Employment Law - July 2015

by Manatt, Phelps & Phillips, LLP
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In This Issue:

  • The Impact of National Same-Sex Marriage for Employers
  • Uber Driver Is an Employee, California Labor Commissioner Says
  • Second Time Is the Charm for FedEx in Overtime Suit
  • Even a Selfie Can Be Protected by the NLRA
  • These Shoes Were Made for Working, but Ninth Circuit Says Employee Must Pay for Them

The Impact of National Same-Sex Marriage for Employers

Why it matters

How will employers feel the impact of the U.S. Supreme Court’s decision in Obergefell v. Hodges? The landmark ruling that the Fourteenth Amendment guarantees a constitutional right to same-sex marriage in all 50 states will establish uniformity and consistency for employers with a presence in multiple states, as employees may now enter into same-sex marriages in their home state or any other state, and marriages legally performed in any other jurisdiction must be recognized as valid. The 5–4 opinion authored by Justice Anthony Kennedy also validates the Department of Labor’s rule defining “spouse” under the Family and Medical Leave Act to include same-sex partners, even for those states that had obtained an injunction against enforcement of the expanded definition. Employers should consider updating their employee handbooks in light of the decision and may need to tweak various forms and policies to adopt more inclusive terminology. The Court’s recognition of changing social norms could also lead to an uptick in suits based on sexual orientation, gender, transgender, or marital status discrimination under either Title VII or state law.

Detailed discussion

“No union is more profound than marriage, for it embodies the highest ideals of love, fidelity, devotion, sacrifice, and family. In forming a marital union, two people become something greater than once they were. As some of the petitioners in these cases demonstrate, marriage embodies a love that may endure even past death. It would misunderstand these men and women to say they disrespect the idea of marriage. Their plea is that they do respect it, respect it so deeply that they seek to find its fulfillment for themselves. Their hope is not to be condemned to live in loneliness, excluded from one of civilization’s oldest institutions. They ask for equal dignity in the eyes of the law. The Constitution grants them that right,” Justice Anthony Kennedy concluded in one of the most highly anticipated decisions of the U.S. Supreme Court’s term.

The Court split 5 to 4 in its opinion, which considered the constitutionality of same-sex marriage in a consolidated case from the Sixth Circuit Court of Appeals. Federal district courts in Kentucky, Michigan, Ohio, and Tennessee had all struck down state laws in those states limiting marriage to a union between one man and one woman. In response, those states had appealed.

After consolidating the cases, which involved a total of 14 petitioners, the Sixth Circuit reversed the lower courts’ decisions. The Supreme Court justices accepted the case for review and, in a split decision which cited both Confucius and Cicero, Justice Kennedy wrote that the “history of marriage is one of both continuity and change.” He went on to hold that

“[w]hen new insight reveals discord between the Constitution’s central protections and a received legal stricture, a claim to liberty must be addressed.”

Not only do the Equal Protection and Due Process clauses of the Fourteenth Amendment require all states to perform same-sex marriages, but the Constitution further requires states to recognize same-sex marriages legally performed elsewhere, the majority wrote.

While the dissenting justices did not hold back on their criticisms (Chief Justice John Roberts characterized the majority’s approach as “deeply disheartening,” while Justice Antonin Scalia called the opinion “as pretentious as its content is egotistic”), employers must now ensure they are in compliance with the law as it currently stands.

Many employers have incorporated same-sex marriage concepts into their policies and procedures, particularly in those states where it was already legal. But those companies with a multistate presence, or with offices in states where same-sex marriage was prohibited, should engage in a thorough review of employee handbooks and all policies and procedures to ensure compliance and consistency, with an accompanying update to employee training. For example, the word “spouse” should now recognize same-sex unions (i.e., watch out for gender-specific policies referencing “husband” and “wife”).

Regarding other recent developments in this area, in March a finalized interpretation by the Department of Labor (DOL) expanding the definition of “spouse” under the Family Medical Leave Act (FMLA) took effect. That rule recognized the June 2013 U.S. Supreme Court decision in U.S. v. Windsor that Section 3 of the Defense of Marriage Act—the provision that interpreted “marriage” and “spouse” to be limited to opposite-sex couples for purposes of federal law—was unconstitutional.

