NEW CASE LAW AFFECTING CALIFORNIA EMPLOYERS IN 2018—EMPLOYERS, BRACE FOR IMPACT

 

 

 

 

 

Palmer Kazanjian Wohl Hodson LLP continually reports on new case law that impacts California employers; however, as the New Year is upon us, there are several additional notable cases that employers should be aware of.  This newsletter provides case law summaries and tips for employers on how to best ensure compliance with California law. Please contact the attorneys at Palmer Kazanjian Wohl Hodson LLP if you would like further explanation on how a particular law may apply to your organization.

EMPLOYER HELD RESPONSIBLE FOR SEXUAL ASSAULT TO HOTEL EMPLOYEE BY TRESPASSER

In M.F. v. Pacific Pearl Hotel Mgmt. LLC, the Court of Appeal held that the Fair Employment and Housing Act (FEHA) protects an employee from sexual harassment perpetrated by a nonemployee when an employer knows, or should have known, of the conduct and failed to take immediate and appropriate corrective action.

Factual Background

The plaintiff, M.F. worked as a housekeeper in a five-building hotel property.  The drunk trespasser was seen at the hotel by an engineering manager three different times in three different locations within the hotel. The engineering manager did not report the trespasser to management, ask the trespasser to leave, or alert the police department. The trespasser pushed the plaintiff’s housekeeping cart aside, pushed the door open, forced the plaintiff back into the room, and raped her for over two hours.  After he left, the plaintiff called the police and was hospitalized. The defendant argued at trial that M.F.’s claim was barred by California’s workers’ compensation exclusivity doctrine. The trial court dismissed the case, concluding the right to recover workers’ compensation benefits is the exclusive remedy for an employee against an employer for a workplace injury. This includes when an injury is caused by “an employer’s negligent or reckless failure to provide adequate premises security despite knowledge of danger to its employees.” The plaintiff appealed. The Court of Appeal agreed with the trial court, but determined that, if the plaintiff could state a claim under the FEHA, the workers’ compensation doctrine would not present a bar to her claim.

The Court of Appeal’s Analysis

The FEHA provides in pertinent part that “an employer may … be responsible for the acts of nonemployees, with respect to sexual harassment of employees …, where the employer, or its agents or supervisors, knows or should have known of the conduct and fails to take immediate and appropriate corrective action.” The Court of Appeal held that after the trespasser began confronting and aggressively propositioning housekeeping employees for sexual favors, the hotel had a duty, under the FEHA, to end the harassment and to take reasonable care to prevent the same conduct from occurring in the future.  More specifically, the Court of Appeal held that because the hotel knew, or should have known, that the trespasser was on its premises for about an hour before the rape occurred and that the trespasser had aggressively propositioned at least one other housekeeping employee for sexual favors, the hotel had a duty to act and could be found liable for sexual harassment, based on its failure to take prompt corrective action to end the harassment. Additionally, if an employer knows a particular person’s abusive conduct places employees at unreasonable risk of sexual harassment, the employer cannot escape responsibility to protect a likely future employee victim merely because the harasser has not previously abused that specific employee.

Practical Tips for Employers

-Employers should act promptly to put an end to any potentially harassing behavior, whether it involves an employee or nonemployee visitor.

-Employers should provide training to management personnel on the proper precautions to take to ensure employee safety.

-Employers should have safety prevention clauses included in their employee handbooks to ensure employee safety.

PAGA PAYSTUB CLAIMS DON’T REQUIRE INTENT OR INJURY

In Lopez v. Friant & Assocs., LLC, the Court of Appeal held that a plaintiff filing suit for civil penalties under the Labor Code Private Attorneys General Act of 2004 (PAGA) does not have to meet the statutory requirements for a private cause of action for damages or statutory penalties.

Factual Background

The plaintiff, Eduardo Lopez, alleged that his employer violated California Labor Code section 226(a) by failing to issue wage statements showing either the last four digits of employees’ Social Security numbers or employee identification numbers.  Lopez sought civil penalties on behalf of himself and other aggrieved employees through the California Private Attorneys General Act (PAGA). Defendant did not dispute the allegation, but moved for summary judgment, arguing that plaintiff could not prevail because he did not suffer any injury resulting from a “knowing and intentional” violation, which is required for statutory damages or penalties under  California Labor Code section 226(e)(1).  The trial court granted summary judgment in defendant’s favor, concluding that plaintiff must do more than show a mere violation of section 226(a)(7) in order to recover civil penalties under PAGA. The plaintiff appealed.

