Bates v. UPS Redux

We originally posted about the Ninth Circuit's panel decision in Bates v. UPS here. It's back. The court decided to reconsider the case with a 15 judge "en banc" panel. The court overhauled the panel's opinion and overruled some prior precedent as well.
At issue was a hearing test UPS required for drivers of certain trucks. The trucks were below the weight that would have required federal DOT hearing tests. UPS decided to use the federal testing standards for the lower weight trucks. The hearing tests of course screened out those with hearing impairments. A class action of hearing impaired applicants sued under the ADA.
Sitting en banc, the court decided the following:
- When an employer expressly takes a "disability" into account in making an employment decision (here, disqualifying the hearing impaired who failed the test), then no "burden shifting" case analysis is necessary.
- Even in such a case, the plaintiff must establish a prima facie case (that s/he has a disability, an adverse action, and causation), and that s/he is a "qualified" individual.
- To show "qualified," the plaintiff must establish (1) s/he satisfies the minimal prerequisites for the job and (2) that s/he can perform the essential job functions with or without reasonable accommodation.
- Essential job functions are duties. The employer has the burden of production to establish the essential job functions.
- There is a difference between duties and qualification standards, which include physical and mental requirements. The parties agreed that the ability to communicate effectively and drive safely were essential job functions. Hearing, on the other hand, is a qualification standard. It may be useful or necessary to perform the essential functions, but hearing in and of itself is not an essential duty.
- The employees must meet the burden of establishing "safe driving" as an essential job function before the employer is required to show that its qualification standard - satisfactory hearing - is job-related and consistent with business necessity.
- "To successfully assert the business necessity defense to an allegedly discriminatory
application of a qualification standard, test or selection criteria, an employer bears the burden of showing that the qualification standard is (1) 'job-related,' (2) 'consistent with business necessity,' and (3) that 'performance cannot be accomplished by reasonable accommodation.' The court overruled prior case authority suggesting the employer had to establish undue hardship or a "BFOQ" as part of the business necessity defense."
- "To show 'job-relatedness,' an employer must demonstrate that the qualification standard fairly and accurately measures the individual’s actual ability to perform the essential functions
of the job."
-"To show that the disputed qualification standard is 'consistent with business necessity,' the employer must show that it 'substantially promote[s]' the business’s needs. This is a high burden, the court noted.
- "Finally, to show that 'performance cannot be accomplished by reasonable accommodation,' the employer must demonstrate either that no reasonable accommodation currently
available would cure the performance deficiency or that such reasonable accommodation poses an 'undue hardship' on the employer."
- "[T]he employer is entitled to use a method of selecting drivers that will retain the overall safety record of its driver pool. Any suggestion in the district court’s opinion that hearing-impaired drivers may be held to a lower safety standard than hearing drivers is disapproved."
- "UPS is entitled to use as some evidence of its business necessity defense the fact that it relied on a government safety standard, even where the standard is not applicable to the category of conduct at issue."

This obviously is a significant ruling for employers to consider when setting job qualification standards that focus on physical or mental abilities. We will write a more detailed article in the weeks to come.

DGV

NLRB: Employees Have No Right to Email About Unions

Not news: Employees use email for personal reasons. News: Employees have no special right to use email for union activities. Employees and their advocates argued to the National Labor Relations Board that employers' property rights should yield to employees' right to communicate under section 7 of the National Labor Relations Act. In a case of first impression, the NLRB said "no" in The Guard Publishing Company, opinion here. So, Employers have the right to ban employees from using their email system for personal reasons.
But if employees email each other about sports, gossip, etc., can the employer selectively ban union talk? Not necessarily. Employers that single out section 7 rights for discriminatory treatment commit an unfair labor practice under section 8(a)(3) of the NLRA. The Board had an answer for that issue as well. In the opinion, the Board re-defined what constitutes "discrimination" in the context of employer policies. The employer may lawfully ban communications about non-work-related activities, so long as the employer's distinctions are not "along section 7 lines." Example: the employer may allow solicitations by charitable organizations, but ban all other solicitations (including by unions).
The decision was 3-2 over a strong dissent, the Board is about to turn over some members, and I hear there's an election coming up next year. So, the degree to which employers may rely on this decision for the long term is unclear. For now, however, employers have more latitude regarding their policies regarding the use of employer property, and their solicitation and distribution policies.

DGV

ERISA Preempts San Francisco Health Care Ordinance

The Golden Gate Restaurant Association took on San Francisco's attempt at universal health care - the Health Care Security Ordinance - and won. It turns out you CAN fight City Hall, particularly when City Hall decides to pass legislation that is clearly preempted by ERISA.

The San Francisco Health Care Security Ordinance was set to take effect January 1, 2008, and would have phased in based on employer size. Basically, employers had to spend a certain amount of money on health care or contribute to a San Francisco fund (read: another tax). But, unless the Ninth Circuit stays the district court's decision and allows the statute to take effect [which would be an insanely burdensome and expensive error if the law ultimately is deemed preempted] the SF ordinance is not going to take effect. Btw, the City is asking the Ninth Circuit to stay the district judge's order.

The district judge's opinion is here. (H/T Workplace Prof's blog for the link to the opinion).
You can learn about the ordinance and the ERISA preemption issues there. Here's the holding:

The Ordinance’s health care expenditure requirements are preempted because they have an impermissible connection with employee welfare benefit plans. By mandating employee health benefit structures and administration, those requirements interfere with preserving employer autonomy over whether and how
to provide employee health coverage, and ensuring uniform national regulation of such coverage. The Ordinance’s provisions also make unlawful reference to benefit plans because they refer to, are designed to act immediately upon, and
cannot operate successfully without the existence of employee welfare benefit plans.

:::temporary editorial breach of the fourth wall - "Speaking of tips: to my friends at that firm with initials that start with C. -- maybe for the New Year you can adopt the "hat tip" as your very own technique for acknowledging those of us who actually do the work!" ::::: [End the editorial narrowcast attack on lazy competitor].

Happy New Year everyone, even the folks at the C. firm!

Greg

California Court of Appeal Enforces Employment at Will

After the California Supreme Court's 2006 decision in Dore v. Arnold Worldwide, discussed here, it is hard to dispute a provision that provides for termination at will, even if the term "at will" is not expressly used.

The Court of Appeal in Bernard v. State Farm, opinion here, held this language provided for employment at will:

“III A. You or State Farm have the right to terminate this Agreement by written notice delivered to the other or mailed to the other’s last known address.
“III B. In the event we terminate this Agreement, you are entitled upon request to a review in accordance with the termination review procedures approved by the Board of Directors of the Companies, as amended from time to time.”

The court rejected the plaintiff's argument the agreement was "ambiguous," thereby allowing the admission of "parol" evidence to explain the contractual term. The court also rejected the notion that the review of termination provision limited State Farm's power to terminate the contract.

In an unpublished portion of the decision, the court rejected the argument that the employer's alleged misrepresentations about the circumstances that led to termination could give rise to a fraud claim. Hunter v. Up-Right remains good law on this point.

No wonder I don't see many implied contract claims anymore.

Greg

California Court of Appeal Upholds 30X Attorneys' Fees Award

So, you litigate a discrimination case and you win. The jury's verdict is about $30,000, which probably is considered a low verdict by your client and you. Silver lining - attorneys fees are available. What are the plaintiffs' attorneys' fees awarded in this case? (Insert Dr. Evil impression here:) About one million dollars. (Pause for dramatic effect with the whole pinky under the chin thing). In fairness, the case was litigated for years and a jury did find intentional discrimination in promotional opportunities at the airport.