Residence was therefore irrelevant for purposes of evaluating the legality of a same-sex marriage under the FMLA, the DOL said, applying a “state of celebration” rule instead. However, four states that did not recognize same-sex marriage—Arkansas, Louisiana, Nebraska, and Texas—filed suit to halt enforcement of the rule and a federal court judge granted a preliminary injunction. Presumably that injunction will terminate in the wake of Obergefell.

Workplace benefits will also be impacted by this decision, from medical insurance coverage to Social Security benefits to tax status. In addition to the DOL, the Internal Revenue Service (IRS) issued guidance after Windsor providing that same-sex marriages should be recognized for purposes of the Internal Revenue Code and the Employee Retirement Income Security Act if they were legally recognized in the state where the marriage was celebrated. As demonstrated by the steps already taken by the DOL and IRS, many federal benefits may already include same-sex marriage. But state law—in particular in the areas of insurance, taxes, and domestic relations courts—will now have to follow.

What else can employers expect? Although Obergefell was not an employment case, the rights recognized by the decision and the sweeping language used by Justice Kennedy in the majority opinion could trigger an increase in lawsuits alleging discrimination based on marital status in states where it is a protected category, such as in California, as well as transgender, sexual orientation, or gender discrimination under either Title VII or related state laws.

To read the opinion in Obergefell v. Hodges, click here.

Uber Driver Is an Employee, California Labor Commissioner Says

Why it matters

A California Labor Commissioner has ruled that an Uber driver seeking reimbursement from Uber for expenses such as tolls and mileage incurred was an Uber employee, and not an independent contractor, and has ordered Uber to pay driver Barbara Ann Berwick approximately $4,000. Uber argued that the ride-sharing company did not exercise the requisite control necessary to make Berwick an employee. But the Labor Commissioner’s Office concluded that Uber vetted her as a prospective driver and provided her with an iPhone. “Defendants hold themselves out as nothing more than a neutral technological platform, designed simply to enable drivers and passengers to transact the business of transportation,” according to the order. “The reality, however, is that defendants are involved in every aspect of the operation.” The decision became public when Uber filed an appeal in California state court; the company issued a statement emphasizing that the hearing officer’s conclusion was limited in application to Berwick and was otherwise nonbinding. However, the decision could have major implications for the ride-sharing industry as a whole—encouraging other drivers to bring suit, as well as other industries based on similar staffing models.

Detailed discussion

Barbara Ann Berwick began working as an Uber driver in July 2014. When she stopped working just a few months later, she filed a claim with the California Labor Commission seeking wages and reimbursement of expenses she incurred while driving for Uber.

A hearing officer conducted a hearing during which Berwick testified that, over 49 days, she drove for approximately 470.70 hours, paid bridge tolls of about $256, and drove roughly 6,468 miles. She also provided a copy of the written agreement between the parties, which set forth the requirements to be a driver (passing a background and DMV check and purchasing liability insurance coverage of $1 million, for example).

Uber presented testimony that the company consists of a technological platform and a smartphone application that facilitates private transactions between private vehicle drivers and passengers. The company exerted no control over the hours Berwick worked, Uber said, and did not geographically restrict her driving.

But Hearing Officer Stephanie Barrett concluded that the evidence, in her view, demonstrated that Berwick was an employee, not an independent contractor.

Relying on a similar case brought by cab drivers, Barrett stated that the overriding factor when considering the question was whether the individual performing the work was engaged in an occupation or business distinct from, or integral to, that of the company utilizing the individual’s services.

“Plaintiff’s work was integral to Defendants’ business,” the officer wrote. “Defendants are in business to provide transportation services to passengers. Plaintiff did the actual transporting of those passengers. Without drivers such as Plaintiff, Defendants’ business would not exist.”

Despite Uber’s contention that it exercised very little control over Berwick’s activities, the degree of control was not dispositive, Barrett said. “By obtaining the clients in need of the service and providing the workers to conduct it, Defendants retained all necessary control over the operation as a whole,” she wrote.

