Blog: The Labor & Employment Law Blog

The California Supreme Court Confirms that Companies May Delegate Some Workplace Safety Obligations to Independent Contractors

On August 22, 2011, the California Supreme Court issued its decision in Seabright Insurance Company v. US Airways, Inc. The issue before the Court was whether the Privette rule applies when the party that hired an independent contractor (the “Hirer” or “Principal”) failed to comply with workplace safety requirements concerning the precise subject matter of the contract, and the injury is alleged to have occurred as a consequence of that failure. The Privette rule essentially provides that when employees of independent contractors are injured in the workplace, they cannot sue the party that hired the contractor to do the work. (Privette v. Superior Court (1993) 5 Cal.4th 689.)

Relevant Facts from the Seabright Case.

US Airways uses a conveyor to move luggage at San Francisco International Airport. The airport is the actual owner of the conveyor, but US Airways uses it under a permit and has responsibility for its maintenance. US Airways hired an independent contractor, Lloyd W. Aubry Co. (“Aubry”), to maintain and repair the conveyor. US Airways neither directed nor had its employees participate in Aubry‘s work.

The conveyor lacked certain safety guards required by applicable Cal-OSHA regulations. An Aubry employee, Anthony Verdon Lujan (“Verdon”), was inspecting the conveyor when his arm got caught in its moving parts and he suffered severe injuries. SeaBright, as Aubry’s workers‘ compensation insurer, paid Verdon benefits based on the injury and then sued US Airways in a civil action, claiming the airline caused Verdon‘s injury and seeking to recover what it paid in workers’ compensation benefits. Verdon intervened as a plaintiff in the civil action, alleging causes of action for negligence and premises liability.

Legal History Below.

Defendant US Airways sought summary judgment based on the Privette case as well as Hooker v. Department of Transportation (2002) 27 Cal.4th 198 (Hooker). In Hooker, the California Supreme Court held that despite the Privette rule, the hirer of an independent contractor can be liable for a workplace injury of the contractor‘s employee if the hirer retained control over the contractor‘s work and exercised that control in a way that affirmatively contributed to the employee‘s workplace injury. (Hooker, at p. 213). US Airways argued that it did not “affirmatively contribute” to Verdon‘s injury and thus summary judgment was appropriate.

SeaBright and Verdon countered with a declaration by an accident reconstruction expert, who stated that the lack of safety guards at the “nip points” on the conveyor violated Cal-OSHA laws (Lab. Code § 6300 et seq. and 8 CCR §§ 3999 and 4002 [regulations governing conveyor safety]) and that the safety guards would have prevented Verdon‘s injury.

The trial court struck the plaintiffs‘ declaration insofar as it discussed causation. It found no evidence that US Airways “affirmatively contributed” to Verdon’s injury and granted summary judgment.

SeaBright and Verdon appealed. The Court of Appeal reversed the trial court holding that, under Cal-OSHA, US Airways had a nondelegable duty to ensure that the conveyor had safety guards, and that the question of whether the airline‘s failure to perform this duty “affirmatively contributed” to Verdon’s injury under the principles in Hooker was one for the jury and thus precluded summary judgment. The Court of Appeal also found that US Airways could not delegate to Aubry the tort law duty US Airlines owed to Aubry‘s employees to ensure that the conveyor met Cal-OSHA safety standards. In support of its finding, the Court of Appeal quoted a comment from a California Supreme Court decision issued some 25 years before Privette, which did not involve workplace safety. US Airways and Verdon then petition the California Supreme Court for review.

California Supreme Court’s Decision.

Whether Cal-OSHA imposes on an employer like US Airways a tort law duty of care that extends to the employees of other parties such as independent contractors is a question that remains unsettled. However, assuming that Cal-OSHA regulations do impose such a duty, the issue before the Court was whether US Airways could and did delegate to Aubry any duty it owed to Aubry‘s employees to comply with the safety requirements of Cal-OSHA, or whether such duty is nondelegable.