The Court of Appeal affirmed nearly all the award, holding it was within the trial court's discretion to award the substantial fees based on a "lodestar" formula (the number of hours expended times a reasonable rate). The court rejected the employer's several arguments that fees should be a multiple of three times recovery, allocated in proportion to the time spent on successful claims, etc. The case is Harman v. City and County of San Francisco, opinion here.

The defense's claim that the recovery should limit the fees is supported by case law. But the trial court has discretion to make such adjustments and apparently did not abuse its discretion here. Unfortunately, the employer's settlement offer was close to the recovery. But there is no mention of a statutory offer to compromise, which could have resulted in a lower fee award. Here's a link to my article on the use of offers to compromise under Code of Civil Procedure section 998. Article.

Greg

Court of Appeal Upholds Denial of Meal/Rest Class Action

The Court of Appeal gave a mixed bag of coal and presents to H.F. Cox, Inc. The court held that class certification should have been granted on an overtime claim and on whether a vacation policy violated California law. However, the court upheld the trial court's decision to deny certification on a meal and rest break claim.
The opinion is interesting because the overtime claim appears to involve a lot of individual issues regarding whether each truck driver was exempt under federal or state exemptions for truckers. But the court found no substantial evidence of individual issues.
The vacation claim is interesting because the plaintiffs should not win on the merits, because the trucking company's policy of paying a flat sum of vacation pay (rather than basing it on the plaintiffs' actual pay, is probably quite legal. So, class certification may be a hollow victory, since the defendant can bring a motion for summary judgment.
The meal period claim should warm the hearts of defense attorneys. The court had no trouble finding there substantial evidence of individual issues regarding whether and to what extent employees took meal breaks. There was no argument over whether they must be affirmatively "provided" or forced.
There was also a claim for off-the-clock work, for which certification was denied. Again, the court of appeal found substantial evidence that individual issues predominate.

The opinion, Bell v. Superior Court, is here.

Congress Amends FMLA to Cover Leave for Relatives on Active Duty in the Military

Congress has amended the FMLA. The bill is here. The President has not signed the bill yet, but is expected to do so soon.
The new provision permits (1) up to 26 weeks of leave in a one-time 12-month period to care for a service member with a "serious illness" who is injured in the line of active duty and (2) up to 12 weeks of leave in any 12-month period for a "qualifying exigency" related to a service member's call to active duty.
The Department of Labor will define "qualifying exigency."
The 26-week leave is a one-time leave. The "qualifying exigency" leave is available like FMLA - 12 weeks per 12 month period.
The reinstatement rights, benefit protections, etc. will be the same as under the current FMLA. This is all new, so stay tuned. Expect to revise your FMLA policies and replace your posters.

Greg

San Francisco Minimum Wage Going Up

The SF minimum wage increases to $9.36 per hour effective 1/1/08. Please replace your posters, too. Information on the new minimum wage and the poster available here.

Happy holidays!

Greg

EEOC Issues New Guidance on Employment Testing

The Equal Employment Opportunity Commission has issued new "enforcement guidance" on "Employment Tests and Selection Procedures," link here.

The Guidance does not contain a lot of analysis. However, it is interesting for a couple of reasons:

- the EEOC considers background checks - such as criminal and credit checks - to be "tests," analyzed under disparate impact and treatment theories. This could have wide-ranging implications. It may be that applicants challenge such tests under an "adverse impact" theory. If adverse impact is shown, the employer will have to prove the tests are "job-related and consistent with business necessity." That means that background/credit/criminal checks for all employees could be challenged.

- the EEOC also identifies "performance appraisals" under the same rubric.

Otherwise, the Guidance briefly discusses anti-discrimination laws and how employment selection procedures may violate them. It also summarizes some EEOC litigation.

H/T to Storm.

Greg

Arbitration Policy Not Enforceable as Agreement

If you have a handbook policy referring to a separate arbitration agreement, a court will expect to see a separate arbitration agreement if the employer tries to enforce it. So, if an employee does not sign the separate agreement contemplated by the policy, the employer should not expect the court to consider the short policy as evidence of an agreement to arbitrate. That's what the court of appeal said in Mitri v. Arnel Management Co, here.
This case is NOT saying that an arbitration agreement cannot be contained within a handbook. Rather, this case says that if the employer says there is a separate agreement in its handbook, the employer should ensure that the separate agreement is signed.

DGV

California Court: USERRA Claims Cannot Be Released

General releases are ineffective to release a growing list of statutory claims. Claims under the FLSA, FMLA, and claims for unpaid wages under California law are just some of the claims that may not be included in a release. The California Supreme Court is going to decide whether claims for unpaid expenses under Lab. Code section 2802 may be released, as was held in Edwards v. Arthur Andersen, discussed here.

So, add another statute to the list of un-releseable laws: USERRA. The Court of Appeal decided in Perez v. Uline, Inc. that a general release was ineffective against a later claim for wrongful termination in violation of public policy and breach of contract. USERRA contains language invalidating such waviers:

This chapter supersedes any State law . . . contract, agreement, . . . or other matter that reduces, limits, or eliminates in any manner any right or benefit provided by this chapter . . . .

Applying this section, the Court held that a release of USERRA claims was invalid. The common law Tameny and contract claims, however, are not USERRA claims. But the Court of Appeal did not make that distinction.

An alternative practice may be to have the employee agree (if true) that he or she has received all wages and leave to which he or she is entitled.

USERRA claims will be more prevalent as more soldiers return to work from duty in Iraq and Afghanistan. Employers should be aware of their obligations under this law. A release apparently is not an option.

As a final note, the case is interesting, too, because it reminds practitioners that waivers of Civ. Code section 1542 are not required in a release for it to be enforceable:

Plaintiff testified he understood he was releasingclaims arising under all statutes the agreement referred to, even those he did notunderstand. This knowledge is sufficient to withstand the provisions of Civil Codesection 1542. Nothing in that statute requires that it be designated in the release or that aparty specifically waive its provisions. While it might have been more comprehensive to have a reference to Civil Code section 1542 in the release, “‘To be effective, a releaseneed not achieve perfection . . . .’ [Citation.]”

This is not exactly news, but it may be new to you. For the record, we always recommend inclusion of the waiver to avoid disputes over the enforceability of a general release.

Greg

California Supreme Court to Consider Administrative Exemption

The California Supreme Court accepted review in Harris v. Superior court (discussed here). The Court may be doing this to clarify the extent to which California will follow federal guidance regarding exemptions from overtime. In the Harris case, the court took a narrow view of the "administrative" exemption, and expounded on who is a "production" employee (not entitled to the exemption). Stay tuned to this space (for a couple of years) and we'll find out.

IRS Standard Mileage Rate for 2008

The IRS announced the 2008 standard mileage rate: $0.505 per mile, which is $0.02 more than in 2007. The IRS is really feeling the pinch at the gas pump, eh? The IRS press release is here.

The California DLSE's enforcement position is that employers may reimburse employees' business use at the IRS standard mileage rate without running afoul of Labor Code section 2802. Remember, though, that the California Supreme Court in the Gattuso decision (discussed here) did not endorse the IRS standard mileage rate as conclusively adequate under section 2802. Therefore, if an employee wishes to track "actual" costs and seek a different reimbursement rate, that request at least must be evaluated under the statute.

Defective offer to compromise is expensive

In ENGLE v.COPENBARGER AND COPENBARGER, the Court of Appeal held that the defendant's offer to compromise under section 998 did not include the plaintiffs' attorneys' fees and costs. That is because the offer as expressed in the section 998 offer did not expressly provide fees and costs were included. So, the plaintiff was able to collect the settlement and then file for attorneys' fees and costs on top of that. They should have read my article (here)!*

DGV

* [Of course...the 998 was served a few years before I wrote the article. Don't mess with my premise. I'm marketing over here. You're also having a conversation with yourself. Can both of us bill then?]

