Klinedinst PC

By Thomas Daugherty

In the case of Lamps Plus v. Varela, the United States Supreme Court gave employers another win in using arbitration agreements to block class action litigation. The Court held that a party cannot compel class arbitration of claims when an arbitration agreement is ambiguous as to class arbitration. 

An employee of Lamps Plus filed a class action lawsuit against his employer after a fraudulent federal income tax return had been filed in his name as a result of a data hack and the release of the tax information of approximately 1,300 employees. Lamps Plus moved to compel arbitration of the employee’s individual claims under the company’s arbitration agreement, and dismiss the class action lawsuit. The federal District Court compelled class arbitration of the claims. Lamps Plus appealed to the Ninth Circuit Court of Appeals, which affirmed the lower court’s decision, holding that the arbitration agreement was ambiguous as to the arbitration of class claims, and that as such, the ambiguities should be construed against the employer, which drafted the agreement. 

The Supreme Court reversed and held that an ambiguous agreement cannot be the contractual basis for compelling class arbitration: courts may not infer from an ambiguous agreement that parties have consented to arbitrate on a classwide basis. The Supreme Court reasoned arbitration is strictly a matter of consent, and that class arbitration is markedly different from individualized arbitration, and would undermine the most important benefits of individualized arbitration–its informality—and would make the process slower, more costly, and more likely to generate procedural morass than final judgment. 

As a result of the Supreme Court’s ruling, if class arbitration of claims is to be allowed, the arbitration agreement must expressly provide for it in unambiguous terms. This would seem to foreclose another potential avenue toward class action claims through arbitration agreements. 

Employers should consider whether an arbitration agreement with each employee may be right to help resolve future disputes on an individual, rather than classwide basis. If you have questions about whether an arbitration is right for your business, or whether your arbitration agreement is up to date, contact the Klinedinst employment team.

Disclaimer

This article is intended to be for informational purposes only. This information does not constitute legal advice. The law is constantly changing and the information may not be complete or correct depending on the date of the article and your particular legal problem. The use of information from this article does not create any type of attorney-client relationship.

About Klinedinst

Klinedinst is the go-to firm for clients looking for litigation, trial experience, transactional representation, and legal counsel.  The firm’s offices in Los Angeles, Sacramento, San Diego, Santa Ana, and Seattle service the entire West Coast. What sets Klinedinst apart is the relationship our attorneys foster with each and every client. Klinedinst lawyers are indispensable strategic partners to business leaders, helping to achieve business objectives and create proactive solutions to resolve the many legal challenges that businesses are confronted with every day.  Whether vigorously advocating for business clients in court, or guiding business transactions and negotiations, Klinedinst is the trusted legal advisor to have by your side.

 
The Ninth Circuit Court of Appeals has essentially squashed a class action suit, filed on behalf of hundreds of thousands of Uber drivers who alleged they were misclassified as independent contractors.

The original lawsuits alleged that Uber had avoided compliance with labor laws by labeling drivers as independent contractors. Because of their independent contractor status, drivers argued that they were allegedly denied reimbursements and gratuities and other protections that they would have otherwise been entitled to had they been employees of the ride-sharing service.

In their published opinion, the three-judge panel that heard the case reversed a lower court’s ruling that certified the class of current and former drivers, based on the District Court’s finding that the Uber arbitration agreements were not enforceable. Specifically, the panel found that the threshold question of the arbitrability of the plaintiffs’ claims had to be determined by an arbitrator, and not the District Court. Uber’s arbitration agreements specifically delegated this issue to the arbitrator.

Additionally, the panel found that class waivers were permitted and enforceable under the recent US Supreme Court case, Epic Systems Corp. v. Lewis, 138 S. Ct 1612 (2018).   Accordingly, the District Court’s grant of class certification had to be reversed.  The Ninth Circuit held that Uber’s arbitration agreements were enforceable, and sent the underlying cases back to the lower courts without class certification.

The ruling dramatically changes the momentum in the long-running class action cases, as Uber has long sought to have individual cases heard in arbitration.  It also represents a victory for employers that utilize arbitration clauses as a means of reducing the risk of class action litigation.

If you have questions regarding your arbitration agreements, policies, or procedures, please feel free to contact one of Klinedinst’s employment attorneys today.

Disclaimer

This article is intended to be for informational purposes only. This information does not constitute legal advice. The law is constantly changing and the information may not be complete or correct depending on the date of the article and your particular legal problem. The use of information from this article does not create any type of attorney-client relationship.

by Gregory A. Garbacz

In a recent case, the United States Court of Appeals, Ninth Circuit, provided a helpful interpretation of California’s meal break requirements, siding with an employer that a voluntary, discounted meal program did not violate California’s meal break requirement.