In analyzing this issue, the Court examined its prior cases, including the 1993 seminal Privette case. In Privette, the Court explained: “At common law, a person who hired an independent contractor generally was not liable to third parties for injuries caused by the contractor‘s negligence in performing the work. [Citations.] Central to this rule of nonliability was the recognition that a person who hired an independent contractor had ‘no right of control as to the mode of doing the work contracted for.‘” (Id. at p. 693.)[1] In light of the limitation on the independent contractor‘s liability to its injured employee under the workers’ compensation system, the Court concluded in Privette that it would be unfair to permit the injured employee to obtain full tort damages from the hirer of the independent contractor.

In analyzing this issue, the Court examined its prior cases, including the 1993 seminal Privette case. In Privette, the Court explained: “At common law, a person who hired an independent contractor generally was not liable to third parties for injuries caused by the contractor‘s negligence in performing the work. [Citations.] Central to this rule of nonliability was the recognition that a person who hired an independent contractor had ‘no right of control as to the mode of doing the work contracted for.‘” (Id. at p. 693.) In light of the limitation on the independent contractor‘s liability to its injured employee under the workers’ compensation system, the Court concluded in Privette that it would be unfair to permit the injured employee to obtain full tort damages from the hirer of the independent contractor.

In 1998 the Court decided Toland v. Sunland Housing Group, Inc. (1998) 18 Cal.4th 253 (“Toland”). The Court reviewed its holding in Privette as it related to the question of whether a hirer of an independent contractor has an obligation to specify, as part of its contract with the contractor, that the contractor should take special precautions to avert a peculiar risk. The Court noted that the hirer “has no obligation to specify the precautions an independent contractor should take for the safety of the contractor’s employees” and “[a]bsent an obligation, there can be no liability in tort.” (Toland, at p. 267.) The Court also said that subjecting those who hire contractors to peculiar risk liability in such circumstances would negate the hirer’s “right to delegate to independent contractors the responsibility of ensuring the safety of their own workers.” (Id. at p. 269.) Thus, in Toland, the Court recognized the principle of delegation of duty as a rationale for its decision.

Then in 2002, the Court refined the principles from Privette and Toland in the Hooker case, holding that an independent contractor‘s employee can sometimes recover in tort from the contractor‘s hirer if the hirer retained control of the contracted work and “fail[ed] to exercise his control with reasonable care . . . .” (Hooker at p. 206.) The Court noted that its prior holding in Privette was based on the principle that the hirer of an independent contractor generally has “no right of control as to the mode of doing the work contracted for . . . .” (Hooker, at p. 213.)

Finally, in 2005, the Court issued its decision in Kinsman v. Unocal Corp. (2005) 37 Cal.4th 659 (Kinsman).) In that case, the Court stressed the “framework of delegation” to explain its holdings in Privette, Toland, and Hooker. According to the Court, those decisions were grounded on a common law principle “that when a hirer delegated a task to an independent contractor, it in effect delegated responsibility for performing that task safely, and assignment of liability to the contractor followed that delegation.” (Kinsman, at p. 671.)

In the present case, the Court concluded that the Privette line of decisions discussed above established that an independent contractor‘s hirer presumptively delegates to that contractor its tort law duty to provide a safe workplace for the contractor‘s employees. However, one question remained: is the duty, if any, to comply with Cal-OSHA and its regulations for the benefit of an independent contractor‘s employees nondelegable? The nondelegable duties doctrine applies when the duty preexists and does not arise from the contract with the independent contractor. (See Eli v. Murphy (1952) 39 Cal.2d 598, 600 and Knell v. Morris (1952) 12 39 Cal.2d 450, 456.)

