Labor and Employment

The Ninth Circuit recently held that during an EEOC investigation, employers can be forced to produce “pedigree information” (i.e., name, telephone number, address, and Social Security number) of their employees or employment applicants. The decision broadens the scope of information that the EEOC can obtain during its investigations and gives the EEOC further grounds to investigate beyond what is arguably “necessary” to make a determination on an EEOC charge.

The Underlying Action

In the underlying Arizona District Court case, EEOC v. McLane Company, Inc., Case No. 13-15126, 2015 U.S. App. LEXIS 187702, a McLane employee, Damiana Ochoa, filed a charge of gender discrimination. After taking maternity leave, Ochoa attempted to return to work but was eventually terminated based on her failure to pass a physical capability strength test multiple times. The EEOC conducted an investigation into the discrimination charge, requesting information regarding the strength test and information on employees who had taken the test. McLane produced the requested information except for employee pedigree information and the grounds for its decisions to terminate employees who had taken the test, refusing based on relevance and privacy. In response, the EEOC filed a subpoena enforcement action to compel McLane’s compliance with the subpoena. The district court, however, refused to enforce the subpoena agreeing with McLane that the pedigree information was irrelevant and unnecessary to issue a determination on the underlying charge.

The Ninth Circuit’s Ruling

In reversing the district court’s ruling, the Ninth Circuit held that the pedigree information and information regarding the reasons for terminating other employees who had taken the test was relevant to the EEOC’s investigation. It remanded to the trial court to determine whether the information sought would be unduly burdensome, even though McLane had not made that argument in opposition to the subpoena. In its ruling, the Ninth Circuit held that the “governing standard [was] not ‘necessity’; it [was] relevance” and that the “relevance standard in this context [swept] more broadly than it would at trial [and] encompass[ed] virtually any material that might cast light on the allegations against the employer.” For reasons that are unclear, the Ninth Circuit did not give much weight to McLane’s privacy objections, although Judge Milan D. Smith wrote a separate concurring opinion expressing concerns over the privacy issues and the government’s loose treatment of the information which exposed the employees to identity theft. It remains to be determined to what extent privacy or overburdensome objections can be used to successfully oppose such a broad interpretation of relevance in the context of EEOC investigations.

Takeaway

The Ninth Circuit’s opinion will likely embolden future EEOC investigations. Employers should continue to object and oppose overburdensome and otherwise objectionable requests for information. Despite the court’s ruling, employers remain obligated to protect their employees’ privacy rights and should not readily disclose such information based on this ruling.

California’s prohibition on non-competition agreements is less than absolute.  For example, non-compete agreements may be enforced against partners or sellers of businesses.  Additionally, in SingerLewak LLP v. Andrew Gantman (2015) 241 Cal.App.4th 610, a California Appellate Court affirmed an arbitration award that would be considered by most to be a misapplication of California’s non-competition law.

The underlying dispute arises from provision within a partnership agreement that imposed a cost on a departing partner (Gantman) who serviced clients of the firm after his departure.  At arbitration, the former partner argued that:

1. The provision was not enforceable under California law because it was a restraint on competition;
2. The exception to the general prohibition of restraints on competition for agreements by partners did not apply because he was not a partner; and
3. The provision was invalid because it did not contain a geographical restriction.

The arbiter disagreed and enforced the provision.  The arbitrator concluded that Gantman was a partner for the purposes of Business and Professions Code section 16602 and that the provision was not a covenant not to compete but a provision allowing competition with the imposition of a cost on the departing partner.  SingerLewak filed a petition to confirm the arbitration award.  Gantman opposed and filed a petition to vacate the award.  The trial court vacated the arbitration award after it concluded that de novo review of the evidence was required and that the provision was invalid and unenforceable because it did not contain any geographical restrictions.

The Appellate Court concluded that the general rule prohibiting review of an arbitration award applied and that the arbitrator’s award should be been affirmed.  The Appellate court reasoned that judicial review of an arbitration award is only appropriate when the decision violates a party’s unwaivable statutory rights or the explicit legislative expression of public policy.  The court held that while section 16600 evidences a settled legislative policy in favor of open competition and employee mobility, there is no absolute public policy against the enforcement of a covenant not to compete entered into by partners.  As such, although the arbitrator may have erred in interpreting or applying section 16602, the decision did not violate an explicit legislative expression of public policy.  Accordingly, the Appellate Court reversed the trial court’s order which had vacated an arbitration award.

The full implications of the decision are unknown, but as of October 21, 2015, the California Supreme Court has ordered the decision published.   Businesses and employees using arbitration should ensure that they aggressively present arguments during the arbitration because it is unlikely they will have chance for review if they cannot meet this burden.