Waiting time penalty statute of limitations

What if you settle up with an employee for all wages due, but the employee gets a lawyer to sue for waiting time penalties alone in court? Well, the court of appeal just saved you a bunch of money.

In McCoy v. Superior Court (Kimco Staffing), the employee sued for waiting time penalties after receiving all wages due. The defendant argued that the applicable limitations period for penalties was one year. The plaintiff argued that the statute of limitations is the same as the underlying wages.

The court of appeal agreed with the employer. It is important to remember, though, that if the employee had sued for unpaid wages AND waiting time, the limitations period for the penalties would have been the same as applicable to the unpaid wage claims.

So, this case is an incentive to settled undisputed wage claims. Doing so may save the employer a lot of potential penalties.

DGV

Recent Shaw Valenza Articles

I know you're asking yourselves, "What do those live wires at Shaw Valenza do when they're not practicing employment law?" We're writing! We write employment law columns bi-weekly in the Sacramento Daily Recorder, about every month in the San Francisco Daily Journal, and occasionally for other periodicals.
Some handy links to recent articles are below. Our California and U.S. Supreme Court roundups are included, as are articles about a new California leave, the continued assault on arbitration, and more! If you want these articles as they are published, rather than waiting for us to blog about them, sign up here.

CALIFORNIA’S NEW LEAVE FOR MILITARY SPOUSES
By Jennifer Brown Shaw and Carolyn G. Burnette
The Daily Recorder
20 November 2007

THE BREACH OF THE DUTY OF LOYALTY – WHAT EMPLOYERS CAN DO ABOUT IT
By Jennifer Brown Shaw and Becki D. Graham
The Daily Recorder
6 November 2007

USING THE STATUTORY “OFFER TO COMPROMISE” TO OBTAIN FAVORABLE SETTLEMENTS
By D. Gregory Valenza
The Daily Journal
2 November 2007

REST BREAK AND MEAL PERIOD CLAIMS AFTER MURPHY V. KENNETH COLE PRODUCTIONS
By Jennifer Brown Shaw and Matt Norfleet
The Daily Recorder
23 October 2007

OFFICE ROMANCES AND THE RISK OF LIABILITY
By Jennifer Brown Shaw
The Daily Recorder
9 October 2007

TITLE III OF THE ADA: COMPLIANCE AND LITIGATION STRATEGIES
By Jennifer Brown Shaw
The Daily Recorder
27 September 2007

UNDERMINING ARBITRATION
By D. Gregory Valenza
The Daily Journal
21 September 2007

CALIFORNIA SUPREME COURT EMPLOYMENT LAW DECISIONS 2006-2007
By Jennifer Brown Shaw
The Daily Recorder
5 September 2007

EMPLOYER-SPONSORED WELLNESS PROGRAMS AND EMPLOYMENT LAW
By Jennifer Brown Shaw and Becki Graham
The Daily Recorder
14 August 2007

WAGE AND HOUR LAWS REDUX
By D. Gregory Valenza
The Daily Journal
10 August 2007

EMPLOYMENT LAWSUITS AGAINST INDIVIDUALS
By Jennifer Brown Shaw and Carolyn Burnette
The Daily Recorder
31 July 2007

AVOIDING WAGE-AND-HOUR RISKS
By D. Gregory Valenza
The Daily Journal
27 July 2007

UNITED STATES SUPREME COURT EMPLOYMENT LAW DECISIONS 2006-2007
By Jennifer Brown Shaw
The Daily Recorder
18 July 2007

FREE SPEECH AND ENGLISH-ONLY POLICIES IN THE WORKPLACE
By Jennifer Brown Shaw and Matthew J. Norfleet
The Daily Recorder
2 July 2007

DGV

Poetry for Entrepreneurs: Love My Startup More than You

Some of you may know that I moved to Silicon Valley recently.

Although i've engaged in some startup activity here, alot of what i've been doing is watching and observing. Being a writer, this naturally made me want to put down a few words about what i'm seeing about the state of entrepreneurship in the valley. Oddly enough I found the best way to comment on life here is through poetry (don't ask me why - I've never written much poetry before).

This poem, "Love My Startup More Than You" is about love and hope and the life of an entrepreneur. It’s about relationships and how they’re put on hold sometimes in the early days of a startup.

It came from watching the way that my married friends were involved in starting companies. It’s not unusual here for someone to have a full time job, and be working nights and weekends for their own (or some friend’s) startup, which alas doesn’t leave a lot of time for romance.
This poem is based on an old army marching tune from World War I - a time when young men ere leaving their girlfriends behind to go to fight in Europe. The original started "Cindy Cindy Cindy Lou, Love My Rifle More Than You”.

I’ve changed Cindy Lou to be Cindy Lu, in honor of the large Asian population in Silicon Valley. And of course i've changed "Rifle" to "Startup". ere it is:


Love My Startup More Than You
by Rizwan Virk

Cindy Lu, Cindy Lu
You know that my heart is true

But my Idea is very new
And we’ll make a million dollars
If only I can prove
That the market is true!

Cindy Lu Cindy Lu
Soon I’ll be home
And put my arms around you
....
But first
I’m being shown
Design specs I must review!

The beta downloads are a jumping
But so are the bugs that need a thumping!

Please let me know
When the baby is asleep
Then I can show
You how we'll avoid feature creep!

Towards you my sweetheart I’ll always feel
A never ending attraction
But right now what I really need to show
Is more customer traction!

Cindy Lu, Cindy Lu
Don’t look at me that way,
You’ll worry yourself blue!

Once we raise our series A
Our mortgage will be easy to pay!

And if the company gets in a bind,
My investors will help me find
Some folks that are keen
To assemble a management team
And we’ll be on our way
To making lots of green!

So please don’t think that I’m mean
When I say:

Cindy Lu, Cindy Lu
You know my heart is true,
But just right now,
I love my startup
More than you!

Shaw Valenza's Annual Legal Update 12/3 and 4

Come see us in person at our annual employment law update. The presentations are on December 3 in Sacramento and December 4 in San Francisco. See the new statutes. Hear about recent case law developments. Touch and actually consume a continental breakfast.

You'll laugh. You'll cry. It's better than Cats! OK, it's more informative than Cats.

Sign up here.

Greg

New I-9 Form

The U.S. Department of Homeland Security has issued a new I-9 Form.
The form itself is largely unchanged. The main revision is to the list of acceptable employment authorization documents. The old form, which was issued in 1991, did not contain all of the acceptable documents.
Don't make too many copies. This form is set to expire in 2008, when the Department may issue an even newer version.

Greg

California Supreme Court on Reimbursement of Expenses under Labor Code section 2802

In California, employers must reimburse employees for "reasonably incurred" business expenses. Labor Code section 2802 so provides.

Typically, employers reimburse employees for actual expenses on a dollar for dollar basis: a business meal, a hotel stay, air fare, etc. When an expense is hard to measure (such as business use of an automobile), employers can approximate the expense by paying the employee an amount per mile driven on business. The IRS mileage reimbursement rate, currently $0.485, is one way of estimating the cost / mile. Of note, the DLSE likes the IRS rate, but no law requires employers to follow it. Conversely, employees may claim automobile expenses above the IRS rate if they can prove they are entitled to them.

Harte-Hanks Shopper, Inc. chose another method. Harte-Hanks would pay employees a higher rate of pay that was intended to "cover" expenses. Frank Gattuso brought a class action challenging that policy.