The Court noted that several courts of appeal have concluded that a hirer‘s statutory or regulatory duties constitute retained control if those duties are nondelegable. The courts disagree, however, about the effect of a breach. Some courts, like the Court of Appeal in this case, have held that the breach of a nondelegable statutory or regulatory duty can, by itself, create a triable issue as to whether the hirer “affirmatively contributed” to the injury of the independent contractor‘s employee. Other courts have held that if the breach is merely an omission, that breach alone cannot qualify as the “affirmative contribution” required for liability under Hooker.

The California Supreme Court ultimately held that the conflict between the courts of appeal is of no moment. It found that US Airways presumptively delegated to Aubry any tort law duty of care the airline had (or may have had) under Cal-OSHA regulations to ensure workplace safety for the benefit of Aubry‘s employees. According to the Court, the delegation which is “implied as an incident of an independent contractor‘s hiring” includes a duty to identify the absence of the safety guards required by Cal-OSHA regulations and to take reasonable steps to address that hazard.
Thus, the Court ultimately found that the Privette rule did apply to the circumstances presented in this case and held that neither SeaBright nor Verdon could recover in tort from US Airways on a theory that Verdon‘s workplace injury resulted from US Airway’s breach of what they claimed to be a nondelegable duty under Cal-OSHA regulations to provide safety guards on the conveyor. Hence, the Court reversed the Court of Appeal decision finding it erred in reversing the trial court, which had granted summary judgment for US Airways.

1 In Privette, a property owner hired a roofing company to install a new roof, and an employee of the roofing company was burned when attempting to carry a bucket of hot tar up a ladder. At issue was the “peculiar risk” exception to the general rule of nonliability. The peculiar risk exception allows lawsuits against those who hire contractors, if the work is “likely to create . . . a peculiar risk of physical harm to others unless special precautions are taken . . . .” (Rest.2d Torts, § 416.)

As the California Legislature reconvenes this week from its summer recess, it will be poised to advance bills that could, if enacted, impact the workplace. Among them is AB 22, which would prohibit employers, except certain financial institutions, from obtaining a consumer credit report for employment purposes. If AB 22 becomes law, employers would be able to obtain such reports only if the information sought is substantially job-related and pertains to a managerial or other sensitive position.

Under AB 22, information would be substantially job-related if the person for whom the report is sought would have access to the employer’s confidential information, money, or assets. Likewise, the position would be a sensitive one if the information contained in the report is required by law to be disclosed or to be obtained by the employer.

This is not the first time California has considered passing such legislation. In late September 2010, then-Gov. Arnold Schwarzenegger vetoed AB 482, which was nearly identical to AB 22. In his veto message, Gov. Schwarzenegger explained that he had rejected similar legislation in 2008 and 2009. That veto message also noted that AB 482 would “significantly increase the exposure for potential litigation over the use of credit checks.”

Gov. Schwarzenegger said he disfavored AB 482 because “California’s employers and businesses have inherent needs to obtain information about applicants for employment and existing law already provides protections for employees from improper use of credit reports.” Indeed, employers in the Golden State who wish to conduct background checks on prospective or existing employees must comply with the federal Fair Credit Reporting Act (“FCRA”), the California Investigative Consumer Reporting Agencies Act (“ICRAA”), and the California Consumer Credit Reporting Agencies Act (“CCRAA”). Each of these laws imposes different requirements.

For example, the FCRA applies when an employer engages an outside screening company to prepare a credit-check report concerning an individual for purposes of “hiring, promotion, retention, or reassignment of employees.” The FCRA requires, among other things, that the employer give notice and obtain written permission from the person whose credit is to be checked. The employer must also provide that person with a “pre-adverse action notice” and a copy of the background report before taking an adverse action (e.g., declining to hire the person). Under the FCRA, employers also must provide a second notice after taking an adverse action, which tells the individual how to dispute inaccurate or incomplete information.

California law is broader than the FCRA in a number of ways. For instance, the ICRAA covers employers who conduct background checks themselves and governs inquiries into a person’s “character, general reputation, personal characteristics, or mode of living” obtained through “any means.” Meanwhile, under the CCRAA, an employer may obtain a copy of a person’s credit report with that person’s written permission; however, employers may find themselves in trouble in terms of anti-discrimination laws if the report contains information about the person’s protected characteristics (e.g., the person’s age, marital status, race, or religion).