On October 14, 2015, the California Second District Court of Appeal held in Sharif v. Mehusa, Inc.  that both the employee and the employer can be deemed “prevailing party” for purposes of recovering attorneys’ fees under the Labor Code.  Plaintiff, Mahta Sharif, brought an action against her former employer, Mehusa, Inc., for unpaid overtime (Lab. Code, § 1194), unpaid wages (Lab. Code, § 201), and violation of California’s Equal Pay Act (Lab. Code, § 1197.5).  She prevailed on her Equal Pay Act claim with the jury awarding her $26,300. Mehusa prevailed on Plaintiff’s overtime and wage claims.  Plaintiff filed a cost memorandum and was awarded her costs. She also filed a motion for attorney fees in the amount of $280,432 under Labor Code section 1197.5(g) as the prevailing party on her Equal Pay Act claim. Plaintiff’s attorney fees request consisted of a lodestar amount of $140,216 and a multiplier of two.  Mehusa filed a motion for attorney fees and costs under Labor Code section 218.5 in the amount of $36,982.24 as the prevailing party on Plaintiff’s wage claims.  Mehusa estimated that 75% of defense counsel’s time was spent defending against Plaintiff’s unsuccessful wage claims.

The trial court ruled that Labor Code section 218.5 is a two-way fee shifting statute that requires the award of reasonable attorney fees and costs to the prevailing party on wage claims.  Relying on Aleman v. AirTouch Cellular (2012) 209 Cal.App.4th 556, 582-583, the trial court further ruled that when there are multiple claims asserted in an action, to be a “prevailing party” under section 218.5, a defendant need not prevail on all of the claims, but only on those claims to which section 218.5 applies.  Thus, after determining that only $35,054 of her attorney’s fee request was related to her successful Equal Pay Act claim, the trial court awarded Plaintiff $35,054 for her attorney’s fees under Labor Code section 1197.5. The trial court also awarded Defendant $31,334.81 under Labor Code section 218.5 for its attorney fees in connection with Plaintiff’s unsuccessful wage claims, and then offset the awards for a net award to Plaintiff of $3,709.19.

Plaintiff appealed contending that she was the sole prevailing party on a “practical level” and as that term is defined in California Code of Civil Procedure section 1032(a)(4). Accordingly, Plaintiff argued that the trial court erred in awarding Mehusa its attorney fees and costs. In affirming the trial court’s decision, the Appellate Court held that a net monetary award to a party does not determine the prevailing party when there are two fee shifting statutes involved in one action.  Instead the court explained, when there are two fee shifting statutes in separate causes of action [as there were in this case – Labor Code sections 1197.5 and 218.5], there can be a prevailing party for one cause of action and a different prevailing party for the other cause of action.

By: The Labor and Employment Group 

Sunday, October 11, 2015 was the deadline for the Governor to act on bills that were passed by the legislature.

There were two bills the Governor rejected that are seen as key victories for employers.  They are:

AB 465 was vetoed. This bill sought to bar mandatory employment arbitration agreements.  This would have caused lawsuits to increase and would have driven up litigation costs for California’s employers.  In vetoing AB 465, Brown correctly called the bill “a far-reaching approach that has been consistently struck down in other states” for conflicts with federal law.

Brown also vetoed SB 406, an unwise expansion of the state’s unpaid family leave policy. SB 406 sought to expand the pool of workers who can take up to 12 weeks off to care for grandparents, grandchildren, siblings and parents-in-law.  The Governor indicated this proposal also would conflict with federal law and would potentially require employers to provide up to 24 weeks of family leave in a year.  What are we France?!?

Not all news was good news.  Watch this blog for updates and further discussion about the Governor’s actions on this year’s legislative agenda.

By: The Labor and Employment Group

When people begin to think about cool weather, hot chocolate, Thanksgiving, and this year the constant announcements about El Niño, only one thing always comes to my mind……..

Employer Handbook Season! 

Yes, the end of the year always brings a flurry of revisions to employer handbooks.  This year is no different.  Business owners, general counsel, and human resources professionals throughout California and the County always look at Q4 and ask themselves “when was the last time your employee handbook was updated?”  We are assisting many clients right now with their handbooks so that they are poised for a January 1 launch. With the constant changes in California (including the dozens of new bills just signed by the Governor), employer handbooks that are more than a year old can quickly become a huge liability.