The Court of Appeal’s Analysis

The plaintiff’s primary argument on appeal was that the “knowing and intentional” requirement under section 226(e)(1) is not applicable to a PAGA action based on a wage statement violation under section 226(a)(7). The Court of Appeal reasoned that Section 226(e)(1) describes a claim for damages and “statutory penalties,” Lopez was suing under PAGA for “civil penalties.” Since plaintiff’s complaint sought only civil penalties under PAGA, he was not required to demonstrate that he suffered injury as a result of defendant’s “knowing and intentional failure” to provide a compliant wage statement. Ultimately, the Court of Appeal reversed the granting of summary judgment, holding that the “knowing and intentional” requirement for proving damages under Section 226(e)(1) is inapplicable to a PAGA claim for recovery of civil penalties.

Practical Tips for Employers

-Under PAGA, aggrieved employees can seek penalties, even while admitting they have suffered no injury at all, and even while admitting that the employer’s technical mistake was neither knowing nor intentional.  An employee may seek these penalties, even if the employer made a technical, innocent mistake, and took remedial measures.

-Employers must issue wage statements in full compliance with the Labor Code and should have contractual indemnification protections in place when outsourcing payroll to a third party vendor.

EMPLOYER’S NEED CLEAR CBA’S IF THEY WANT ARBITRATION TO BE THE SOLE FORUM FOR EMPLOYEES TO RESOLVE THEIR STATUTORY CLAIMS

In Cortez v. Doty Bros. Equip., the Court of Appeal concluded that a collective bargaining agreement can waive an employee’s right to bring statutory claims in a judicial forum.

Factual Background

From September 2008 through May 2013, plaintiff, Gabriel Cortez was a member of the Teamsters Local Union No. 986 (Teamsters) and worked at various times as a truck driver for the defendant in its water division. Cortez sued defendant on behalf of himself and putative class members, alleging failure to comply with multiple provisions of the California Labor Code governing overtime pay, meal periods and rest breaks, and requiring timely payment of wages upon termination of employment.  Cortez further alleged that defendant violated the recordkeeping requirements of California Labor Code sections 226, 1174 and 1174.5, and Industrial Welfare Commission Wage Order No. 16-2001 (“Wage Order 16”).  The trial court granted defendant’s petition to compel arbitration of plaintiff’s individual claims, pursuant to the arbitration provision.  The parties also stipulated to allow the superior court, rather than an arbitrator, assess whether the class claims must be arbitrated.  The trial court determined that the agreement did not contemplate arbitration of class claims. The plaintiff appealed.

The Court of Appeal’s Analysis

The Court of Appeal affirmed and reversed in part; it determined that some wage and hour claims were subject to arbitration, while others were not.  The Court of Appeal determined that claims for failure to timely pay wages upon separation and unfair competition claims were not addressed by Wage Order 16. As such, they were not encompassed in the arbitration provision contained in the collective bargaining agreement.  The Court of Appeal affirmed the trial court’s finding that the agreement did not allow class arbitration.  Absent language in the arbitration provision itself or extrinsic evidence establishing the parties’ agreement to arbitrate class claims, only individual claims could be arbitrated.

On the other hand, the Court of Appeal determined that plaintiff’s claims under the Labor Code for meal and rest break violations and recordkeeping violations were encompassed in Wage Order 16 and thus, were subject to arbitration.  As a result, the Court concluded that the Labor Code claims that arose under Wage Order 16 must be arbitrated.

Practical Tips for Employers

-Employers should use clear and unambiguous language when specifying claims that are subject to arbitration.

EMPLOYERS BEWARE: FAILING TO COMPEL ARBITRATION MAY RESULT IN ARBITRATION WAIVER

In Sprunk v. Prisma LLC, the Court of Appeal held that a defendant in a class action litigation can waive its right to seek arbitration against absent, unnamed class members by deciding not to compel arbitration against the named plaintiff within a reasonable timeframe.

Factual Background

Maria Sprunk worked as an exotic dancer for a club owned by Prisma, LLC (Prisma). She filed a wage-and-hour class action in October 2011, alleging she and a class of exotic dancers had been misclassified as independent contractors and had consequently been denied wages, meal periods, and reimbursement of business expenses. The plaintiff and all putative class members had signed arbitration agreements. In January 2012, Prisma filed a motion to compel arbitration of Sprunk’s individual claims only. In September 2012, Prisma withdrew its motion to compel arbitration, and filed instead an answer and a cross-complaint naming Sprunk and 500 fictional “Roe” cross-defendants. In December 2012, it dismissed the cross-complaint. The trial court granted class certification in April 2015.