The Supreme Court decided that employers may pay extra wages to employees to cover reimbursable expenses, but they must be accounted for so the employee can determine whether he or she is receiving full reimbursement, and so that taxing authorities can distinguish between reimbursed expenses and wages.

Caution: This opinion is not a license to under pay employees a lump sum that does not fully compensate them for expenses. The employee may challenge the reimbursement amount as insufficient before the Labor Commissioner or in court. Instead, the opinion is helpful because it does not bind the employer to a specific method of reimbursement.

The case is Gattuso v. Harte-Hank Shopper, Inc. The opinion is here.

Instant Leave of Absence Notes (dot.com)?

Here's something you know: employees sometimes take time off when they are not sick, or at jury duty, etc.

Here's something you may not know: There's a new website that actually sells pre-printed, official looking forms authorizing leaves of absence. Sort of like a fake note a kid gives to his or her school. The concept is not new, but the availability of excuse forms on the internet may be. The url is "my excused absence dot com" I'm not linking to it.

What will happen when an employee is caught using a fake note? What if a real doctor signs a fake note? Will a business sue the website for unfair business practices? Oh, the mind boggles.

Anyway, if you did not have enough to worry about, be on the look out for doctors' notes and jury duty excuses that may not be genuine.

DGV

California Court: No Preemption of State Law Claims for Bank

Banks have a special weapon in employment litigation (including wrongful termination and even discrimination claims). The National Bank Act preempts these state law claims, at least as they relate to bank "officers."

So, may a bank subject to the National Bank Act designate "officers" at will to come within the preemption provisions? No, said the court of appeal in Ramanathan v. Bank of America. Quoting from an earlier California Supreme Court case, the court reviewed the criteria for evaluating whether a bank employee is an "officer" and covered by the National Bank Act's discharge provisions:

a bank ‘officer’ within the meaning of section 24 possesses the following attributes: First, he or she holds an office created by the board of directors and listed in the bank’s bylaws. (Citation.) Second, he or she is appointed by the board of directors, either directly or pursuant to a delegation of board authority set forth in the bylaws. (Citations.) Third, he or she has the express legal authority to bind the bank in its transactions with borrowers, depositors, customers, or other third parties by executing contracts or other legal instruments on the bank’s behalf. (Citation.)
Fourth, his or her decision-making authority, however it might be limited by
bank rule or policy, relates to fundamental banking operations in such a manner
as to affect potentially the public’s trust in the banking institution. (Citation.) If a particular bank employee holds a position possessing these features, he or she may be viewed as the bank itself in the eyes of third parties. Such an employee is an ‘officer’ and serves at the pleasure of the board of directors.”

The court then applied these criteria and found that Ramanathan, a "vice president," raised a triable issue of fact as to whether he was an officer under the National Bank Act. Therefore, the court vacated summary judgment and remanded for trial on Ramanathan's claims for discrimination, harassment and wrongful termination brought under California law.

Thanks to Connecticut Employment Law Blog for reminding me to post about this case.

Governor Vetos Two More Bills

Our recap of new California legislation affecting employers is here.

Governor Schwarzenegger vetoed two more bills in the final hours of the session:

AB 1707 - New requirements for personnel files.

http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_1701-1750/ab_1707_bill_20070910_enrolled.html

SB 180 - "Card checks" for agricultural employees seeking union representation.

http://www.leginfo.ca.gov/pub/07-08/bill/sen/sb_0151-0200/sb_180_bill_20070828_enrolled.html

That wraps up this year's legislative session. I think you will see most of the vetoed bills introduced again in the coming year.

DGV

Court of Appeal Explains Attorney-Client Privilege Applicable to Corporations

The attorney-client privilege may apply to communications between lower-level corporate employees even when an attorney is not a party to the particular communication. That's what the Court of Appeal held in Zurich American Ins. Co. v. Superior Court. "If legal advice is discussed or contained in the communication between Zurich employees, then to that extent, it is presumptively privileged. A communication reflecting a discussion of litigation strategy which expresses that the strategy is in response to advice of counsel would come within the privilege."

The Court framed the issue as follows:

The fundamental issue in this case is whether corporate communications not directly involving an attorney, but which discuss legal advice, come within this privilege. As we have seen, the discovery referee and trial court adopted a definition of the attorney-client privilege limited to "items in the claim file that contain actual copies of letters or e-mail communications from outside counsel, or documents that have been created by counsel, or received by counsel, or that contain direct communications from counsel, as indicated in the comment section of the attached listing of documents,... " This definition is inadequate because it fails to take into account language of section 952 expressly contemplating that confidential communications include information transmitted to persons "to whom disclosure is reasonably necessary for the transmission of the information," and those to whom disclosure is reasonably necessary for "the accomplishment of the purpose for which the lawyer is consulted." Section 952 expressly includes legal opinions and advice given by a lawyer within the definition of confidential communication.

The court of appeal reversed a trial court's determination that several communications were not privileged. Here is the test for privilege the court developed:

The first relevant inquiry is whether the document contains a discussion of legal advice or strategy of counsel for Zurich. Section 952 provides that a "confidential communication" "includes a legal opinion formed and the advice given by the lawyer in the course of that relationship."

If it is determined that the document reflects legal advice or opinions and is thus privileged, the court must determine whether Zurich waived the privilege by distributing the advice within the corporation. Section 952 extends the privilege to confidential communications shared with "those who are present to further the interest of the client in the consultation or those to whom disclosure is reasonably necessary for the transmission of the information or the accomplishment of the purpose for which the lawyer is consulted,... " The disputed documents must be reviewed to determine whether the Zurich employees to whom legal advice was relayed come within this broad definition.
[citations] . . . .

The key concept here is need to know. While involvement of an unnecessary third person in attorney-client communications destroys confidentiality, involvement of third persons to whom disclosure is reasonably necessary to further the purpose of the legal consultation preserves confidentiality of communication." [citation]

The relay of legal advice to corporate personnel not present at the attorney-client consultation was addressed by the INA court. "[D]isclosure may be made to persons not present at the attorney-client consultation, i.e., the third persons need not necessarily participate in the legal consultation." (Id. at p. 766.)
. . .

The Court also noted a couple of additional issues that arise in litigation over privilege (bullets are mine for ease of reading):

- otherwise routine, non-privileged communications between corporate officers or employees transacting the general business of the company do not attain privileged status solely because in-house or outside counsel is "copied in" on correspondence or memoranda. [citations]
- In addition, Zurich may not shield facts, as opposed to communications, from discovery. Any relevant fact may not be withheld merely because it was incorporated into a communication involving an attorney.
- In addition, "It is settled that the attorney-client privilege is inapplicable where the attorney merely acts as a negotiator for the client, gives business advice or otherwise acts as a business agent. . . . [citations]

Governor Takes Action on Pending California Employment Bills

We covered pending bills here. Governor Schwarzenegger vetoed nearly all of the burdensome proposed measures. As of this writing, two remain pending. If he does not sign them by midnight tonight, they become law automatically.

So, here is what we believe to be a comprehensive list of 2007 employment law bills that were signed, vetoed, and the two that remain pending.

We will provide more detailed summaries of the new laws in future posts.