When creating or revising handbooks, employers must remember that the employee handbook is the announcement of the Companies policies.  This is the first step toward legal compliance with the myriad of California’s (sometimes ridiculously generous) employment laws.  If your handbook contains the wrong language, contains outdated content, or if you don’t enforce your policies consistently, the employer will often find themselves on the wrong side of employment-related lawsuits.

Ultimately a yearly examination will help employers prepare for incorporating changes in law into their workplace, ensure their policies are providing a structure for the administration of like leaves/vacations/sick time, and revising policies that are either obsolete or are not enforced uniformly.

Areas to Scrutinize

Every year brings a torrent of new laws, regulations, and rulings here in California.  Employers should carefully scrutinize certain areas within your handbooks to make sure you are compliant.  The top areas of impact to focus on in reviewing your employee handbook for 2016 are:

• E-mail, Social Media and Technology Use policies
• Wage & Hour rules and policies
• Equal Employment Opportunity rules and policies
• Policies to help remain union free
• Vacation and Sick leave policies
• Leave laws and policies

Additional Areas to Include

In addition to the areas, you want to ensure some of the basics of a solid employer handbook are also included and up to date.  Some of those items include:

• At-Will Statement
• Anti-Harassment and Discrimination policy
• Disclaimer (not a contract policy)
• Attendance
• Drug and Alcohol Abuse policy
• Workplace Violation policy
• Disciplinary Policy and Procedure

Ultimately your handbook must be created with your Company in mind.  Meeting legal requirements are a must for any handbook.  However, you should then examine how those policies will work operationally.  Operationally, the wording of the policies or the inclusion of policies may be vastly different for local, regional and national businesses.

Then What???

Once created, the work is not done.  Employers must consider how to deliver the new handbook to its employees, how to obtain acknowledgements that the handbook was received, and whether to have any meetings describing new or updated policies.  The beginning of the New Year is a great time to launch new handbooks, arbitration agreements and other workplace policies.

We feel strongly every business should have access to high quality policies and handbooks.  Whether you need a new handbook from scratch or you need your revisions reviewed for legal compliance we will work with you to make the process easy, fast, and cost effective.  Please call your favorite Weintraub Labor & Employment attorney for help.  We want to help.

On August 31st, the California Legislature passed a new bill (AB 465) to ensure that waivers of employment rights and procedures, often through arbitration agreements, are made voluntarily and not as a condition of obtaining or keeping employment. As the Wall Street Journal recently reported, the number of companies using arbitration agreements in the workplace has risen dramatically from 16% in 2012 to 43% in 2014. Critics of such forced waivers of workplace claims contend that they eliminate important procedural guarantees of fairness and due process provided by our judicial system. The bill’s author, Assembly Member Roger Hernández, framed the issue as follows: “No worker should be forced to choose between a job and giving up core labor rights and procedures. Existing labor laws are meaningless if workers are forced to sign away enforcement of those rights.”
However, despite what sounds like a well-intentioned law, opponents of the bill argue that it is unnecessary and unenforceable. California case law already provides adequate protections against such waivers so long as they include provisions for: (1) a neutral arbitrator; (2) no limitation of remedies; (3) adequate opportunity to conduct discovery; (4) written arbitration award and judicial review of the award; and (5) no requirement for the employee to pay unreasonable costs that they would not otherwise incur in litigation. Arbitration agreements that do not include these provisions have regularly been struck down as unconscionable. Further, coercion and lack of consent by employees, the apparent injustices target by this bill, have always been grounds to invalidate contracts.

Perhaps most importantly, opponents of the bill have readily pointed out that the law likely will be preempted by federal law. The Federal Arbitration Act (“FAA”) provides that arbitration agreements are “valid, irrevocable, and enforceable.” As the U.S. Supreme Court held in 2011, “when state law prohibits outright the arbitration of a particular type of claim, the analysis is straightforward: The conflicting rule is displaced by the FAA.” AT&T Mobility v. Concepcion, 563 U.S. 333 (2011). It’s hard to imagine how AB 465 will survive such a clear case of preemption. And if it does, given the recent rise in workplace arbitration agreements, the new law would needlessly redirect these disputes back to an already overburdened and underfunded judicial system.

Realistically, if Governor Brown signs the bill and it survives preemption, it will only provide a minimal level of protection for employees. Employers may be able to comply with the new law simply by including clear language that the arbitration agreement is voluntary and not a condition of employment. Whether courts will impose a higher standard for somehow proving that the employee’s waiver is voluntary remains to be determined. We shall see if Governor Brown signs the bill.