Many California employers retain the services of background screening agencies to conduct such credit or background checks. Employers should confirm that the agency they select for such tasks is familiar with both federal and California laws and up to date in terms of the status of AB 22.

The California Assembly passed AB 22 in May 2011, and the Senate Appropriations Committee is scheduled to consider the bill this week. If AB 22 passes out of committee, the full state Senate soon may be asked to send the bill to the governor’s desk. Should AB 22 advance to that stage, Gov. Jerry Brown will decide whether to veto or enact it.

Almost every employer offers some form of vacation leave to its employees. Some employers, following the lead of academia, also offer long-term employees sabbatical leaves so that they can “recharge their batteries” and hopefully return to work more productive and creative.

Employers must ensure that they have proper policies in place in characterizing sabbatical leave to avoid it from being considered as vacation leave. The difference is important: Vacation leave that has been earned but not used must be paid out at the time the employee’s employment ends; whereas, sabbatical leave does not.

In Paton v. Advanced Micro Devices, Inc., the plaintiff sued his former employer claiming that the eight weeks of sabbatical leave that he had accrued was actually vacation time that needed to be paid out to him when his employment ended. Plaintiff argued that the sabbatical program was essentially extra vacation leave and that, under section 227.3 of the Labor Code, his employer could not require him to forfeit such pay.

Although the trial court granted the former employer’s motion for summary adjudication, the California Court of Appeals reversed and adopted a four-part test for determining whether leave should be considered sabbatical leave or vacation leave. The four factors adopted by the Court are:

(1) Whether the leave is granted infrequently. This tends to support the assertion that the leave is sabbatical in nature and intended to retain experienced employees who have devoted a significant period of service to the employer. The Court recognized that offering sabbatical leave every seven years would appear to be an appropriate starting point for assessing corporate sabbaticals;

(2) Whether the length of the leave is adequate to achieve the employer’s purpose, which typically requires that the length of leave be longer than that “normally” offered as vacation leave;

(3) Whether the sabbatical leave is offered in addition to regular vacation leave; and

(4) Whether a sabbatical program incorporates some feature demonstrating the employer’s intent that the employee is expected to return to work after the sabbatical is over.

The Court made clear that no single factor would be dispositive. Rather, the court emphasized that it was important to determine whether the sabbatical leave was intended as an incentive to induce experienced employees to continue working for defendant and increase the productivity or creativity upon their return to work as opposed to merely providing additional vacation for longer-term employees.

Employers who offer or intend to offer sabbatical leaves to their employees should review such plans with legal counsel to avoid incurring additional, unintended liabilities.

abor Code section 2810 was enacted by the California Legislature in 2004. The primary provision of section 2810 prohibits a party such as an employer from contracting for certain types of services, including construction services if that party knows or should know the contract “does not include funds sufficient to allow the contractor to comply with all applicable local, state and federal laws or regulations governing the labor or services to be provided.” It also provides a private cause of action in favor of employees “aggrieved” by any violations.

Section 2810 was enacted to address “wide spread subminimum wages and working conditions” that existed primarily in construction, janitorial, security and garment industries at the time. In Castillo v. Toll Bros., Inc. (decided July 28, 2011), a California appellate court addressed the provisions of section 2810 for apparently the first time. Toll Bros. was the general contractor on several construction projects and was later sued by employees of subcontractors alleging violations of wage and hour laws, including section 2810. The employees argued that Toll Bros., in bidding the projects, did not include sufficient funds to the subcontractors that resulted in the claimed wage and hour violations.

Toll Bros. moved for summary judgment in both class actions arguing that under section 2810, it only had to ensure that the employees of the subcontractors were being paid a minimum wage. The plaintiff employees on the other hand, argued that, because employees in construction services are typically paid at rates higher than minimum wage, the contracts entered into by Toll Bros. should have included funds sufficient to pay the local prevailing wages for this labor.