DGV

Signed:

SB 812 - Alternative workweeks for pharmacists
http://www.leginfo.ca.gov/pub/07-08/bill/sen/sb_0801-0850/sb_812_bill_20071011_chaptered.html

AB 392 - Military leave for spouses
http://www.leginfo.ca.gov/cgi-bin/postquery?bill_number=ab_392&sess=CUR

SB 929 - Prevailing wage and lowers the hourly wage applicable to the "computer exemption" from over $49 to $36 per hour.
http://www.leginfo.ca.gov/pub/07-08/bill/sen/sb_0901-0950/sb_929_bill_20071011_chaptered.html

SB 14: - California National Guard qualify for membership in the Public Employees Retirement System (PERS), and can purchase additional PERS service credit.
http://www.leginfo.ca.gov/pub/07-08/bill/sen/sb_0001-0050/sb_14_bill_20071009_chaptered.pdf

AB 338 - Increases availability of workers' compensation temporary disability benefits
http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_0301-0350/ab_338_bill_20070924_enrolled.html

Vetoed:

AB 504 - Lockouts - fines for employers.
http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_0501-0550/ab_504_bill_20070910_enrolled.html

AB 622 - Independent Contractors.
http://www.leginfo.ca.gov/pub/07-08/bill/sen/sb_0601-0650/sb_622_bill_20070906_amended_asm_v95.html

SB 936 - Workers' Compensation benefits.
http://www.leginfo.ca.gov/pub/07-08/bill/sen/sb_0901-0950/sb_936_bill_20070913_enrolled.html

SB 942 - (More) Workers' Compensation benefits.
http://www.leginfo.ca.gov/pub/07-08/bill/sen/sb_0901-0950/sb_942_bill_20070906_amended_asm_v94.html

AB 8 - Health care tax on employers to fund universal health care.
http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_0001-0050/ab_8_bill_20070910_enrolled.html

AB 124 - Applying meal period laws to certain government employees.
http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_0101-0150/ab_124_bill_20070821_amended_sen_v94.html

SB 549 - Mandated bereavement leave.
http://www.leginfo.ca.gov/pub/07-08/bill/sen/sb_0501-0550/sb_549_bill_20070907_enrolled.html

SB 836 - Familial status discrimination.
http://www.leginfo.ca.gov/pub/07-08/bill/sen/sb_0801-0850/sb_836_bill_20070910_enrolled.html

AB 377 - Labor contractors and pay records.
http://www.leginfo.ca.gov/cgi-bin/postquery?bill_number=ab_377&sess=CUR&house=B&search_type=email

SB 727 - Expansion of Paid Family Leave.
http://www.leginfo.ca.gov/pub/07-08/bill/sen/sb_0701-0750/sb_727_bill_20070906_enrolled.html

AB 435- Extending statute of limitations for equal pay claims.
http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_0401-0450/ab_435_bill_20070910_enrolled.html

AB 1043 - Voiding forum selection and choice of law clauses in employment contracts.
http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_1001-1050/ab_1043_bill_20070907_enrolled.html


Still Pending as of this Writing:

AB 1707 - New requirements for personnel files.
http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_1701-1750/ab_1707_bill_20070910_enrolled.html

SB 180 - "Card checks" for agricultural employees seeking union representation.
http://www.leginfo.ca.gov/pub/07-08/bill/sen/sb_0151-0200/sb_180_bill_20070828_enrolled.html


Finally, here are a bunch of public sector-related bills that the Governor signed last week (thank you, o thank you, state bar labor and employment law section email):

AB 1307 Public employee benefits: supplemental contribution program. http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_1301-1350/ab_1307_bill_20071011_chaptered.pdf

AB 1432 – State teachers' retirement.
http://leginfo.ca.gov/pub/07-08/bill/asm/ab_1401-1450/ab_1432_bill_20071011_chaptered.pdf

SB 901 - State teachers' retirement: postretirement earnings. http://www.leginfo.ca.gov/pub/07-08/bill/sen/sb_0901-0950/sb_901_bill_20070906_enrolled.pdf

AB 246 - County employees' retirement: retirement boards. http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_0201-0250/ab_246_bill_20070904_enrolled.pdf

AB 554 – Public employees: benefits.
http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_0551-0600/ab_554_bill_20070914_enrolled.pdf

AB 754 - Public employees.
http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_0751-0800/ab_754_bill_20070917_enrolled.pdf

AB 756 - Memoranda of understanding: addenda.
http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_0751-0800/ab_756_bill_20070917_enrolled.pdf

AB 757 - Teachers: retirement and employment.
http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_0751-0800/ab_757_bill_20070910_enrolled.pdf

AB 1124 - County employees' retirement.
http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_1101-1150/ab_1124_bill_20070907_enrolled.pdf

AB 1288 - County employees: vision care. http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_1301-1350/ab_1316_bill_20070910_enrolled.pdf

AB 1316 – State teachers' retirement: disability.
http://www.leginfo.ca.gov/cgi-bin/postquery?bill_number=ab_1316&sess=CUR&house=B&author=bass

AB 1317 - Public employees' retirement: executive compensation.
http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_1301-1350/ab_1317_bill_20070918_enrolled.pdf

California Legislature's Season of Autumn Leaves

It's Fall, and the California Legislature's thoughts turn to.... leaves. Not the pretty yellow, orange and rust-colored leaves one finds during fall foliage drives along idyllic country roads, as the cold weather paints a rosy hue on the cheeks of children :::cue the banjo:::
Sorry. A little too much cider.

Anyway, the Vermont legislature thinks of foliage. The California Legislature's thoughts turn to new leaves of absence. The first one signed by Governor Schwarzenegger this year is AB 392. This law is an "urgency" statute, which means it takes effect immediately because of soldiers in Iraq and Afghanistan who will be taking leave.

Under the new law, employers must grant up to 10 days of job-protected, unpaid leave to employees seeking time off when a "spouse" (which under AB 205 includes registered domestic partner) obtains a qualified leave from military conflict. Here is a summary of the provisions:

- The law applies to employers with 25 or more employees;
- The employee seeking leave must inform the employer within 2 days of receiving notice that the soldier will be on leave
- Leave is available only to employees working 20 or more hours per week.
- Qualified leave is limited to employees with spouses who have been deployed to military conflict as defined in the statute. The statute is unclear as to whether guardsmen/women and reservists have to be deployed to the area of conflict like members of the armed services.

This law will be codified at Section 395.10 of the Military and Veterans Code, rather than in the Labor Code where several other leaves appear.

Greg

Court of Appeal's Meal and Break Opinion in Long Awaited Brinker case

....too bad it's unpublished for now.

Meal and break claims have been all the rage in employment law circles. Plaintiffs have alleged in class actions that employers have denied rest breaks, and have not properly "forced" employees to take meal periods that are long enough, early enough, or free enough from duty.

Today, though, the employers won a significant ruling which, if eventually published, could shift some of the momentum.

With respect to rest periods, the court summed up that the trial court should not have granted class certification, and that rest period law is as follows:

Had the court properly determined that (1) employees need be afforded only one 10-minute rest break every four hours "or major fraction thereof" (Cal. Code Regs., tit. 8, § 11050, subd. 12(A)), (2) rest breaks need be afforded in the middle of that four-hour period only when "practicable," and (3) employers are not required to ensure that employees take the rest breaks properly provided to them in accordance with the provisions of IWC Wage Order No. 5, only individual questions would have remained, and the court in the proper exercise of its legal discretion would have denied class certification, with respect to plaintiffs' rest break claims because the trier of fact cannot determine on a class-wide basis whether members of the proposed class of Brinker employees missed rest breaks as a result of a supervisor's coercion or the employee's uncoerced choice to waive such breaks and continue working.

With regard to meal periods, the court clarified the law regarding the timing of meal periods. The court noted employees are entitled to a thirty-minute meal period for each work period of more than five hours per day. That does NOT mean that a second meal period must occur within five hours of the first meal period. That means that if an employee works ten hours, two meal periods must be provided at some time during the shift. There is no such thing, therefore as "early" lunch violations.