In Rodriguez v. Taco Bell Corp. (2018 DJDAR 6993, July 18, 2018), the Ninth Circuit considered an appeal from a trial court’s decision granting summary judgment in favor of employer Taco Bell.   Ms. Rodriguez had worked in a restaurant as a cook at Taco Bell for approximately seven years.  Ms. Rodriguez had received an acknowledged Taco Bell’s meal break policy upon her hiring.  The meal break policy generally conformed to the Brinker requirements, although it contained a variation allowing employees to voluntarily purchase a discounted meal during their meal break.  If they did purchase the discounted meal, then they were required to eat the meal in the Taco Bell restaurant.  Taco Bell justified the requirement that the voluntary meal be eaten on site, because it prevented theft – specifically an employee using their discount to benefit nonemployees or family members which might have occurred if they were allowed to purchase the food at a discount and leave the facility.

Ms. Rodriguez challenged this voluntary meal policy arguing that the requirement that she eat the meal on site violated California law relative to meal break periods and required the payment for her time spent eating, as well as a meal break premium.  More specifically, Ms. Rodriguez argued that Taco Bell retained control over her due to the requirement that she eat the discounted meal on site such that the time should be counted as work time, not valid break time.  In contrast, Taco Bell argued that the policy was valid and met the Brinker requirements, because the discounted meal policy was voluntary, the employees performed no work while they were eating and were not required to perform work, and the employees could choose not to purchase the discounted meal and could leave the premises for their break.

California’s Labor Code requires that nonexempt employees receive compliant meal breaks or they must be paid for all time worked and be paid an additional, one hour meal premium for each day in which they do not receive compliant meal breaks.  (Labor Code §§ 226.7, 512 )  The applicable regulation governing the restaurant industry (Wage Order 5) requires that the employee be relieved of “all duties” during the meal break. (Cal. Code Reg, tit. 8, §11050(11)(A).)  The California Supreme Court in the Brinker case had further clarified this requirement, explaining that the employer had to “relinquish control over their activities,” permit the employees to take an uninterrupted break, and not encourage or impede them from taking a compliant break.  (Brinker Restaurant Group v. Superior Court (2012) 53 Cal.4th 1004)

Applying these requirements to the Taco Bell policy, the Ninth Circuit concluded that Taco Bell’s voluntary, discounted meal policy did not violate these meal break requirements.  There was no evidence produced by plaintiff showing the program was not wholly voluntary.  Nor did Plaintiff produce any evidence showing that the employer encouraged participation in the program or otherwise impeded compliant meal breaks.  Moreover, Defendant produced evidence showing that employees were free to purchase meals at full price, and then leave with the meals or eat them wherever they wanted.  In ruling in favor of the employer, the Ninth Circuit distinguished the Taco Bell situation from other circumstances in which employers compelled or coerced employees to spend their meal breaks on premise, and thereby did not relinquish control over the employees for their full meal break.

The Ninth Circuit also rejected another, derivative claim of Ms. Rodriguez.  Her counsel argued that the value of the discount on the meal that Taco Bell provided had to be included in the calculation of the employee’s overtime rate, and, thus, Taco Bell had underpaid overtime and also provided inaccurate wage statements.   The Court again rejected this claim, but only on a procedural basis.  The Court noted that the overtime claim was premised upon the claim that there was a meal break violation, which the Court found not to exist.

However, the Court’s analysis may highlight a ground for future liability that employers providing meals should avoid.  California law requires that the overtime pay be based upon the “regular rate of pay”, which includes any discretionary bonuses and other forms of compensation that the employee receives.  The court acknowledged that federal law requires the “regular rate” to be calculated on the basis of all compensation received by the employee and that California followed federal law in this regard.  (29 C.F.R. §778.116; Prachasaisoradej v. Ralph’s Grocery (2007) 42 Cal. 217.)  The Court acknowledged that the discounted value of the meal provided might fall within the definition of additional compensation paid to the employee.  As such, it needed to be incorporated into the “regular rate of pay” calculation for purposes of overtime calculation.  The Court rejected Ms. Rodriguez’s claim, but only finding that she failed to offer any evidence concerning the reasonable cost or fair value of the meals, which would be the proper measure for any claim of increased compensation.

In conclusion, the Ninth Circuit Rodriguez holding is a win for employers that provide voluntary meal programs for employees.  Such programs are lawful and do not result in a meal break violation, absent some showing that the meal program is not voluntary or that employees are encouraged or coerced into participating in the program and staying on site during a meal break, or that some other interference exists.  However, the Rodriguez holding also highlights a potential source of liability for employers offering discounted meals to employees, or other forms of indirect compensation.  Such benefits must be carefully analyzed to determine whether the value of the indirect compensation must be included in the calculation of the “regular rate of pay” as it is used to calculate overtime and to assure wage statements are accurate.

