Employment Law - June 2014

by Manatt, Phelps & Phillips, LLP

In This Issue:

  • Appellate Court Tosses Employee’s Seating Suit
  • Arbitrator Should Decide Agreement’s Enforceability, Says California Appellate Court
  • California Legislature Considers Employer Liens, Another Minimum Wage Hike
  • Employers Could See Rise Of Charges Due To Claim Referral Program From OSHA To NLRB

Appellate Court Tosses Employee’s Seating Suit

Why it matters: An employer won a rare victory in a suitable seating case when a California appellate court affirmed summary judgment in a suit brought by a sample worker. Class actions brought in the state alleging violations of California Wage Orders requiring employers to provide “suitable seating” for employees have inundated the courts. To avoid protracted litigation over uncertain legal issues many employers have opted to settle. But in an unpublished opinion, an appellate panel determined that a seat is not necessary for on-the-clock downtime.

Detailed Discussion
As an event specialist for Advantage Sales and Marketing, James R. Howard was required to attract and engage with store customers to attempt to persuade them to purchase the products he demonstrated. For all or substantially all of his job duties, typically performed standing behind a demonstration table or cart, Howard had to stand. During his three 30-minute breaks, Howard was always able to find a seat in a break room.

Although he never requested a seat or complained that he needed one during his employment, he later sued Advantage alleging the company violated California Wage-Order No. 7-2001.

The Wage Order mandates that: “(A) All working employees shall be provided with suitable seats when the nature of the work reasonably permits the use of seats. (B) When employees are not engaged in the active duties of their employment and the nature of the work requires standing, an adequate number of suitable seats shall be placed in reasonable proximity to the work area and employees shall be permitted to use such seats when it does not interfere with the performance of their duties.”

Affirming summary judgment for the employer, the court said Advantage satisfied the requirements of the order. “The undisputed material facts establish Howard’s work as an event specialist demonstrating products in grocery stores required that he stand while engaged in his active work duties,” the court wrote. “The undisputed material facts also establish Advantage provided Howard with suitable seating within reasonable proximity to his work area for his use when he was not engaged in active duties of his employment, within the meaning of the wage order.”

Howard argued that he should have been allowed to sit down while performing his passive duties, such as cutting up sample cookies and fruits, distinguishing this time from his “active duties” that required standing. But this approach would require courts to parse out duties and activities “instead of approaching the issue from examining the nature of the work, as required by the language of the work order,” the court noted.

The panel declined to compartmentalize Howard’s job duties and took a holistic approach to the position.

“The wage order does not support Howard’s interpretation. The wage order does not define the term ‘active duties’ and the wage order never refers to ‘passive duties,’” the panel wrote. “[T]he term ‘active duties’ reasonably refers to the time when an employee is on duty as opposed to on a rest or meal period. Although not actively performing their work duties, employees on rest or meal periods still have duties to their employers, such as to comply with workplace rules while on breaks. The wage order requires Advantage to allow Howard to be seated in provided seats to the extent he is on such a break from his active duties.”

The interpretation of the wage order to require seating on break was not meaningless, the court added, because the provision of seating during rest breaks is not addressed in other wage orders.

To read the opinion in Howard v. Advantage Sales and Marketing, click here.

Arbitrator Should Decide Agreement’s Enforceability, Says California Appellate Court

Why it matters: According to a California appellate court, an arbitrator should have decided the issue of an arbitration agreement’s enforceability – not a trial court judge. Although the panel agreed with the trial court that the agreement was procedurally unconscionable (as a contract of adhesion presented to the employee on a take-it-or-leave-it basis allegedly without explanation), the court reversed denial of a motion to compel arbitration, ruling that the agreement was not substantively unconscionable. Because it was not overly harsh or one-sided, the appellate court said the agreement should be enforced, including the provision that an arbitrator resolve disputes relating to its interpretation or enforceability.

Detailed Discussion
Lourdes Tiri worked as a cook at Lucky Chances, a card-club casino and restaurant in California. Three years into her employment, Tiri said she was called into the human resources department and handed an agreement to sign. According to Tiri, the agreement was not explained and she felt as though she had to sign it as a condition of employment.

The five-page document titled “Mutual Agreement to Arbitrate Claims” provided that the process of final and binding arbitration would resolve “any and all differences and/or legal disputes” between the parties, with limited exceptions. A delegation provision stated that “The Arbitrator, and not any federal, state, or local court or agency, shall have the exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability, or formation of this Agreement, including, but not limited to, any claim that all or any part of this Agreement is void or voidable.”