“Defendants hold themselves out as nothing more than a neutral technological platform, designed simply to enable drivers and passengers to transact the business of transportation,” the officer said. “The reality, however, is that Defendants are involved in every aspect of the operation. Defendants vet prospective drivers, who must provide to Defendants their personal banking and residence location, as well as their Social Security number. Drivers cannot use Defendants’ application unless they pass Defendants’ background and DMV checks.”

Uber also controls the tools the drivers use, Barrett added, requiring drivers to register their cars, and monitoring their passenger approval ratings, with the threat of termination if their rating falls below a specific level. Barrett also observed that drivers did not pay Uber to use its intellectual property, that Uber alone had the discretion to negotiate cancellation fees with the passenger, and that Uber discouraged drivers from accepting tips “because it would be counterproductive to Defendants’ advertising and marketing strategy.”

Because Berwick was an employee, the hearing officer concluded that Uber was required to indemnify her for all that she had spent in the discharge of her duties, pursuant to Labor Code Section 2802. That included toll charges of $256 and mileage at a rate of $0.56 per mile for 6,468 miles, or $3,878.08. With interest, the total amount was $4,152.20.

Barrett declined to award unpaid wages or liquidated damages, finding that Berwick failed to provide the required evidence to support her claim for additional wages, such as any record of payment information from the defendants.

Uber has already appealed the decision to the California Superior Court.

To read the California Labor Commissioner’s decision in Berwick v. Uber Technologies, click here.

Second Time Is the Charm for FedEx in Overtime Suit

Why it matters

A putative class of Federal Express drivers was unable to persuade the Ninth Circuit Court of Appeals to reverse denial of a motion for class certification in their suit seeking overtime under California state law. Yvette Green and other drivers charged that the company illegally denied meal breaks and withheld overtime to workers in the state by requiring them to clock in prior to the start of their shift and then stay on the premises without payment until their shift started. In 2009, a federal district court judge denied class certification and the federal appellate panel reversed. On remand, the judge again denied certification and the employees again appealed. But the second time proved to be the charm for FedEx, with the Ninth Circuit finding that Green failed to establish that the company had a policy limiting what workers could do once they were clocked in but not officially on their shift. Instead, the evidence showed that once employees clocked in, they were allowed to leave the premises as long as they were at the worksite and ready to work when their shift started. In light of the company’s recent agreement to pay $228 million to a class of California FedEx drivers claiming that they were employees and not independent contractors, the unpublished ruling constitutes a resounding victory for the employer.

Detailed discussion

A driver for Federal Express, Yvette Green, alleged that the company failed to pay her for work performed during meal breaks and withheld overtime pay to its California workers. According to Green, the company had a policy that required workers to clock in prior to the start of their shift, and then remain on the premises without payment until their shift started, as well as remain on the premises at the end of their shift until they clocked out.

Green sought to certify two classes of workers in the suit: (1) an “Unpaid On-the-Clock Class” for those employees who were not paid for the time between when they clocked in until the time they actually started their shift and the time between when they ended their shift to the time they clocked out; and (2) a “Working Meal Break Class” for those employees that were not paid for work performed during unpaid meal breaks.

A federal court judge denied Green’s motion for class certification in 2009. She appealed to the Ninth Circuit Court of Appeals and a three-judge panel reversed. The court instructed the trial judge to stay its decision pending the California Supreme Court’s ruling in Brinker Restaurant Corp. v. Superior Court, 273 P.3d 515 (2012).

After Brinker was issued, the district court again denied the motion for class certification and Green again appealed to the Ninth Circuit.

This time, the federal appellate panel affirmed the denial of Green’s motion.

The court first examined the Unpaid On-the-Clock Class. In its first decision, the Ninth Circuit had instructed the district court to determine whether the level of FedEx’s control over employees within the proposed class “when they are on-the-clock but off-shift” was sufficient to render the time compensable.

Absent a policy that prevented the FedEx employees from using that time for their own benefit, Green could not show classwide control by the employer, the panel said—and without demonstrating classwide control, Green could not satisfy Federal Rule of Civil Procedure 23(b)(3), as individual fact inquiries concerning whether FedEx controlled each employee would predominate over any common question.