In affirming summary judgment in Toll Bros.’ favor on some of the claims, the California appellate court held that the clear language of section 2810 “unambiguously requires the sufficiency of a contract challenged under section 2810 to be measured by the minimum wage cost for the work anticipated.” The Court found it significant that there was “no general law requiring an employer to pay its workers the average local wage for a particular skill or trade if that average wage is higher than the legal minimum.” “Merely to pay less than the prevailing wage therefore violates no law” and could not form the basis for a section 2810 violation.

Thus, the Court held that a contract violates section 2810 only if the funds paid will not allow the subcontractor to comply with applicable laws or regulations in performing the contract, one of those applicable laws being the minimum wage law. The Court also rejected the plaintiffs’ argument that they should be treated differently given that the construction industry regularly pays higher wages than the legal minimum wage. The Court found that the California legislature did not express an intent to distinguish between the various industries in enacting section 2810.

Therefore, employers who are entering into contracts with subcontractors should analyze whether the contract for services allows the subcontractor to pay its employees at least minimum wages for the work anticipated to avoid a possible violation of section 2810.

Can an employee take FMLA leave for substance abuse?

The FMLA regulations clearly state that:

“FMLA leave may only be taken for treatment for substance abuse by a health care provider or by a provider of health care services on referral by a health care provider. On the other hand, absence because of the employee’s use of the substance, rather than for treatment, does not qualify for FMLA leave.”

(19 C.F.R. § 825.119(a) (emphasis added).)

So, according to the regulations, an employee is not qualified for FMLA leave if he/she is absent because of current substance abuse right? Not so fast.

In Picarazzi v. John Crane, Inc. (“J. Crane”), the employee, Picarazzi, had a history of alcohol abuse and started to have attendance problems in March 2008. In late March or early April, 2008, the employee informed J. Crane of his alcoholism and his need to get some help. He filled out leave of absence paperwork and went into rehab on April 2, 2008. He turned in a FMLA medical certification from his doctor that said he would be in rehab for approximately 30 days and the anticipated discharge date was May 2, 2008. The HR coordinator for the J. Crane approved the FMLA leave and provided the employee with an FMLA designation form stating that his “12 weeks of job protection expires on June 23, 2008.” The Company also asked that the employee check in every 30 days.

The employee was discharged from rehab on April 23rd with a return to work note from the rehab facility stating he could return to work the next day. However, his doctor issued a return to work note stating he could return to work on April 30th with no restrictions. The employee did not return to work at any time between April 24th and April 30th. Instead, he had relapsed and returned to rehab on April 30th. He was discharged from rehab on May 8th, and his doctor provided a return to work release saying he could return to work on May 13th. He didn’t return to work until May 14th, and then went out sick on May 15 & 16. He relapsed again on or around May 21st and eventually went back into rehab on June 9th and was released on June 15th. On many days in between and after his various rehab treatments, the employee was absent from work and apparently consuming alcohol (in fact he admitted in his deposition that he was drinking about a pint of vodka every day).

In applying its attendance “point” system, J. Crane considered the periods when the employee was in rehab (April 2 – April 23, April 30 – May 8, and June 9 – June 15) as FMLA leave and did not assess any points against him for those days. However, J. Crane did not consider the days when the employee was not in rehab and did not return to work, as protected leave and assessed absentee points against him. Pursuant to its policy, because the employee had a significant number of absentee points against him, J. Crane terminated the employee on June 26, 2008. He filed a lawsuit against J. Crane arguing that his termination was wrongful and violated his rights under the FMLA.[1]

In reliance on the strict language of the FMLA regulations, J. Crane filed a motion for summary judgment against the employee’s FMLA claim. The Company argued that it assessed absentee points against the employee only on those occasions when he was not enrolled in a rehab program or under his doctor’s care.