In August 2015, Prisma moved to compel arbitration against the class members. As a result of Prisma’s delay in compelling arbitration against Sprunk for several years, the trial court held that Prisma had waived its right to arbitrate Sprunk’s claims. The trial court reasoned that the defendant’s delay in compelling arbitration, as to Sprunk, was inconsistent with an intent to arbitrate. After the class was certified, Prisma filed two separate motions to compel arbitration directed at the unnamed plaintiffs who had signed arbitration agreements. The trial court denied Prisma’s motions to compel arbitration, finding that Prisma’s delay in seeking arbitration of Sprunk’s individual claims resulted in a waiver of its right to compel arbitration as to the unnamed class members as well. The court concluded that the delay was both unreasonable and prejudicial. The defendant appealed.

The Court of Appeal’s Analysis

The Court of Appeal affirmed, holding that evidence supported the trial court’s finding that Prisma had the opportunity to assert its right to arbitrate against Sprunk, but instead made a strategic decision to delay in doing so. The Court of Appeal determined that this conduct fit within the legal concept of waiver. At issue here was whether the trial court could consider Prisma’s delay in moving to compel arbitration against Sprunk in determining whether Prisma waived its right to arbitrate against the unnamed class members. The Court of Appeal agreed with the trial court’s findings that the four-year delay caused prejudice by stretching out the litigation process and unreasonably requiring the opposing party to engage in procedures that would not have been necessary in arbitration. The Court of Appeal concluded, “An attempt to gain a strategic advantage through litigation in court before seeking to compel arbitration is a paradigm of conduct that is inconsistent with the right to arbitrate” and supports a finding of waiver.

Practical Tips for Employers

-Employers should not risk their right to compel arbitration by delaying in compelling arbitration, as to the named plaintiff, to try and obtain a strategic advantage.

“ONE DAY OF REST IN SEVEN”

In Mendoza v. Nordstrom, Inc., the California Supreme Court clarified California’s so-called “day of rest” rule, which guarantees employees “one day’s rest therefrom in seven,” prohibits employers from “causing” its employees to work more than six days in seven, and exempts employees when, inter alia, the total hours of employment do not exceed 30 hours in any week or six hours in any one day.

Factual Background

Christopher Mendoza (Mendoza) and Meagan Gordon (Gordon) are former employees of Nordstrom, Inc. (Nordstrom). Mendoza worked as a barista and later a sales representative for Nordstrom in San Francisco and San Diego; Gordon worked as a sales associate in Los Angeles. On several occasions, Mendoza was asked by a supervisor or coworker to fill in for another employee, with the result that he worked more than six consecutive days. During each of these periods, some, but not all, of Mendoza‘s shifts lasted six hours or less. Similarly, on at least one occasion Gordon worked more than six consecutive days, with some but not all of her shifts lasting six hours or less. Mendoza sued Nordstrom in state court, alleging, inter alia, that it had violated California Labor Code sections 551 and 552 by failing to provide him statutorily guaranteed days of rest. The suit was filed as a putative class action on behalf of nonexempt California Nordstrom‘s employees and the day of rest claim was brought pursuant to PAGA, California Labor Code sections 2698– 2699.5.

Nordstrom removed the action to federal court, based on diversity jurisdiction, pursuant to 28 U.S.C. § 1332(d). After removal, the parties stipulated to Gordon‘s filing a complaint in intervention. Gordon‘s complaint likewise was a putative class action and also included a PAGA claim for violation of sections 551 and 552. The district court granted summary judgment on claims, other than the day of rest claims. PAGA authorizes a representative action without the need for class certification; thus, plaintiffs withdrew their motion for certification.

Thereafter, the court held a bench trial on the merits. After trial, it concluded: (1) section 551 guarantees a day of rest on a rolling basis, for any seven consecutive days; but (2) under section 556, the guarantee does not apply so long as an employee had at least one shift of six hours or less during the period, as Mendoza and Gordon did; and (3) Nordstrom did not cause Mendoza or Gordon to work more than six consecutive days because it did not force or coerce them to do so. The court dismissed the action. After plaintiffs timely appealed, the Ninth Circuit Court of Appeals issued an order requesting that the California Supreme Court resolve unsettled questions under California’s “one day of rest in seven.”

The Supreme Court clarified that a day of rest is guaranteed for each workweek (as the workweek is defined by the employer). Thus, there is no rolling seven day period in which a day off needs to be provided. Instead, if an employer defines its workweek as Monday through Sunday, one day off must be provided in that week. It can be Saturday one week, Tuesday the next week, and Friday the next.