Tiri signed the agreement. Five years later she was fired. She filed suit in California state court alleging wrongful discharge, and Lucky Chances moved to compel arbitration based on the agreement.

A trial court judge denied the motion, ruling that the agreement was both procedurally and substantively unconscionable and therefore unenforceable.

But on appeal, an appellate panel reversed, holding that the trial court “lacked the authority to rule on the enforceability of the agreement because the parties’ delegation of this authority to the arbitrator was clear and is not revocable under state law.”

Noting that the application of either the Federal Arbitration Act or California law would yield the same result, the court said that clauses in arbitration agreements delegating enforcement issues to an arbitrator are effective when they are clear and not revocable under state law.

Analyzing the delegation clause for revocation, the court acknowledged that the agreement was procedurally unconscionable as a contract of adhesion presented to Tiri on a take-it-or-leave-it basis without the benefit of an arm’s-length bargaining transaction.

“Tiri was an unsophisticated party who was presented with the agreement containing the clause years after being hired by Lucky Chances, and was given little time to review it,” the court wrote. “The arcane nature of the clause, Tiri’s lack of sophistication, and the failure of Lucky Chances to provide adequate time to review the agreement all add to the oppression and surprise of the delegation clause in this case.”

However, the court rejected Tiri’s contention that the delegation clause was also substantively unconscionable. “The delegation clause is not overly harsh, and does not sanction one-sided results,” the court said. Nor did the clause lack mutuality, “because Tiri and Lucky Chances are bound by it equally. The agreement requires arbitration for ‘any and all differences and/or legal disputes’ (whether by or against the employee or employer). This mutuality is nearly unqualified.”

Tiri’s argument that other provisions of the arbitration agreement, such as the confidentiality clause, were substantively unconscionable did not sway the court because they were not specific to the delegation clause. “[S]he did not assert and demonstrate that the confidentiality clause as applied to the delegation clause renders that clause unconscionable by impeding her ability to arbitrate whether the arbitration agreement as a whole is unconscionable,” the court said.

Concerns about delegation clauses that arbitrators are invested in the outcome or that mutuality is lacking because an employer would not claim it drafted an unconscionable agreement are “always present with delegation clauses in employment agreements,” the panel wrote. “To conclude that they signify substantive unconscionability would be tantamount to concluding that delegation clauses in employment arbitration agreements are categorically unenforceable.”

Instead, courts should find delegation clauses unconscionable “only if they impose unfair or one-sided burdens that are different from the clauses’ inherent features and consequences,” something Tiri failed to demonstrate.

“As a result of our conclusion that the delegation clause is valid, we leave to the arbitrator the question whether the arbitration agreement as a whole, or any of its other severable provisions, is unconscionable,” the court concluded.

To read the decision in Tiri v. Lucky Chances, click here.

California Legislature Considers Employer Liens, Another Minimum Wage Hike

Why it matters: The California legislature has been busy recently with multiple laws related to employment. The state Assembly passed a bill that would allow employees to place a lien on the real or personal property of employers for unpaid wages. Sponsored by a union, the proposed law faces opposition from groups like the California Chamber of Commerce, which argue that such liens could negatively impact business and real estate in the state. Meanwhile, the Senate approved a bill that would bump the state’s minimum wage up to $13 in 2017 – just months after Governor Jerry Brown signed legislation increasing the state’s minimum wage from $8 to $10 in 2016. Employers should keep a close eye on both bills for continued developments.

Detailed Discussion
Could employees be given the right to file a lien against employers for unpaid wages? If California legislators have their way, the answer could be yes.

A.B. 2416 “would authorize an employee to record and enforce a wage lien upon real and personal property of an employer, or a property owner, as specified, for unpaid wages and other compensation owed the employee and certain other penalties, interest, and cost.” Once an employee files the lien, he or she has 90 days to commence an action to enforce it or face the permanent extinguishment of the lien and its unenforceability.

The proposed law includes exceptions where an employer has obtained a surety bond or insurance that provides for the payment of the wages and other compensation in an amount adequate to fully satisfy the employee’s claim as well as for employees governed by certain collective bargaining agreements.

An employee that “acts unreasonably and in bad faith” in relation to the recording or filing of a lien could be fined up to $1,000.