Despite the Language of the FMLA Regulations, the Court Denied the Motion for Summary Judgment. Why?

Among other reasons, the Court found that:

1. An employee need not be enrolled in a rehab facility every day that he is on leave in order to qualify for FMLA leave. Therefore, some days the employee was out of rehab could still qualify as FMLA protected and thus a triable issue of fact exists.

2. The employer made representations to the employee (contained in the FMLA designation form prepared by J. Crane’s HR coordinator) that he was on “job protected” FMLA leave until June 23, 2008.

Important Lessons for Employers.

• Accuracy of FMLA paperwork is essential. The Court focused on J. Crane’s FMLA designation form that stated that the employee’s “job protected” leave would expire on June 23, 2008. The medical certification from the employee’s doctor listed only 30 days for the anticipated duration of rehab. Therefore, that should have been the date the employee’s “job protected” FMLA leave should have expired absent a change in circumstances (and new medical certification) extending the FMLA leave. What the HR coordinator did with the FMLA designation form was confuse the employee’s total “entitlement” to 12 weeks leave in a 12 month period under the FMLA, with the “approved amount” of FMLA leave being granted based on the information provided by the health care provider. Therefore, according to the Court, while the FMLA regulations don’t protect the current use of alcohol, the employee here could reasonably rely on the representation in the FMLA designation form and believe he was on job protected leave until June 23, 2008.
• Employers should not complete generic FMLA paperwork and merely say “you get 12 weeks during 12 months and the leave expires on X.” Rather, employers should use the information they have from the employee and his/her health care provider to complete careful and accurate FMLA paperwork that reflects the realities of the given situation. If circumstances change and the employee says he/she needs further leave, the employer is entitled to seek additional medical certification to be fully informed of the employee’s current situation and the basis for any further FMLA leave.

[1] The employee also claimed that J. Crane didn’t follow its progressive discipline policy but that issue is not discussed in this case review.

On July 18, 2011, the California Supreme Court issued its opinion in the case California Grocers Association v. City of Los Angeles, in which it upheld the Grocery Worker Retention Ordinance enacted by Los Angeles in December 2005. That ordinance provides that when grocery stores of a specific size are acquired by a new owner, the current employees have certain rights during a 90-day transition period. These rights include: the seller must prepare a list of non-managerial employees with at least six months employment as of the date of transfer and the buyer of the store must hire from that list during the transition period. Furthermore, the hired employees may only be discharged for cause during the transition period and that, at the end of the transition period, the buyer must prepare a written evaluation of each employee’s performance and “consider” offering all “satisfactory” employees continued employment. There are similar ordinances that have been adopted by several other California municipalities, such as Berkeley (Marina Business Workers), Emeryville (Hotel Workers), and San Jose (Airport Business Workers).

Read More

The California Supreme Court handed down a decision on June 30, 2011, which is viewed by many as hurting business travel to California. The Court, in Sullivan v. Oracle, unanimously decided that non-resident employees working in California are entitled to overtime payment pursuant to California law. The Court also gave out-of-state employees four years to sue their employer, holding that overtime work performed by out-of-state employees within California can serve as the basis for a claim under California’s unfair competition law (“UCL”). (Cal. Bus. & Prof. Code § 17200.)

This decision ended a long running dispute between Oracle Corporation, a large software company headquartered in California, and three of its former employees who trained Oracle’s customers in the use of the company’s products. While the plaintiffs mainly worked in their home states (Colorado and Arizona), they occasionally worked in California for business trips. The most these employees worked in California was 110 days per year; however, other years, they spent as little as 20 days in California. Oracle applied the wage-hour laws of the plaintiffs’ resident states to their employment. As a result, plaintiffs filed claims for overtime compensation under California law and restitution under the UCL.

On appeal, the Ninth Circuit Court of Appeals asked the California Supreme Court to decide the underlying questions of California law which would have a significant impact on the “large but undetermined number of California-based employers [who] employ out-of-state residents to perform work in California.”