Unfortunately for Green, the testimony did not support classwide control. “The designees testified that they saw no reason why the employees would not be able to leave the FedEx premises (or use the time for any other purpose) after clocking in as long as they returned and were ready to work by the time their shift started,” the panel wrote. “Additionally, it is undisputed that if an employee worked during that time (whether before or after their shift), they would be compensated for that time if they notified their manager and had their time card adjusted.”

Green only presented testimony from some employees at the Los Angeles branch that they thought they could not leave the premises after clocking in. “At best, this evidence suggests that employees at that branch may have been under FedEx’s control after clocking in,” the court said. “However, this evidence must be contrasted with testimony from employees at the San Diego office indicating that they were free to leave the premises after clocking in.”

Taking the testimony from employees at both locations, the “evidence demonstrates that the district court’s conclusion, that FedEx did not have a uniform policy that automatically placed all of the potential class members under FedEx’s control as soon as they ‘clocked in,’ was not clearly erroneous,” the panel said.

The Working Meal Break Class similarly failed under the court’s scrutiny. While California employers are obligated to relieve employees of all duty for an uninterrupted 30-minute period, the employer is not required to actually ensure that its employees take meal breaks, the court said, citing Brinker.

“If a meal break is provided, and an employee works through the break, ‘the employer is liable only for straight pay, and then only when it knew or reasonably should have known that the worker was working through the authorized meal period,’ ” the court wrote. “However, ‘the employer is not obligated to police meal breaks and ensure no work thereafter is performed.’ ”

To certify a class, Green had to show that FedEx knew or should have known that some of its employees were working through their meal breaks. Green proposed that the class could be established by using electronic scans of packages during designated meal breaks, but the court rejected the suggestion.

“First, it is undisputed that FedEx did not regularly review the electronic data Green would use to show work performed during meal breaks. Therefore, Green’s evidence does not show that FedEx actually knew of uncompensated work being done,” the panel wrote. “Thus, FedEx had no obligation to sift through the volumes of electronic data produced by the scanning devices to determine whether its employees were actually taking their authorized breaks.”

Lacking a common method of proof that would require FedEx to compensate its employees on a classwide basis, the court held that individual issues as to whether an employee actually worked during a meal break—and brought that to FedEx’s attention—would predominate.

The Ninth Circuit affirmed denial of the motion to certify both classes in the suit.

To read the decision in Green v. Federal Express Corporation, click here.

Even a Selfie Can Be Protected by the NLRA

Why it matters

A worker who violated her employer’s no cellphone use and disloyalty policies by taking selfies with coworkers that were posted online with a comment that she was “working like an [sic] slave” was terminated in violation of the National Labor Relations Act (NLRA), an administrative law judge recently determined. The Tinley Park Hotel and Convention Center had a rule banning cellphone use during working hours, as well as a provision in the employee handbook prohibiting disloyalty. When she was fired after a selfie taken during work hours was posted and commenting on it, Audelia Santiago filed a complaint with the National Labor Relations Board (NLRB). An administrative law judge had no problem with the no-cellphone rule but found the disloyalty policy ran afoul of the NLRA, impeding concerted, protected employee activity. Even though Santiago’s discharge for violating the ban on cellphone use was lawful, Tinley Park also cited the disloyalty policy for her termination and therefore remained liable under the statute. “[A]n employer does not escape liability for an unlawful discharge because it asserts other, lawful reasons for the same disciplinary actions,” the judge wrote, ordering the employer to rehire Santiago and change its policy. The decision is the latest in the streak of employee-friendly rulings from the NLRB, striking down policies on everything from dress codes to social media policies.

Detailed discussion

Tinley Park Hotel and Convention Center provides hotel, meeting, and convention center services in Illinois. Audelia Santiago was employed at one of its operations, a Chicago Holiday Inn hotel, where she worked as a banquet server since 2007.

In 2011, Tinley Park issued an updated employee handbook. As relevant to the dispute, Rule 9 prohibited “Disloyalty, including disparaging or denigrating the food, beverages, or services of the company, its guests, associates, or supervisors by making or publishing false or malicious statements.” In addition, Rule 30 stated: “Cellular phone usage during work hours is prohibited.”