About Klinedinst

Klinedinst is the go-to firm for clients looking for litigation, trial experience, transactional representation, and legal counsel.  The firm’s offices in Los Angeles, Sacramento, San Diego, Santa Ana, and Seattle service the entire West Coast. What sets Klinedinst apart is the relationship our attorneys foster with each and every client. Klinedinst lawyers are indispensable strategic partners to business leaders, helping to achieve business objectives and create proactive solutions to resolve the many legal challenges that businesses are confronted with every day.  Whether vigorously advocating for business clients in court, or guiding business transactions and negotiations, Klinedinst is the trusted legal advisor to have by your side.

by Linda M. Toutant

In June 2018 the General Counsel for the National Labor Relations Board (“NLRB”) issued guidelines to aid employers in determining the legality of facially neutral rules contained in employee handbooks.  The Guidelines, issued June 6, 2018 as Memo GC 18-04, follow the decision in The Boeing Company, 365 NLRB No. 154 (12/14/17) and explain, generally, that the legality of neutral handbook rules is to be judged by balancing the specific rule’s function in supporting appropriate employer goals (e.g., confidentiality/productivity/discipline) against the rule’s propensity to interfere with employee rights to act collectively.  The Boeing decision and the new NRLB Guidelines make clear that, in judging the existence of (not the application of) facially-neutral handbook rules, the law will apply a practical-based analysis.

The Guidelines explain, for example, that handbook rules that (a) do not prohibit or interfere with protected collective acts and rights; or (b) whose business justification outweighs any potential adverse impact on those protect rights, are “generally lawful.”  Of interest to employers are the following examples of “generally lawful” handbook rules, all of which the Board found facially neutral, in service of legitimate business purposes and, on balance, presenting slight or no risk of interference with rights of collective, protected activity:

1. Civility rules prohibiting disparaging or condescending behavior or comments.
2. Rules prohibiting photography and recording.
3. Rules protecting confidential, proprietary and customer information and documents.
4. Rules against defamation and misrepresentation.
5. Requirements that employer authorization be obtained before employee speaks for the company.
6. Prohibitions against the use of employer logos and intellectual property.
7. Rules prohibiting nepotism or self-enrichment.

Even rules prohibiting insubordination or disruptive activity, if facially neutral, serving legitimate employer interests and, on balance, not adverse to collective activity, are within the Board’s examples of “generally lawful” employee obligations.  They are to be distinguished, of course, from unlawful rules prohibiting (on their face or in their application) strikes or walkouts, for example.

In addition to providing a number of examples of “generally lawful” handbook rules, the Guidelines also discuss a second category of rules earmarked by the NLRB as “warranting individualized scrutiny.”  While not obviously unlawful, these rules “warrant scrutiny” including because they are over-broad, or focused on employer protections at the risk of interference with collective rights.  (For example, the NLRB mentions rules prohibiting the use of the employer’s name rather than its trademark; or rules protecting employer rather than customer information as “warrantying scrutiny).  The line of demarcation between “accepted” and “scrutinized” rules is not always easily identified, and the NLRB encourages all questionable handbook rules be submitted to it for review.

The Guidelines also remind employers of examples of “unlawful” rules – the mere existence of which create  an adverse impact on rights guaranteed by the NLRA, for example: rules prohibiting the sharing of information concerning wages and benefits and rules prohibiting communications by employees to the media.

The take away here for employers is that, even with the NLRB’s practical Guidelines, facially-neutral handbook rules can form the basis of NLRA violation claims.  Employers are reminded of the importance of seeking regular review by counsel of their handbooks, policies and procedures.

About Klinedinst

Klinedinst is the go-to firm for clients looking for litigation, trial experience, transactional representation, and legal counsel.  The firm’s offices in Los Angeles, Sacramento, San Diego, Santa Ana, and Seattle service the entire West Coast. What sets Klinedinst apart is the relationship our attorneys foster with each and every client. Klinedinst lawyers are indispensable strategic partners to business leaders, helping to achieve business objectives and create proactive solutions to resolve the many legal challenges that businesses are confronted with every day.  Whether vigorously advocating for business clients in court, or guiding business transactions and negotiations, Klinedinst is the trusted legal advisor to have by your side.

by Lindsey N. Casillas

It is not uncommon for employers to regularly receive questions from non-exempt employees about “comp time.”  “Comp time” or compensated time off can refer to the equitable practice of allowing non-exempt employees to take extra time off from work after a long week instead of receiving overtime pay.  Comp time policies are not new, but wage and hour litigation in California is continuing to snare well intentioned employers of all sizes in class action litigation over improperly implemented comp time policies.  Employers are best protected from such class claims when they are vigilant about comp time policies and employee paychecks.