Additionally, there is an exception for employees who work shifts of six hours or less every single day in the workweek. As such, part-time employees, who consistently work short shifts of six hours or less, can be scheduled to work seven days. However, any shift over six hours in that week will moot that exemption.

Finally, an employer can’t “cause” an employee to go without a day of rest, but an employee can “choose” to forgo that right as long as s/he is fully apprised of the entitlement. As such, an employer may not encourage its employees to forgo rest or conceal the entitlement to rest, but is not liable simply because an employee chooses to work a seventh day.

Practical Tips for Employers

-Employers should still exercise caution when their employees work for more than six days in a workweek.

-Employers should add a provision to their employee handbooks advising employees of their right to one day of rest per workweek. They should also make sure the workweek is clearly defined.

-Employers should keep in mind that allowing an employee one day off to rest and rejuvenate is a smart beneficial practice.

-Employers should provide training to their managers not to pressure their employees to work seven days and to take shifts to cover other employees when they only have one day off per workweek.

-Employers should consider obtaining a waiver from the employee who works a seventh day in any workweek that she or he is doing so by choice.

TAXICAB DRIVER—EMPLOYEE OR INDEPENDENT CONTRACTOR?

In Linton v. DeSoto Cab Co., the Court of Appeal held that despite the employment disclaimer in the Lease Agreement and the fact that the plaintiff had a significant amount of control over his job, there was still strong evidence of an employment relationship.

Factual Background

In Linton, the plaintiff worked as a cab driver for the defendant cab company. Upon hire, plaintiff signed a 15-page “Taxicab Lease Agreement” containing language disclaiming any employment relationship between the parties. Linton brought a wage and hour action against defendant claiming misclassification as an independent contractor. Defendant required Linton to pay a “gate fee” in exchange for his obtaining a taxicab to drive for each of his shifts. Linton alleged that he was an employee (not an independent contractor) and that by charging him “gate fees,” the defendant was violating the wage and hour laws. The Labor Commissioner determined that Linton was an employee and not an independent contractor. On appeal, the trial court ruled in favor of defendant, holding that Linton was an independent contractor and had not been misclassified. The plaintiff appealed.

The Court of Appeal’s Analysis

The Court explained that the labels used by the parties were not dispositive and the degree of freedom permitted to a worker does not automatically lead to the conclusion that the worker is an independent contractor. The key issue is the control retained by the employer. Despite the employment disclaimer in the Lease Agreement and the fact that the plaintiff had a significant amount of control over his job, the Court concluded that the trial court erred in placing the burden of proving an employment relationship on Linton, rather than presuming such a relationship and requiring the defendant to prove otherwise. Linton presented “strong evidence of an employment relationship”, including that: (1) defendant terminated the parties’ relationship based on a single passenger complaint without investigation, (2) defendant monitored Linton’s driving by video review, (3) defendant required Linton’s social security number and maintained his personal information, (4) Linton was required to return the taxicab on request and his vehicle could be leased to another driver if he was late, and (5) Linton did not represent himself as an independent business and could not drive a taxicab independent of defendant or for another taxicab company.

Practical Tips for Employers

-When assessing an employee’s classification, employers should focus on how much control they hold over the relationship, not the degree of freedom given to the worker.

-In California, a worker is presumed to be an employee, unless the employer can prove otherwise.

-Employers should review their independent contractor agreements. If the right to terminate a worker without cause is important, then employers should consider classifying the worker as an employee. The misclassification can be a costly error.

WILL THE COURT PERMIT A BROAD EXCEPTION TO THE GOING AND COMING RULE?

In Morales-Simental v. Genentech, Inc., the Court of Appeal held that a plaintiff-employee in charge of his own department at his place of employment cannot order himself to return to work to invoke the special errand exception to the going-and-coming rule.

Factual Background

Vincent Ong (Ong) worked as a night shift supervisory employee for the defendant. His duties included participating in hiring decisions. He left his home to drive to Genentech, Inc. (Genentech) around 3:00 am on his night off, allegedly to pick up prospective employee resumes for review. While on his way to Genentech, he was involved in a car accident in which one person was killed. The family of the decedent brought a wrongful death lawsuit against Ong and Genentech. They alleged Genentech was liable under the doctrine of respondeat superior because Ong was in the course of his employment at the time of the accident. Genentech prevailed on summary judgment. The plaintiffs appealed.