The Court found that California’s overtime laws “apply by their terms to all employment in the state, without reference to the employee’s place of residence.” The Court reasoned that to not apply California’s overtime laws would “encourage employers to substitute lower paid temporary employees from other states for California employees, thus threatening California’s legitimate interest in expanding the job market.” However, this type of activist policy argument is not the place of the Court and fails to consider the ancillary jobs lost by the substantial decrease in business travel to California. Most disturbing, however, was the Court’s suggestion that the employee performing work may be entitled to apply either the resident state labor laws or California’s labor laws, whichever may be more beneficial for him or her.

Employers doing business in California are expected to see a flood of new wage and hour litigation as a result of this new ruling. Accordingly, California-based employers should review their payroll practices and develop policies and procedures to deal with overtime compensation of out-of-state employees traveling to work within California.

Employees in California generally are not eligible for state unemployment benefits if they quit their jobs voluntarily. However, if the employee resigns for reasons related to childcare, he or she may still qualify for such benefits under the EDD’s regulations. Childcare-related resignations often stem from changes in the employee’s domestic circumstances; for example, when the employee has separated or divorced from a spouse. Such resignations may also result from the employee’s daycare provider becoming unable to continue performing such services; for example, if a daycare center closes its doors or if a relative, neighbor, or friend of the employee who watched the child is no longer available to do so.

Under EDD regulations, good cause for quitting may be “based on domestic circumstances if the [employee]’s obligation is of a real, substantial, and compelling nature such as would cause a reasonable person genuinely desirous of retaining employment to take similar action.” (Cal. Code Regs., title 22, section 1256-9(b).) This exception may apply so long as the reason for quitting “is due to a legal or moral obligation.”

The EDD recognizes that providing or arranging for childcare is a parent’s legal or moral obligation. Thus, the employee’s eligibility for unemployment benefits usually will depend upon his or her childcare options. According to the EDD, “under normal circumstances, arranging care with neighbors, relatives, friends, a nursery school, or daycare service are considered practical alternatives to quitting [a job].” Moreover, EDD guidelines specify that an employee has good cause to quit only if he or she “has explored all childcare options and is left with no practical alternative to quitting.”

In that vein, the EDD may decline to find good cause if the employee’s childcare options are not unworkable but merely undesirable; for example, if the distance from home or work to an alternate childcare provider is somewhat greater but not excessively far. Similarly, an employee typically will not qualify for unemployment benefits if he or she quits simply because the cost of childcare is too high. Under the guidelines, the cost of childcare “is usually not a consideration in deciding if a claimant had good cause for quitting.” However, the EDD has signaled that “special circumstances may arise” if the cost of available childcare is “exceptional and unreasonable.”

To avoid resignations for childcare-related reasons, employers may consider various options; for example, modifying an employee’s shift, transferring the employee to another worksite, or utilizing a telecommuting arrangement. When an employee quits on account of childcare options without giving the employer an opportunity to contemplate such alternatives, or if the employer believes the employee has not explored or unreasonably rejected other childcare options, the employer may consider challenging the employee’s application for unemployment benefits.

Today, the United States Supreme Court ruled in favor of Wal-Mart in its monumental sex discrimination lawsuit brought on behalf of all female employees. The court ruled unanimously that the lawsuit against Wal-Mart Stores Inc. cannot proceed as a class action, reversing a decision by the 9th U.S. Circuit Court of Appeals in San Francisco. The lawsuit could have involved up to 1.6 million women, with Wal-Mart facing potentially billions of dollars in damages. The decision is a victory for many employers snared in the net of class action litigation by employees who are attempting to support their cases by flimsy evidence.

The Court unanimously ruled that the purported class of employees could not prove a “common question of law or fact.” The Court pointed out that “the crux of a Title VII inquiry is the reason for a particular employment decision, and respondents wish to sue for millions of employment decisions at once. Without some glue holding together the alleged reasons for those decisions, it will be impossible to say that examination of all the class members’ claims will produce a common answer to the crucial discrimination question.” The Court found the necessary “glue” to be completely absent from Plaintiffs’ case.