Employees in violation of the handbook were subject to discipline—including discharge—even for a first-time offense.

On June 27, 2014, Santiago arrived at work at 5:30 a.m. and worked continuously without a break until she finished setting up for dinner at 7:30 p.m. Joined by other employees, she then took a break in a nonpublic hallway until 8 p.m. A coworker took a selfie with a handful of employees and then posted the picture to Santiago’s Facebook page with the caption, “No phones at work.”

Multiple people commented on the post and when her shift was over, Santiago herself replied to a comment by writing “Yea Cody you are right cause while I was the only one working like an slave you guys were taking selfies with my own phone and posting them on my wall lol.” She also posted additional pictures from the hallway, one with the caption, “That’s how we work at TPCC.”

Santiago later testified the comment was a joke because the picture made it appear that the employees were not working when they had actually just taken their first break of the day. Again, several people commented on the post with remarks like “keep paying all these people for doing nothing.”

A few days later, Santiago was terminated for using her cellphone while on duty and violating the disloyalty provision of the employee handbook. Santiago lied and said she did not take or post any pictures to Facebook. She then filed a charge with the National Labor Relations Board (NLRB). The General Counsel filed a complaint against Tinley Park and a trial was held in April.

Santiago’s termination violated Section 8(a)(1) of the National Labor Relations Act (NLRA), Administrative Law Judge Charles J. Muhl determined. “Rule 9 reasonably could be construed to prohibit protected activity, such as coworkers discussing with one another the complaints they have about their supervisors.”

The Board has “repeatedly” found language similar to that in Tinley Park’s disloyalty provision to be unlawful, Muhl wrote, and has drawn a distinction between statements that are both false and malicious (which are not protected) and statements that are merely false (which retain protection). “By prohibiting ‘false or malicious’ statements, [Tinley Park] has banned merely false statements, an overly broad prohibition,” the ALJ wrote.

Santiago’s June 27 comments were protected, even if not concerted, and implicated the concerns underlying Section 7, Muhl determined. “Part of the back and forth between Santiago and her Facebook friends centered on their terms and conditions of employment that day, in particular how hard Santiago and other employees had been working,” the ALJ said. “Santiago stated she had been working like a ‘slave’ and noted that she had no time to play games like she used to do. These comments came after Santiago began work at 5:30 a.m., but did not take her first break until 14 hours later at 7:30 p.m. that day. Employees’ complaints about their hours of work, including heavy workloads, long have constituted protected activity.”

Tinley Park argued that Santiago was terminated in part because she violated the ban on cellphone use, a rule that did not violate the NLRA. But Muhl held that because her discharge was based at least in part on her violation of Rule 9—her termination form explicitly cited the violation—her discharge was unlawful.

“Although her discharge also was justified by violations of [Tinley Park’s] cell phone rules, an employer does not escape liability for an unlawful discharge because it asserts other, lawful reasons for the same disciplinary action,” the ALJ said. “The fact that one reason for a disciplinary action is lawful in no way diminishes the fact that the other reason was unlawful.”

The General Counsel also challenged three other provisions of Tinley Park’s employee handbook: a rule forbidding employees from disclosing confidential information, including wages; a rule prohibiting “discourteous or disrespectful” treatment of guests, among others; and a “catch-all” provision for “[a]ny other conduct that the company believes has created, or may lead to the creation of a situation that may disrupt or interfered with the amicable, profitable and safe operation of the company.”

Muhl struck down all three of the rules, finding they violated Section 8(a)(1) of the NLRA. The ALJ ordered Tinley Park to cease and desist from maintaining the challenged rules and to offer Santiago full reinstatement to her former position and make her whole for any loss of earnings and benefits.

Tinley Park has already appealed the decision to the Board.

To read the decision in Tinley Park Hotel and Convention Center v. Santiago, click here.