The Court of Appeal’s Analysis

On appeal, Genentech argued that summary judgement was proper because the “going and coming” rule provides that an employee commuting to and from work is typically outside the scope of employment, and the employer is not liable for the employee’s tort occurring during that commute. There was no evidence that anyone from Genentech asked Ong to drive to Genentech in the middle of the night. Nor was there evidence Genentech authorized Ong’s trip by paying for his travel expenses. Plaintiffs argued that the “special errand” exception applied, which provides that an employee is within the scope of his employment while performing an errand, either as part of his regular duties or at the specific order or request of his employer. Plaintiffs’ principle argument was that Ong, as a supervisory employee, had the authority to act on Genentech’s behalf and, in essence, order himself to complete a special errand connected to his employment duties.

The Court of Appeal affirmed the trial court’s decision, holding that plaintiffs’ claims against Genentech were without merit. The court reasoned that Ong returned to the office on his time off, on his own, and without any request from the employer.  The fact Ong was a supervisor did not make his decision that of his employer; he could not request himself to return to work.  None of the employee’s duties with respect to hiring employees for Genentech required him to drive to work at 3:00 AM. The court declined plaintiffs’ request to expand the special errand exception to the going and coming rule in this manner.

Practical Tips for Employers

-This ruling strengthens the current law regarding the “going and coming” rule of respondeat superior, which can be an important defense in cases based on vicarious employer liability.

-Employers should make sure that job duties/descriptions are laid out clearly to make it easier to defeat claims invoking the coming and going rule.

WORKERS’ COMPENSATION VICTORY BINDING IN CIVIL DISCRIMINATION LAWSUIT

In Ly v. County of Fresno, the Court of Appeal determined that correctional officers’ claims for ethnicity, national origin, and race discrimination were barred because the claims had been previously litigated in workers’ compensation proceedings.

Factual Background

Three Laotian correctional officers filed Fair Employment and Housing (FEHA) charges, alleging racial and national origin discrimination, harassment, and retaliation by their employer, the County of Fresno (County). Simultaneously, the three officers pursued workers’ compensation remedies through the Workers’ Compensation Appeals Board (WCAB) in which they alleged compensable psychiatric work-related injuries as a consequence of the claimed discrimination. In the WCAB proceedings, the administrative law judges denied the officers’ claims upon finding that the County’s actions were lawful, non-discriminatory, good faith personnel actions, and were based upon business necessity.

Following the WCAB proceedings, the County moved for summary judgment in the civil discrimination suit the plaintiffs had filed, arguing that the WCAB rulings were binding. The trial court granted summary judgment, ruling that the FEHA claims were barred by the doctrines of res judicata and collateral estoppel, as those claims had already been fully litigated before the WCAB. The trial court noted that plaintiffs were not forced to litigate their FEHA claims before the WCAB, but each officer chose to pursue their remedies in that forum on the exact claims asserted in the FEHA action. Thus, their civil action was barred. The officers appealed.

The Court of Appeal’s Analysis

Res judicata precludes a party from litigating legal claims in one legal forum and then later re-asserting the same in a second forum.  Res judicata requires that the earlier proceedings resulted in a final decision; the same legal causes of action were at issue; and the parties in both proceedings were the same.  The Court of Appeal found each of the criteria for res judicata was met and, therefore, affirmed the trial court’s decision.

The Court of Appeal considered whether the WCAB proceeding and the FEHA lawsuit involved the same right.  They determined that the officers sought to enforce the same right before the WCAB and the trial court– the right to be free from discrimination, harassment, and retaliation in the workplace.  They also claimed the same exact injuries in both forums– psychiatric injuries.  Further, the County affirmatively disproved that it engaged in unlawful discrimination. The Court of Appeal concluded that the differing burdens of proof required in the WCAB and under FEHA were immaterial because the County actually disproved unlawful discrimination in the WCAB proceedings. Therefore, the decisions against the officers before the WCAB were final and the officers could not re-assert claims of discrimination against the County in trial court under the FEHA.

Practical Tips for Employers

-At the beginning of any employment litigation, it is crucial that an employer determine if there is a pending workers’ compensation proceeding; if so, the employer should carefully monitor that proceeding by proactively engaging with the insurer and its counsel to assess what issues are to be tried and to participate, to the extent possible, in any proceedings on the merits.

CALLING ALL CALIFORNIA EMPLOYERS—GET PREPARED NOW!

Due to the extent of the upcoming changes to workplace related laws in 2018, employers have much to do to get prepared. If you have any questions about your company’s compliance with these laws or need assistance getting prepared for the upcoming year, please contact the attorneys at Palmer Kazanjian Wohl Hodson LLP.