Supporters of the legislation – which passed the Assembly in a 43 to 27 vote – include Service Employees International Union, which contends the measure is necessary to combat employee wage theft, which the union says reaches billions of dollars every year.

But opponents argue that the bill allows liens to be filed based simply on allegations before a wage claim has been proven. “A.B. 2416 would cripple California businesses,” the California Chamber of Commerce said in a statement, dubbing it a “job killer.” “This bill would also severely disrupt commercial and personal real estate markets in this state.”

On the opposite side of the Assembly, state Senators voted 21 to 12 in favor of S.B. 935 to raise the state’s minimum wage.

Currently, the state’s minimum wage is $8 per hour. Pursuant to a law signed by Gov. Brown last September, the hourly wage will increase in steps to $9 in 2015 and $10 in 2016, making it one of the highest in the nation.

But apparently it wasn’t high enough for state lawmakers, who proposed an additional increase to $13 in 2017 (by jumping to $11 in 2015 and $12 in 2016). Going forward in 2018, the state’s minimum wage would be adjusted on an annual basis, tied to the rate of inflation. If the average percentage of inflation for the previous year was negative, the wage would not be adjusted.

The legislation’s sponsor, Sen. Mark Leno (D-San Francisco), said that last year’s increase was insufficient. Adjusted for inflation, the 1968 minimum wage would be worth $10.77 per hour today, he said, leaving state residents with less purchasing power than they had almost 50 years ago.

Now being considered by the Assembly, the bill faces pushback from business groups and employers arguing they cannot afford the increase.

To read A.B. 2416, click here

To read S.B. 935, click here

Employers Could See Rise Of Charges Due To Claim Referral Program From OSHA To NLRB

Why it matters: A new cooperative endeavor between the Occupational Safety and Health Administration (OSHA) and the National Labor Relations Board (NLRB) could result in an increase in charges filed against employers. A few months ago, an OSHA representative testified before a Senate subcommittee and bemoaned the 30-day statute of limitations for filing a whistleblower claim under the Occupational Safety and Health (OSH) Act. Less than one month later, the Board issued a memo announcing the new agreement. Now when OSHA notifies complainants that their whistleblower charge is untimely, the agency will also provide information about the right to file a charge with the NLRB and the potential to raise claims under the National Labor Relations Act (NLRA). Employers should take note – the program has already begun.

Detailed Discussion
On April 29, the Senate Subcommittee on Employment and Workplace Safety held a hearing entitled “Workers’ Memorial Day: Are Existing Privacy Sector Whistleblower Protections Adequate to Ensure Safe Workplaces?” As one of five witnesses, assistant secretary for OSHA Dr. David Michaels testified that the OSH Act “is badly in need of modernization” to better protect workers.

While other whistleblower statutes have been beefed up in recent years, Section 11(c) of the OSH Act has not. One example: the 30-day statute of limitations period in which employees can file a claim. Michaels estimated that the agency rejects hundreds of cases each year solely because they are untimely. As part of his testimony, Michaels made several recommendations to modernize the law, including an extension of the time limit.

Less than one month later, OSHA and the NLRB announced an alternative that doesn’t require the agencies to engage in the rulemaking process or an amendment to the statute: a claim referral program between the agencies.

In a memorandum issued through OSHA from the Office of the Solicitor and Directorate of Whistleblower Protection Programs, the agency noted that many employee safety activities involve concerted activity protected under the NLRA, like employer retaliation for group complaints concerning unsafe working conditions.

The new policy established that “OSHA personnel will advise all complainants who have filed, or attempted to file, an untimely Section 11(c) complaint to also contact the NLRB to inquire about filing a charge alleging unfair labor practices.” OSHA personnel “will then advise complainants regarding their ability to contact the NLRB,” explaining that “they may file a charge” and the NLRB has a six-month time limit in which to file, recommending “that the complainant contact the NLRB as soon as possible to discuss his or her rights.”

To implement the program, OSHA intake personnel were provided with a sample notification letter for complainants whose Section 11(c) claims were untimely as well as talking points for a telephone or face-to-face conversation to explain the referral.

A memorandum from the NLRB’s Office of the General Counsel to all regions confirmed the program, noting that the agency plans to track the number of contacts received and charges docketed as a result of OSHA referrals.

For more information on the Subcommittee hearing or to watch testimony, click here

To read OSHA’s memorandum, click here.

To read the Board’s memorandum, 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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