The court, however, punted on the most eagerly awaited issue: is an employer required to "ensure" the employees take their meal periods, or must they simply be "offered" like rest periods? The court of appeal refused to decide the issue until the trial court had the opportunity to do so. Therefore, we must continue to wait and see on that issue. The federal district court in White v. Starbucks Corp. (N.D.Cal. July 2, 2007) 497 F.Supp.2d 1080 has held that meal periods merely have to be offered, but that decision is not binding on California courts.

It is unclear why the Court of Appeal chose not to publish this decision. However, I believe the defense bar may seek an order of publication. Yeah, I know, bold prediction.

The opinion is in Brinker Restaurant Corp. v. Superior Court.

DGV

California Court of Appeal Limits Administrative Exemption

Insurance claims adjusters were ruled "non-exempt" under the administrative exemption in what is known as the Bell cases. See Bell v. Farmers Ins. Exchange (2001) 87 Cal.App.4th 805; Bell v. Farmers Ins. Exchange (2004) 115 Cal.App.4th 715. So, in Harris v. Superior Court, the Court of Appeal found that Liberty Mutual claims adjusters likewise were non-exempt.

The headline here, though, is that the Court thoroughly analyzed the administrative test, and explained the limited applicability of the administrative test in California (although the court claimed it was relying on federal regulations). The two key points are these:

- exempt administrative work must involve policy making, higher level, office work. The court sets a high bar here, rendering lower level employees in traditionally administrative

- "production" work - by definition not administrative - does not have to involve actually producing the product or service that the employer sells. Rather, even office work is "production" when it is simply carrying out policies.

This decision should be closely examined when classifying employees in back-office departments such as MIS, accounting, and maybe even HR. The exemption may be tougher to prove for lower-level administrative jobs in the more vertical, larger organizations.

DGV

Supplemental Disability Pay Does Not Affect Salary Basis Test

Generous employers sometimes supplement California's state disability insurance coverage with salary continuation programs. No good deed goes unpunished? Not this time. Employees brought a class action alleging unpaid overtime. They claimed they were misclassified as "exempt" because the employer's salary replacement program resulted in impermissible "deductions" from their salary during the initial week of "disability." The complaints were that the salary continuation program did not fully replace salary, that payments were delayed because the employer required the employee to present the SDI check so the payments could be coordinated, and other perceived flaws. The legal issue was whether the salaries could be reduced under the "bona fide" disability plan exception to the salary basis required.
The Court of Appeal turned back all of the plaintiffs' arguments. The Court also rejected the DLSE's enforcement position that reliance on SDI was improper under the "bona fide" plan exception.
The case is Sumuel v. ADVO, Inc. and the opinion is here.

Applicant Waives ADA claim in Employment Application

Christine Nilsson applied for a job as a police officer in Mesa, Arizona. As part of the application process, she had to undergo a detailed background investigation. she signed a waiver regarding this investigation:

Nilsson agreed to “waive all [her] legal rights and causes of action to the extent that the Mesa, Arizona, Police Department investigation (for purposes of evaluating [her] suitability or application for employment) . . . violate[d] or infringe[d] upon . . . [her] legal rights and causes of action . . .” In addition, Nilsson: [A]gree[d] to hold harmless and release from liability under any and all possible causes of legal action the City of Mesa, Arizona Police Department, their officers, agents, and employees for any statements, acts, or omissions in the course of the investigation into [her] background, employment history, health, family, personal habits and reputation.

Ultimately, Nilsson was denied employment allegedly based on a negative psychological evaluation. She sued under the ADA, Title VII (for retaliation) and state law.

The Court of Appeals held that the ADA claim, based on denial of employment due to a mental disability, was barred by the release. However, the court said that the Title VII claim was different. The release covered the entire background and investigation process, but did not cover the interview. Nilsson claims Mesa asked improper questions about a prior EEOC proceeding. That claim was permitted to proceed to the merits. (The Ninth Circuit then said summary judgment was properly granted).

Of note, the opinion does not discuss the Fair Credit Reporting Act and its potential effect on the case. In addition, the Court first analyzed whether Nilsson knowingly and voluntarily released the claims. The Court found Nilsson had the necessary education and experience to sign the release. The release also advised her to consult with counsel if she did not understand it.

So, at least where the employee is sufficiently sophisticated to understand a release, a relatively simple release in an application bars claims based on pre-hire background checks, medical examinations, etc.

The case is Nilsson v. City of Mesa.

DGV

California Court: Alleged Independent Contractor Drivers Are Employees

In Estrada v. Fedex Ground Package System, Inc., the Court of Appeal upheld the trial court's determination that certain FedEx drivers were mis-classified as independent contractors.

There's a lot more to the court's analysis, but this pretty much sums up the court's discussion of the independent contractor issue:

FedEx’s control over every exquisite detail of the drivers’ performance, including the color of their socks and the style of their hair, supports the trial court’s onclusion that the drivers are employees, not independent contractors.

The Court of Appeal also denied FedEx's appeal of the class certification order. The Court concisely summarized the requirements:

A class action requires an ascertainable class with a well-defined community of
interest among its members. Community of interest, in turn, requires that common questions of law or fact predominate, and that class representatives (who must be able to adequately represent the class) have claims typical of the class. The class is ascertainable if it identifies a group of unnamed plaintiffs by describing a set of common characteristics sufficient to allow a member of that group to identify himself as having a right to recover based on the description.

Finally, the Court of Appeal ruled once and for all that employers may require employees to use their own vehicles as part of the job. (Of course, the employee must be reimbursed for the expenses associated with using the vehicle).

DGV

Settlement of Wage Claim under FLSA

The Fair Labor Standards Act permits settlements of claims for unpaid wages under the supervision of the Secretary of Labor. The Secretary has a form, under which employees acknowledge receipt of all wages due them and release all claims under the Fair Labor Standards Act arising from the failure to pay those wages.

In Dent v. Cox Communications Las Vegas, Inc., the employees signed U.S. DOL approved releases. Then Dent sued for more unpaid wages, but for a time period preceding the dates included in the DOL release. The Ninth Circuit held that the release covered only the payroll periods expressly covered in the DOL release and Dent was free to pursue earlier claims.

WARN Act Inapplicable to Remote Employees

The WARN Act normally applies to layoffs or plant closings at "single" sites of employment. There are detailed regulations on what constitutes a "single site." These regulations extend the "single site" concept to mobile workers (such as traveling salespersons), who receive work assignments and report to management at a "headquarters." These mobile employees may be covered by WARN under those special circumstances.

In Bader v. Northern Line Layers Inc., the workers were at construction sites in several states. Headquarters was in Billings, MT. The workers argued that because the construction assignments were temporary, and the Billings office handled all accounting, billing, payroll, and other administrative functions, they were actually employed in Billings for WARN purposes. The Ninth Circuit disagreed. The court noted that work assignments were made locally. Most of the employees were not Montana residents. The supervision was located locally, not in Montana, etc.

WARN is tricky and each layoff or shutdown needs to be closely examined in light of the applicable regulations and case law.

Pending California Bills

Every year at this time, the California Legislature sends a raft of proposed laws to the Governor for signature or veto. Here is a fairly comprehensive list of the employment-related bills awaiting action by Governor Schwarzenegger this year. Click the link for the text of the bill.

We of course will analyze the ones that are passed in future posts. We also will cover all the new laws and major court decisions at our annual legal update, held in Sacramento and San Francisco later this year. Get details here.