In making this finding the Court looked at the fact that Wal-Mart had a written policy prohibiting discrimination and penalties for those who violated it. The Court felt the Plaintiffs’ evidence from a sociologist, asserting that Wal-Mart’s corporate culture made it vulnerable to gender bias, completely inadequate. The Court’s decision also said that in this type of case there needs to be a common element tying together “literally millions of employment decisions at once.” The majority found the Plaintiffs’ statistical evidence and sociologist’s report amounted to nothing but thin air. Ultimately, commenting on the question of evidence of common elements, the Court found the evidence supporting Plaintiffs’ claims to be “entirely absent here.”

The Court did hold that a corporate policy, such as Wal-Mart’s, of giving local supervisors discretion over employment matters, could support a Title VII disparate-impact claim. However, the justices pointed out that the disparate-impact claim would be challenging a single employment decision by a single supervisor, and did not mean that “every employee in a company with that policy has a common claim.” The Court felt that “in a company of Wal-Mart’s size and geographical scope, it is unlikely that all managers would exercise their discretion in a common way without some common direction.”

This decision brings some much needed relief to employers faced with the ever growing trend of class-action discrimination lawsuits. In addition, the Court’s decision will potentially have a larger impact on Wage & Hour Class Actions, where the Justices have provided employers with a strong decision outlining the evidentiary burden employees have in certifying a matter as a class action.

___________________

 If you have any questions about this Legal Alert or other employment law related questions, please feel free to contact any members of the the  Labor and Employment Group. For additional articles on employment law issues, please visit Weintraub’s law blog at www.thelelawblog.com.

Disagreeing with the California Labor Commission, a California Court of Appeal upheld the trial court’s decision that explicit mutual wage agreements which include straight time and overtime components are enforceable under California law. The Court affirmed that Labor Code section 515(d) does not outlaw explicit mutual wage agreements of this kind. In Arechiga v. Dolores Press, Inc., a janitor sued his former employer for overtime wages. The trial court dismissed the claim, finding that an explicit mutual wage agreement existed between the employee and the employer under which the employee’s fixed salary of $880 lawfully compensated him for both his regular and overtime work based on a regular hourly wage of $11.14 and an overtime wage of $16.71. Following his termination, Arechiga claimed that Labor Code section 515 governed his employment agreement. Citing subdivision (d) of the statute, Arechiga asserted that the Court must find that his salary of $880 compensated him only for 40 regular hours per week thus making his regular rate of pay $22 per hour and his overtime rate $33 per hour. He then argued that his employer owed him overtime at $33 per hour for his regularly scheduled 26 hours of overtime worked each week. Arechiga pointed to the express language of section 515(d) to support his argument. Subdivision (d) states: “For the purpose of computing the overtime rate of compensation required to be paid to the non-exempt full-time salaried employee, the employee’s regular hourly rate shall be 1/40th of the employee’s weekly salary.”

In reaching its decision, the Court of Appeal rejected earlier case law and Labor Commissioner guidance which disallowed such explicit mutual wage agreements. The Court explicitly rejected reliance on the Labor Commissioner’s Enforcement Policies and Interpretations Manual of the Division of Labor Standards Enforcement because that enforcement manual was not properly adopted and thus is nonbinding on California Courts. It is also found that section 515(d)’s language did not preclude such agreements.

Caution: The Arechiga case also lays out specific elements that such an express mutual wage agreement must contain in order to make them enforceable.

Take Away: This is an important decision for California employers. It establishes Court of Appeal precedent that the Labor Commissioner’s longstanding interpretation of 5.15(d) and its repudiation of such express mutual wage agreement are no longer controlling. However, to ensure an agreement is enforceable, employers should work with their employment counsel before entering into one with their employees.