threatened to veto the bill if it makes it to the President’s desk.  For more information about the DOL overtime rules, visit my posts here.

2.  San Diego employers need to ensure they are in compliance with the October 1, 2016 deadline.

The City of San Diego’s new paid sick leave law (and its “implementing ordinance”) requires employers to provide written notice to employees about the paid sick leave law by October 1, 2016 (yes – that is tomorrow).  The Implementing Ordinance requires that every employer must also provide each employee at the time of hire, or by October 1, 2016, whichever is later, written notice of the employer’s legal name and any fictitious business names, address, and telephone number and the employer’s requirements under the law.  The notice must also include information on how the employer satisfies the requirements of the law, including the employer’s method of earned sick leave accrual.  The notice must be provided to employees in English and in each employee’s primary language, if it is a language if it is spoken by at least five percent of the employees at the employer’s workplace.  Employers may provide this notice through an accessible electronic communication in lieu of a paper notice.  The City published a form notice to comply with these requirements, which can be downloaded here.

3.  Governor signs law making it illegal for out-of-state employers to have their disputes heard outside of California.

Governor Brown signed S.B 1241 into law that restricts employers from requiring employees who primarily reside and work in California to adjudicate claims outside of California when the claim arose in California, or deprive employees of California law with respect of claims arising in California.

Employers should carefully review their arbitration agreements with California employees to ensure that the agreement does not have a choice of law provision that applies another state’s law to the agreement or require any claims be adjudicated outside of California.  The effective date for the law is January 1, 2017.

4.  New CA law prohibits employers from asking about juvenile convictions.

A.B. 1843, signed into the law by Governor Brown on September 27, 2016 prohibits employers from asking or taking into consideration juvenile convictions.  The law states, “employers [are prohibited] from asking an applicant for employment to disclose, or from utilizing as a factor in determining any condition of employment, information concerning or related to an arrest, detention, processing, diversion, supervision, adjudication, or court disposition that occurred while the person was subject to the process and jurisdiction of juvenile court law.”

5. NCAA and Pac-12 sued by former USC football player for unpaid wages.

An interesting class action lawsuit was filed by a former USC football player claiming that the NCAA and Pac-12 violated the Fair Labor Standards Act and California law by not paying football players minimum wage or overtime.  This is a different twist to the often debated issue of whether college athletes should be allowed to accept endorsement money.  It will be interesting to see how the lawsuit develops: on one side there is an argument that as the college sports programs have turned into huge profit generating centers sports, not academics could be seen as the primary focus for these athletes, but on the other hand the players are still students and many school programs do not generate huge revenues for the schools.