Labor and Employment

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.

Taking the next step to implement the federal Americans with Disabilities Amendments Act of 2008 (“ADAAA”), the U.S. Equal Employment Opportunity Commission (“EEOC”) published its long-awaited final regulations on March 24, 2011. However, it is widely believed that the ADAAA and the recently published regulations will not greatly impact employers in California who are already covered by the state’s Fair Employment and Housing Act.

The ADAAA overturned a number of decisions from the United States Supreme Court that had interpreted the definition of “disability” rather narrowly. By expanding that definition, the ADAAA has made it less difficult for employees to qualify for disability protection under federal law. The EEOC’s expressed aim in publishing these regulations is to make it easier to determine who qualifies for such protection under the new law.

For example, the ADAAA and the related regulations have relaxed certain provisions so that an employee is not required to prove that a given condition “significantly” or “severely” restricts his or her ability to perform a major life activity. Meanwhile, comparably low thresholds have existed under California law for a number of years. Still, employers in the Golden State are well advised to take heed of these developments – particularly those with multi-state operations and those who are more prone to be sued under federal law for various reasons.

A copy of the EEOC’s new regulations may be accessed at this link. The EEOC also posted a “Questions and Answers” document (at this link) and a “Fact Sheet” (at this link) to help employers understand the impact of the ADAAA and the related regulations. Attorneys at Weintraub Genshlea Chediak have reviewed these regulations and related materials carefully. They are prepared to provide guidance to employers who wish to give greater consideration to these developments.

On September 30, 2010, Governor Schwarzenegger signed into law the “Michelle Maykin Memorial Donation Protection Act” which adds another statutory leave entitlement to the California Labor Code.

The new organ and bone marrow donation leave law provides for the following:

• The law applies to employers (persons, partnerships, corporations, associations, or other business entities) that employ 15 or more employees.
• Employees who are donating an organ to another person may take a leave of absence not exceeding 30 days (and which may be taken in one or more periods) in any one-year. Employees who are donating their bone marrow to another person may take a leave of absence not exceeding 5 days (and which may be taken in one or more periods) in any one year.
• In order to receive a leave of absence under the new law, an employee must provide a written verification to the employer that shows that the employee is an organ or bone marrow donor and that there is a medical necessity for the donation. Note: the statute does not define “written verification” or provide any explanation of what will satisfy this requirement. However, it is reasonable to assume that a medical certification from a health care provider containing the necessary information will be sufficient.
• Employers may require that as a condition of an employee’s initial receipt of bone marrow or organ donation leave, that an employee use up to 5 days of earned but unused sick or vacation leave (if any) for bone marrow donation, and up to 2 weeks of earned but unused sick or vacation leave (if any) for organ donation. However, the leave is paid leave and thus, the employer has an obligation to pay the employee for all time off while on leave under this new law
• The leave taken for organ or bone marrow donation does not run concurrently with any leave taken under FMLA/CFRA.
• The leave taken for organ or bone marrow donation does not cause a break in the employee’s continuous service for purposes of seniority or benefit entitlements like sick leave and vacation accrual.
• An employee returning from organ or bone marrow donation leave shall be restored to the position he or she held when the leave began or to an equivalent position.
• Employers shall not interfere with, restrain, or deny the exercise or the attempt to exercise the right of an employee to take organ or bone marrow donation leave, and may not discharge, fine, suspend, expel, discipline, or in any other way discriminate against an employee who exercises their right to such leave or opposes a practice made unlawful under the new law.
• An employee has a private right of action in superior court to enforce the new law and a court has the jurisdiction to enjoin an employer from any act or practice that violates the new law.

What Should Affected Employers Do?

• Update your leave policies (handbook) to include this new statutory leave and distribute a memo to employees advising them of the new organ and bone marrow donation leave.
• Train your managers and supervisors regarding this new statutory leave.
• Properly and consistently administer this statutory leave entitlement like all other statutory leave entitlements.

____________________

Lizbeth “Beth” West is a shareholder in the Labor and Employment Law Section and Disputes, Trials & Appeals Section at Weintraub Genshlea Chediak. Beth’s practice focuses on counseling employers in all areas of employment law, and defending employers in state and federal court, as well as before administrative agencies. She has extensive experience in defending wage and hour claims, and complex whistle-blowing and retaliation claims. She also provides training services on various employment issues, such as sexual harassment and violence in the workplace. If you have any questions about this Legal Alert or other employment law related questions, please feel free to contact Beth West at (916) 558-6082. For additional articles on employment law issues, please visit Weintraub’s employment law blog at www.thelelawblog.com.