These Shoes Were Made for Working, but Ninth Circuit Says Employee Must Pay for Them

Why it matters

The dismissal of a class action suit filed by employees against Denny’s Inc. seeking reimbursement for the cost of nonslip work shoes deducted from paychecks was affirmed by the Ninth Circuit Court of Appeals. The workers alleged that they were forced to pay the cost of special shoes purchased from Denny’s preferred shoe supplier, but a federal court judge dismissed the suit. On appeal, a panel of the Ninth Circuit affirmed the dismissal of the employees’ case, holding that the employees were not required to use Denny’s shoe supplier and that the national restaurant chain was not obligated to pay for apparel that was not part of the uniform. Pursuant to California Labor Code Section 2802, companies are only required to pay for uniform apparel that cannot be used at another job, the panel wrote, a standard that did not apply to the shoes at issue because the plaintiff failed to demonstrate that they could not be of general use.

Detailed discussion

When Rolando Lemus began working at a Denny’s restaurant, he was instructed to purchase black, slip-resistant footwear and was provided with an order form from a suggested vendor.

Seeking to represent a class of similarly situated workers, Lemus filed suit alleging that Denny’s policy regarding the purchase of shoes violated multiple sections of the California Labor Code. Employees should have been reimbursed for the footwear, he told the court, should not have had the cost of the shoes deducted from their wages, and were coerced to buy the footwear from Denny’s preferred third-party vendor.

A federal district court judge granted summary judgment to Denny’s, and in an unpublished opinion, the Ninth Circuit Court of Appeals affirmed the dismissal of the employee’s suit.

Section 2802(a) of the Labor Code mandates that “[a]n employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties.” But Lemus did not present evidence that the provision requires employers to pay for nonuniform work clothing, the court said.

Under California law, “a restaurant employer must only pay for its employees’ work clothing if the clothing is a ‘uniform’ or if the clothing qualifies as certain protective apparel regulated by [the California Occupational Safety and Health Act (CAL/OSHA) or the Occupational Safety and Health Act (OSHA)].”

Employers may specify basic wardrobe items which are “usual and generally usable in the occupation” (such as white shirts, dark pants, black shoes, and belts) that are of unspecified design without having to furnish such items, the panel explained. Only if the required uniform or accessory does not meet the test of being “generally usable,” then the employee does not have to pay for it.

“Lemus has not argued that the black, slip-resistant shoes that he purchased were part of a ‘uniform’ or were not ‘generally usable in the [restaurant] occupation,’ ” the court said, and his counsel conceded that the case was not a uniform situation. “Therefore, despite the general indemnification provision in section 2802, under California law, Denny’s is not required to provide the cost of slip-resistant footwear.”

The employee next asserted that Denny’s violated Section 221 by deducting the cost of the slip-resistant footwear from employee wages. The provision—which states “[i]t shall be unlawful for any employer to collect or receive from an employee any part of wages theretofore paid by said employer to said employee”—has an exception at Section 224 for “a deduction [that] is expressly authorized in writing by the employee.”

Denny’s employees ordered their shoes online by logging into their accounts using a personal password, expressly authorizing the wage deduction electronically, the panel wrote.

Finally, the court considered Lemus’ allegation that Denny’s violated Section 450 by “coercing” its employees to buy the shoes from its preferred vendor. Again, the panel sided with Denny’s. Prior case law finding such coercion has involved situations where the employer actually required the employee to purchase something from the employer or required workers to take something of value (such as meal credits) in lieu of wages.

Denny’s did not require its employees to purchase shoes from its preferred vendor and the dictionary definition of coerce—“[c]ompulsion by physical force or threat of physical force,” per Black’s Law Dictionary—did not support Lemus’ position.

“There is no evidence that Denny’s threatened Lemus or indicated that it would punish Lemus if he did not buy his shoes from its preferred vendor,” the panel wrote. “No one ever checked to see if his shoes were from the preferred vendor, and Lemus never checked any other employees’ shoes when he was a manager. Although Lemus’ facts, when taken in the light most favorable to him, show some pressure to purchase from the preferred vendor, Denny’s certainly did not utilize physical force or threat of force, nor did it exert overwhelming pressure on its employees.”

To access the decision in Lemus v. Denny’s Inc., click here.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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