On August 7, 2015, the California Labor Commissioner issued its first opinion letter on one discrete issue under the California Health Workplaces Healthy Families Act which requires employers to provide paid sick leave to employees.  The question posed to the Labor Commissioner was this:

If an employee currently works a regular 10 hour shift, and if the employer elects to proceed under a “no accrual or carry over” system … of providing paid sick leave, does the employer have to “front load” that employee at the beginning of the year with 30 hours of leave (three days at 10 hours per day) or only with 24 hours of leave on the theory that a “day” is limited to a maximum of eight hours?

Here is a summary of what the Labor Commissioner said:

Under Section 246(d) of the Labor Code, “an employer that elects to proceed under the ‘no accrual or carry over’ option must provide a minimum of 24 hours or three days of paid sick leave for employees, and the ‘full amount of leave’ must be received at the beginning of the year (i.e. “front load” or provided “up front”).  Note that subdivision (d) was recently amended in AB 304 to include the following sentence: ‘The term ‘full amount of leave’ means three days or 24 hours.’  … In other words, ’24 hours or three days’ must be interpreted as alternative but equally applicable standards, and an interpretation must be applied that would not undercut either standard for any employee. …

This means that if an employee’s regular work hours are 10 hours per day, a ‘paid sick day’ for that employee … would be the normal full day, which if translated into hours, would be 10 hours.  The ‘full amount of leave’ for this employee would need to be front loaded at the beginning of the year, meaning that three 10 hour days (which, if translated into hours would be 30 hours) must be front loaded at the beginning of the year. …

Likewise, for employees who regularly work six hour days, and if the employer chooses the no accrual or carry over system, the ‘full amount of leave’ the employer would need to front load for these employees would be a minimum of 24 hours (not three six-hour days).  If the employer front loaded only three six hour ‘days’ for these employees, it would undercut the mandatory minimum standard of 24 hours for these employees. …”

So in essence, the Labor Commissioner’s opinion confirms what many legal scholars had opined previously – that the benefit is the “greater of” 24 hours or 3 days at the employee’s regular or normal daily hours of work.

The Labor Commissioner also said that the same analysis applies to the “24 hours or three days” cap that employers can place on an employee’s use of paid sick leave each year.

Take Away:  Employers should review their sick leave (or PTO) policies and ensure that they comply with this “greater of” standard.

Joining similar holdings from several other circuits, the Ninth Circuit recently held in Mayo v. PCC Structurals, Inc. that a depressed employee who threatened to kill his co-workers and was thereafter fired was not a qualified individual under the ADA.  The court therefore affirmed the district court’s summary judgment on the employee’s disability discrimination claim.

Stress, Depression, and Bullying Lead Employee to Threaten Co-Workers’ Lives

The plaintiff, Timothy Mayo, welded aircraft parts for PCC Structurals.  In 1999, Mayo was diagnosed with major depressive disorder (MDD).  Despite the diagnosis, he continued working without incident for years.  In 2010, that changed.  Mayo and some other co-workers felt they were being bullied by their supervisor.  Following a co-worker’s complaint and a subsequent meeting to discuss the bullying, Mayo told three different co-workers that he wanted to kill the supervisor.  He told one co-worker that he felt like bringing a shotgun to work and “blowing off” the supervisor and others’ heads.  He told another co-worker that he wanted to “bring a gun down and start shooting people,” explaining that 1:30 p.m. was an optimal time because all of the supervisors would be present.  Pretty scary stuff.

Mayo’s co-workers reported the threats and HR reached out to him.  He told an HR representative that he “couldn’t guarantee” he wouldn’t carry out the threats.  PCC suspended him and called the police, who in turn took Mayo into custody for six days on the basis that he was a threat to himself and others.  After his release, Mayo spent two months on FMLA leave.  His doctor thereafter cleared him to return to work but suggested that he be assigned a different supervisor.  Instead, PCC fired him.

Ninth Circuit Holds that the Employee Cannot Sue for ADA Discrimination

Mayo sued PCC for disability discrimination in violation of Oregon’s version of the ADA, arguing that his threats were the result of his MDD and that PCC failed to accommodate him with a different supervisor.  The district court granted summary judgment, holding that Mayo could not establish a prima facie case of disability discrimination.  To establish a prima facie case, an employee must show, among other things, that he is a qualified individual under the ADA.  A qualified individual is someone who can perform the essential functions of his job with or without a reasonable accommodation.

According to the Ninth Circuit, Mayo was not a qualified individual under the ADA because he could not handle the essential functions of his job.  The court held: “[a]n essential function of almost every job [including Mayo’s] is the ability to appropriately handle stress and interact with others.”  According to the court, threatening the lives of one’s co-workers “in chilling detail” on multiple occasions is a pretty clear indicator that an employee cannot appropriately handle stress and interact with others.  Shocking, right?  This is true, according to the court, regardless of whether the comments resulted from the MDD.