AB 504 - Lockouts - fines for employers

http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_0501-0550/ab_504_bill_20070910_enrolled.html

AB 622 - Independent Contractors

http://www.leginfo.ca.gov/pub/07-08/bill/sen/sb_0601-0650/sb_622_bill_20070906_amended_asm_v95.html

SB 936 - Workers' Compensation benefits

http://www.leginfo.ca.gov/pub/07-08/bill/sen/sb_0901-0950/sb_936_bill_20070913_enrolled.html

SB 942 - (More) Workers' Compensation benefits

http://www.leginfo.ca.gov/pub/07-08/bill/sen/sb_0901-0950/sb_942_bill_20070906_amended_asm_v94.html

AB 8 - Health care tax on employers to fund universal health care

http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_0001-0050/ab_8_bill_20070910_enrolled.html

AB 124 - applying meal period laws to certain government employees

http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_0101-0150/ab_124_bill_20070821_amended_sen_v94.html


SB 549 - Mandated bereavement leave

http://www.leginfo.ca.gov/pub/07-08/bill/sen/sb_0501-0550/sb_549_bill_20070907_enrolled.html

SB 836 - Familial status discrimination

http://www.leginfo.ca.gov/pub/07-08/bill/sen/sb_0801-0850/sb_836_bill_20070910_enrolled.html

AB 377 - Labor contractors and pay records

http://www.leginfo.ca.gov/cgi-bin/postquery?bill_number=ab_377&sess=CUR&house=B&search_type=email

SB 727 - Expansion of Paid Family Leave

http://www.leginfo.ca.gov/pub/07-08/bill/sen/sb_0701-0750/sb_727_bill_20070906_enrolled.html

AB 1707 - new requirements for personnel files

http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_1701-1750/ab_1707_bill_20070910_enrolled.html

SB 180 - "card checks" for agricultural employees seeking union representation

http://www.leginfo.ca.gov/pub/07-08/bill/sen/sb_0151-0200/sb_180_bill_20070828_enrolled.html

California Supreme Court: Class Action Waiver in Arbitration Clause Void in Overtime Case; Opt-Outs Not a Shield

Well, the California Supreme Court giveth and it taketh away. If you enjoyed the Court's decisions in the Ralph's and Green cases issued last week, you might have been looking forward to another employer victory in the Gentry opinion. Not so much.

In fact, not at all. The California Supreme Court in another 4-3 split, decided that class action waivers may be deemed invalid. Trial courts must decide, case by case, whether a class action waiver is void according to these criteria:

when it is alleged that an employer has systematically denied proper overtime pay to a class of employees and a class action is requested notwithstanding an arbitration agreement that contains a class arbitration waiver, the trial court must consider the factors discussed above:

- the modest size of the potential individual recovery,

- the potential for retaliation against members of the class,

- the fact that absent members of the class may be ill informed about their rights, and

- other real world obstacles to the vindication of class members’ right to overtime pay through individual arbitration.

If it concludes, based on these factors, that a class arbitration is likely to be a significantly more effective practical means of vindicating the rights of the affected employees than individual
litigation or arbitration, and finds that the disallowance of the class action will likely lead to a less comprehensive enforcement of overtime laws for the employees alleged to be affected by the employer’s violations, it must invalidate the class arbitration waiver to ensure that these employees can “vindicate [their] unwaivable rights in an arbitration forum.”

The above may be the headline, but the rest of the opinion is worse. Disagreeing with the Ninth Circuit, the court decided that Circuit City's "opt-out" provision did not save an arbitration agreement from procedural unconscionability. Here the Court frankly just made up a rationale for why an employee who has a 30 day period to choose whether to sign an agreement actually may not have any choice. The Court had to do this, or its unconscionability jurisprudence would not apply simply because the employer gave the employee a meaningful chance to either sign or not sign the arbitration agreement.

Justices Moreno, Werdegar, Kennard, and ... Chief Justice George made up the majority. Justices Baxter, Corrigan and Chin joined in the dissent.

Wow, this is another blow to using arbitration agreements in employment cases. It's almost at the "why bother" stage.

The case is Gentry v. Superior Court (Circuit City Stores)

DGV

Virtual Entrepreneurship in Second Life: the New Pioneers

I just attended the Second Life Community Convention in Chicago and I’m happy to say that the pioneering spirit at the edge of the electronic frontier is not only still alive and well, it is thriving in the form of virtual entrepreneurs.

For those of you who haven’t heard of it, Second Life is an example of a metaverse – a virtual 3-d world that exists only out on the Internet. It’s been around for a few years now and over the last year there has been a lot of press (both positive and negative) about it in the last twelve months – though I think for the general population the idea of living an entire virtual life on the internet, complete with virtual businesses, virtual art, virtual relationships, is still a fairly fringe concept. Unlike many “games” there isn’t necessarily a game-plot in second life – i.e. your goal is not to kill monsters, but rather to live a virtual life (which might include killing monsters if that’s your thing). There are no points – but there are dollars – which you can make, buy, sell, and you can spend – just like in the real world. You can join and create both formal and informal social networks, or just make friends and socialize.

My mission was to find entrepreneurs in the virtual world and to assess the possibilites of starting and growing businesses based on this virtual world. What I found was that the convention and the businesses I ran across remind me alot of how the Web was perceived in 1995/1996 - a small but dedicated group of initial pioneers who are working on the cuttng edge but are still relatively low key.

There is no single event yet which marks the beginning of a “mad rush” into this new frontier by the investment community, like the Netscape IPO represented in the nineties. One candidate is the first time a virtual person – Anshe Chung – appeared on the cover of Business Week as a real estate mogul who was eventually worth at least a million US dollars but who owned no real land outside of Second Life, a lot of eyes (and eyebrows) were raised. For lots of investors, this was the first time they had even heard of Second Life.

In fact, despite this rush of users, the term pioneer is still a very good one for a vrtual entreprenuer – most businesses I encountered were small, doing pioneering work building new gadgets, location, clothing, etc. out in the virtual world. The landscape is evolving all the time – as users add new islands, new shops, new cafes, new dance clubs, etc. It still reminds me a little of the Old West – a relatively open landscape that is being shaped by dreamers and innovators that will eventually become something all of us have to pay attention to. There are now lots of more settlers, but the character of the place hasn't quite changed yet.

Altough there has been a large rush of users in recent months, the total number of registered users is still pretty small when compared to users of the web, or of social networking applications like MySpace or Facebook. While these social networking companies have been the poster boys for the “web 2.0” hype, I might argue that the real pioneering work of inventing a new kind of Internet which is used for collaboration, social interaction, education, marketing and business is going on virtual worlds like Second Life. This is “internet 2.0” – and may someday be more important than static web pages.

So here are some of the things that I found:

• Today, most transactions within second life are small by real-life standards. This is because they are conducted with Linden dollars, and the exchange rate is 266 linden dollars for each US dollars. However, the fact that there is an easy to find exchange rate and as the sheer volume of transactions adds up, more and more transactions within second life can add up to real money. Entrepreneurship is alive and on the rise. Today, there are a very large number of shops and vendors within second life who are selling and trading in virtual goods. Some of these have become well established, but many are new and just scraping by. To date, some of these kinds of businesses are making enough money to sustain their owner’s lifestyles but a few are rising beyond that level yet.
  
• The ability to build a community within the virtual world is one of its main strengths. While we talked about web 2.0 communities, the communities and interaction within a 3-d world allow a level of interaction that is unparalleled and so the communities formed tend to be stronger and more intimate than simply email or web based communities.
  
• The real money today and the largest companies in the virtual world are made by “builders” – who take real life corporations and build a presence for them in the virtual world. These projects today range in size form $20K to $100K – which again parallels the cost of establishing web presences a decade ago before it became mainstream.
  Real life companies like IBM are using shared collaborative spaces in Second Life rather than spending the money to go to actual physical locations to collaborate. Real life movies (300, Transformers) and publishers and authors (William Gibson for example) are starting to launch books and do special marketing events within Second Life. Reuters has a presence within second life as well.
  