While the concept of comp time may seem fair, the problems lie in the execution.  Because of the quid pro quo nature of the comp time arrangement, many employers implement comp time policies casually – having only oral agreements with employees and allowing time to be taken off the books.  But in California, the laws governing payment to employees (including comp time practices) are stringent and an unwary, though well intended, employer can easily become subject to a wage and hour lawsuit for violating them.  Consider the following common missteps.

Misstep 1: Allowing comp time to be accrued and taken off the books.  Why is this a problem?  California Labor Code section 1174(d) specifically requires businesses to keep accurate records of all hours worked by each employee.  If an employer is allowing comp time to be accrued and taken off the books, then the employer has time records that it knows are inconsistent with hours actually worked by that employee in violation of California Labor Code section 1174. Failure to keep accurate records is a misdemeanor under Labor Code section 1175 and subjects an employer to a fine of $100 or imprisonment of not less than 30 days pursuant to Labor Code section 1199.

Misstep 2: Exchanging comp time evenly – one day off for one day worked or 8 hours for 8 hours.  Why is this a problem?  Comp time does not accrue on an hour for hour basis.  Rather, employers must always consider and comply with California’s overtime requirements in connection with the number of hours an employee works in a shift or workweek.  For example, assume an employee worked four 10-hour days and one 8-hour day in one workweek for a total of 48 hours worked.  For each day the employee worked 10 hours, two (2) of those  hours are subject to California’s overtime pay laws requiring the employee to be compensated at a rate of one and one half (1.5) times the employee’s regular rate of pay.  (In California, if an employee works over eight (8) hours in a single shift, the additional hours are considered overtime.)  If an employer is compensating an employee for those overtime hours worked in comp time instead of overtime pay, the rate the comp time is calculated at remains the same.  In this example, the employee should receive 12 hours of comp time which is calculated by multiplying the eight (8) hours of overtime by the applicable rate of compensation, one-and-one-half (1.5).  Failure to accurately calculate comp time and overtime is likely to trigger a multitude of derivative Labor Code violations and penalties, including but not limited to unpaid overtime, waiting time penalties, and penalties associated with inaccurate wage statements.

Misstep 3: The arrangement is only agreed upon verbally and is not document in writing.  Why is this a problem? Comp time arrangements are required by California Labor Code section 204.3 to be in writing before the work begins.  An oral agreement is simply not allowed under the law.

An employer can offer comp time in California, but the employer must comply with Labor Code section 204.3, which requires all of the following:

• Accrual of comp time must be at the overtime rate of pay (not less than one and one-half the regular rate of pay for each hour worked in excess of eight (8) hours in a shift or 40 hours in a workweek, or double time if applicable).
• An employer’s policy regarding comp time must be in writing before comp time work begins.
• Employees may not accrue more than 240 hours of compensatory time off.
• An employee must make a written request for comp time in lieu of overtime pay.
• An employee requesting comp time must be a full time employee who is regularly scheduled to work at least 40 hours in a workweek.
• An employee who takes comp time must be paid at the rate of pay in effect at time of payment.
• At the time of termination, comp time must be paid or cashed out at the higher of either the employee’s current rate of pay or the employee’s three-year average rate of pay.
• An employee must be permitted to use comp time within a reasonable period of time of making the request to the employer. (Essentially, an employer may deny use of comp time only if it would unduly disrupt the employer’s operations).
• An employer must keep records of comp time accrued and used by its employees.

Bottom line – comp time is complicated.  And, it only takes one disgruntled employee who has experienced an improperly implemented comp time practice to bring a class action lawsuit which can cost a business thousands of dollars in legal fees.  Don’t let this happen to your business!  If you have questions regarding compensatory time off or employee compensation, contact Klinedinst PC’s Employment Group for assistance and counseling.

About Klinedinst

Klinedinst is the go-to firm for clients looking for litigation, trial experience, transactional representation, and legal counsel.  The firm’s offices in Los Angeles, Sacramento, San Diego, Santa Ana, and Seattle service the entire West Coast. What sets Klinedinst apart is the relationship our attorneys foster with each and every client. Klinedinst lawyers are indispensable strategic partners to business leaders, helping to achieve business objectives and create proactive solutions to resolve the many legal challenges that businesses are confronted with every day.  Whether vigorously advocating for business clients in court, or guiding business transactions and negotiations, Klinedinst is the trusted legal advisor to have by your side.