With the new year comes the likelihood that the U.S. Supreme Court, the California Supreme Court, and the Ninth Circuit will issue a number of significant decisions spanning a range of topics in the employment arena.  In addition to the new California laws that have recently come into effect, covered here, California employers should watch these three litigation areas as well:

Protections for LGBTQ Employees

The U.S Supreme Court will decide whether Title VII protects gay and transgender employees from discrimination after granting petitions for writ of certiorari in three cases.  Two of those cases, Altitude Express Inc. v. Zarda and Bostock v. Clayton County, Georgia, involve allegations that the plaintiffs’ employers discriminated against them based on sexual orientation.  The third case, R.G. & G.R. Harris Funeral Homes Inc. v. U.S. Equal Employment Opportunity Commission, involves a claim of workplace discrimination based on the employee’s transgender status.  Together, these cases will answer whether Title VII’s provisions banning discrimination “because of . . . sex” covers sexual orientation and gender identity.  The circuit courts are split on the issue, and the Court gave the impression it was equally divided during its October hearing.  Interestingly however, Justice Neil Gorsuch seemed to accept that sex “appears to be a factor” in decisions to fire gay workers and may be a surprise swing vote.  The Court is expected to render its decisions in a matter of months.

Issues Involving Dynamex

The California Supreme Court overturned established law when it announced a new test regarding the classification of workers as independent contractors in Dynamex Operations West Inc. v. The Superior Court of Los Angeles County.  The State proceeded to codify that ruling this fall through Assembly Bill 5 (A.B. 5).  At the request of the Ninth Circuit, the California Supreme Court will decide whether Dynamex applies retroactively in Vazquez v. Jan-Pro Franchising International.  Depending on how the court rules, employers may need to examine their business operations and consider how the ABC test may impact their classification of workers as independent contractors.

Issues Involving PAGA

The scope of the Private Attorneys General Act (PAGA) continues to be heavily litigated as well, and two cases in particular may have dramatic implications on how the law is applied.  In Kim v. Reins International California Inc., the California Supreme Court heard argument at the beginning of the month on whether a restaurant worker who settled his individual Labor Code violation claims may still pursue a PAGA action on behalf of other workers.  A Court of Appeal panel had previously affirmed a trial court ruling that the plaintiff’s decision to settle his individual wage and hour claims precluded him from doing so because he no longer qualified as an “aggrieved employee” under the statute.  During the hearing, Justice Goodwin H. Liu foreshadowed an anti-employer ruling, stating that if employers could settle claims to “pick off individuals” while arguing that someone else will bring the PAGA suit, PAGA’s purpose would be frustrated and some PAGA actions would never be pursued.  We should see a decision by early April.  Stay tuned.

In another case, the Ninth Circuit is considering the whether PAGA claims must satisfy Rule 23 class action pleading requirements in Canela v. Costco Wholesale Corp.  There, the plaintiff sought to represent member service employees who worked as greeters or exit checkers and were not provided a seat.  The case was removed to the Northern District of California under the Class Action Fairness Act, where the plaintiff abandoned her class claims.  Instead, she asserted that she would proceed with her PAGA claim as a representative action only and did not move for Rule 23 class certification.  Costco moved for partial summary judgment on her PAGA claim, arguing that she could only bring her claim as an individual PAGA action.  The district court denied this motion, finding that the plaintiff could rely on the qui tam exception for third-party standing and that a plaintiff is not required to obtain Rule 23 class certification to assert PAGA claims in federal court.  The Ninth Circuit panel heard arguments on January 6th, and we should see a decision by early April for this case as well.  Depending on how the courts rule in these PAGA cases, employers may have another tool to try to limit the spread of PAGA actions.

Issues Involving Wage-and-Hour Claims

Finally, the Ninth Circuit has certified questions to the California Supreme Court in two wage-and-hour cases.  In Frlekin v. Apple, the Ninth Circuit asked the California Supreme Court to opine on whether “time spent on the employer’s premises waiting for, and undergoing, required exit searches of packages or bags voluntarily brought to work purely for personal convenience by employees” is compensable as “hours worked” within the meaning of California Industrial Welfare Commission Wage Order No. 7.  Likewise, in Ward v. United Airlines, the California Supreme Court will weigh in on whether California Labor Code 226 applies to “wage statements provided by an out-of-state employer to an employee who resides in California, receives pay in California, and pays California income tax on her wages, but who does not work principally in California or any other state.”  Depending on how the California Supreme Court decides both of these cases, employers may need to examine their business and payroll practices.