In affirming the district court’s holding, the Ninth Circuit agreed with several other Circuits that have held employers cannot be forced to choose between not accommodating a disability and creating an unsafe workplace for other employees.  The court noted that this was a “common sense principle” and it was aware of no cases, regulations, or guidance that disagreed.

But while it may seem like common sense, to get to its holding, the Ninth Circuit had to distinguish several prior cases in which it had excused conduct resulting from a disability.  The court accepted that conduct resulting from a disability “is considered to be part of the disability, rather than a separate basis for termination.”  But the court drew the line at specific threats of violence, holding that an employer has no obligation to “simply cross their fingers and hope that violent threats ring hollow.”  While expressly acknowledging the real struggles of depression and mental illness, the Court held that protecting the individual rights of those who suffer from such illness must give way to an employer’s obligation to maintain the safety of its workforce.

Take Away For Employers

This case is a clear victory for employers and, as the court stated, applies a “common sense principle.”  But the case should also be read narrowly.  Importantly, the Ninth Circuit distinguished rather than overruled its previous line of cases holding that conduct resulting from a disability is to be considered part of the disability.  Employers still have to be careful not to automatically terminate any employee whose misconduct can be attributed to a disability.  Under most circumstances, an employer will still have to determine whether it can accommodate the employee in a way that eliminates the risk of misconduct.  Employees who threaten actual violence, however, are a different story.

The EEOC issued a press release on July 20, 2015 announcing that the federal appeals court has dismissed Abercrombie & Fitch’s (“AF”) appeal of the EEOC’s religious discrimination case because AF made the decision to settle the case following the U.S. Supreme Court’s ruling.

Below is a summary of the court proceedings.

The case arose when Samantha Elauf, then a teenager who wore a headscarf or hijab as part of her Muslim faith, applied for a job at an AF store in her hometown of Tulsa, Okla.  She was denied hire for failing to conform to the company’s “look policy,” which AF claimed banned head coverings.  Elauf then filed a charge with the EEOC, alleging religious discrimination, and the EEOC filed suit against AF charging that the company refused to hire Elauf due to her religion, and that it failed to accommodate her religious beliefs by making an exception to its “look policy” prohibiting head coverings.  The trial court granted summary judgment on liability to EEOC after holding that the evidence established that Elauf wore the hijab as part of her Muslim faith, that AF was on notice of the religious nature of her practice, and that it refused to hire her as a result.  A jury subsequently awarded Elauf damages for the discrimination.

AF appealed and a divided panel of the Tenth Circuit Court of Appeal ruled in favor of AF.  The court of appeals held that AF was not on sufficient notice of Elauf’s religious practice because, despite correctly “assuming” that Elauf wore a headscarf because of her religion, the company  did not receive from Elauf explicit, verbal notice of a conflict between the “look policy” and her religious practice.  The evidence in the case included that AF never disclosed to Elauf the “no head coverings” rule in its “look policy.”  The Supreme Court granted review and reversed the Tenth Circuit’s decision.  The Supreme Court held that to prevail in a disparate-treatment (intentional discrimination) claim under Title VII, an applicant/employee need show only that his/her need for an accommodation was a motivating factor in the employer’s decision, not that the employer had knowledge of his/her need.

Final Resolution of the Case.

In the settlement, AF agreed to pay $25,670 in damages to Elauf and $18,983 in court costs.   Elauf said, “I was a teenager who loved fashion and was eager to work for Abercrombie & Fitch.  Observance of my faith should not have prevented me from getting a job.  I am glad that I stood up for my rights, and happy that EEOC was there for me and took my complaint to the courts.”   Elauf also said that she was “grateful to the Supreme Court” for its decision and that she hopes that “other people realize that this type of discrimination is wrong and the EEOC is there to help.”

Employers Remember: Based on the Supreme Court’s decision, an applicant or employee does not have to request a religious accommodation in order to later bring a religious discrimination/failure to accommodate claim.  Instead, the applicant or employee need only show that the employer (e.g. by and through its supervisor(s)) was “motivated” by a desire to avoid accommodating the applicant’s or employee’s religious practices.  This will likely be shown based on some evidence of suspicion or knowledge on the employer’s (supervisor’s) part that religious practices were at play in the given situation. 

Takeaway:  Train your supervisors so that they know they cannot make adverse employment decisions based on an applicant’s or employee’s religion, and that the employer may be required to provide accommodations to applicants or employees for certain religious practices.