• While the numbers are still small, the impact of an event in a Second Life can go well beyond the number of people who are actually at the event. For example, a book or movie event may only have 60 people attending in Second Life. That event is then rebroadcast on blogs, vlogs, podcasts, and described on blogs which start extending the reach to many thousands of end users.
  
• Think of the web and the metaverse as co-existing and working together; many applications which require more compl.ex interactions than can be done in second life today (such as the stock exchanges) start with a Second Life transaction, and then take you to web sites to implement the complex business logic. Expect to see more of this.
  
• The metaverses are going through growing pains and not yet mainstream, but given the growth rates they will be soon. The current infrastructure won’t hold up well as the numbers on virtual communities grow like the numbers on the web did.
  
• The amount of time spent by a consumer in Second Life paying attention to new products and spaces is significantly higher than the time spent by a user of the web on a web page or a banner ad. In some case, a Second Life user will spend 20 minutes before they decide whether a shop or a product is right for them – on the web think seconds.
  
• Initially the real opportunity long term may be in leveraging the virtual worlds not simply as a place to sell – but as a place to promote, provide thought leadership, cutting edge music and movies, and educational tools and tying into real products. However as the numbers and dollar volume of transactions grows, expect to hear about more businesses that have limited “real-life” presence at all but are thriving within virtual worlds. Expect that at some point, for certain sectors of the economy, having a presence in a metaverse maybe as important as having a website for your business is today. Remember even 10 years ago that most businesses did not have websites and today it is a requirement in certain industries.
  

While some of the numbers that exist on second life today might look “smallish” to a venture capital and entrepreneurial community that is used to seeing millions of US dollars invested in software and new media companies, my main point is this: Just Wait.

Conclusion: The metaverses today still represent a ground floor opportunity .. .they are still a bit like the wild west in the second half of the nineteenth century, and the World Wide Web in the last decade of the twentieth century. If you’re a pioneer you should be looking at it seriously…

Court of Appeal Rejects Trade Secrets Claim

The Court of Appeal in Yield Dynamics, Inc. v. Tea Systems Corp. undertook a detailed analysis of Yield's claims for misappropriation of trade secrets, asserted against a former employee. The court upheld the trial court's conclusions that Yield had failed to establish (1) the misappropriated items were properly defined as "trade secrets" because there was no independent economic value associated with their secrecy (2) damages. The court also upheld the trial court's decision in favor of the defense on a number of other claims, including breach of contract, fraud, and unfair competition. This case provides a useful roadmap to litigants attempting to establish trade secrets status.

DGV

California Supreme Court: Plaintiffs Must Prove They Are Qualified Individuals With Disabilities Under California Law

The federal ADA requires employees to prove as part of their prima facie case that they can perform the essential functions of the job they hold or seek, with or without reasonable accommodation. Put another way, if they can't do the job regardless of accommodation, they cannot claim discrimination under the ADA.
The California FEHA is broader than the ADA in many respects. Lower courts were split on whether the employee had to prove they were qualified - that they could perform essential job functions with or without accommodation. In Green v. State of California, the court of appeal held that employers, not employees, had the burden of proof on this issue. That is, the lower court said that employers must show the employee was NOT able to perform essential job functions with or without any accommodation.
The California Supreme Court, reviewing Green v. California, held that FEHA is analyzed like the ADA, in that employees have the burden of proving they can perform their essential job functions with or without reasonable accommodation.

DGV

California Supremes: Bonuses Legal in California!

When I am asked to give examples of California employment law that makes people in other states smack their foreheads, wage and hour law always provides the best ones. In recent years, courts held that profit-based bonus plans were illegal in California because they took into account costs such as workers' compensation premiums and breakage, merely within the FORMULA used in calculating a profit-based bonus. Pity me. When I advise out-of-state employers on this issue, I usually have to hold the phone six inches from my ear.

No more. A sliver of sanity was restored today. The California Supreme Court decided in PRACHASAISORADEJ v. RALPHS GROCERY COMPANY, INC., that such bonuses are perfectly legal. That is, employers no longer have to fear giving extra compensation to employees based on profitability. The essence of the Court's decision:

The Plan was not illegal, we conclude, simply because, pursuant to normal concepts of profitability, ordinary business expenses, such as storewide workers’ compensation costs, and storewide cash and merchandise losses, were figured in, along with such other store expenses as the electric bill and the cost of goods sold, to determine the store’s profit, upon which the supplementary incentive compensation payments were calculated. By doing so, Ralphs did not illegally shift those costs to employees. After fully absorbing the expenses at issue, Ralphs simply determined what remained as profits to share with its eligible employees in addition to their normal wages.

Amen.

California Labor Commissioner to Hold Public Forum on Meal and Rest Periods

The DLSE has scheduled a "public forum" on August 2, 2007 in Sacramento. The details are here.

The purpose of the meeting is to allow members of the public "to inform the newly appointed California State Labor Commissioner, Angela Bradstreet, of their concerns regarding how recent changes to the meal and rest period enforcement practices required by legislation and recent court decisions has impacted their daily work-lives."

Alternatively, the Labor Commissioner will accept written comments by August 31, 2007.

DGV

Final California AB1825 Sexual Harassment Training Regulations (Really)

The Fair Employment and Housing Commission reports here that the California Office of Administrative Law has approved the final AB 1825 sexual harassment training regulations.
Here are the regulations.

They will become effective on or about August 17. Employers have until then to ensure that their training programs are in compliance with the specifics. There are provisions that may require employers' attention. Here are a few:

1. Electronic learning -

An employer utilizing a webinar for its supervisors must document and demonstrate that each supervisor who was not physically present in the same room as the trainer nonetheless attended the entire training and actively participated with the training’s interactive content, discussion questions, hypothetical scenarios, quizzes or tests, and activities. The webinar must provide the supervisors an opportunity to ask questions, to have them answered and otherwise to seek guidance and assistance.

2. Who are qualified trainers -

(A) A trainer shall be one or more of the following:
1. "Attorneys" admitted for two or more years to the bar of any state in the United States and whose practice includes employment law under the Fair Employment and Housing Act and/or Title VII of the federal Civil Rights Act of 1964, or
2. "Human resource professionals" or "harassment prevention consultants" working as employees or independent contractors with a minimum of two or more years of
practical experience in one or more of the following: a. designing or conducting
discrimination, retaliation and sexual harassment prevention training; b. responding to sexual harassment complaints or other discrimination complaints; c. conducting investigations of sexual harassment complaints; or d. advising employers or employees regarding discrimination, retaliation and sexual harassment prevention, or
3. "Professors or instructors" in law schools, colleges or universities who have a post-graduate degree or California teaching credential and either 20 instruction hours or two or more years of experience in a law school, college or university teaching about employment law under the Fair Employment and Housing Act and/or Title VII of the federal Civil Rights Act of 1964.

(B) Individuals who do not meet the qualifications of a trainer as an attorney, human resource professional, harassment prevention consultant, professor or instructor because they lack the requisite years of experience may team teach with a trainer in classroom or webinar trainings provided that the trainer supervises these individuals and the trainer is available throughout the training to answer questions from training attendees.

Documentation -

(2) Documentation of Training. An employer shall keep documentation of the training provided its employees under this section to track compliance, including the name supervisory employee trained, the date of training, the type of training, and the name the training provider and shall retain the records for a minimum of two years.

Small employers crossing the 50 employee threshold - six months to do the training

Content - review your training programs carefully to ensure all the elements care covered.

Too much trouble? Well, I have a suggestion [shameless plug alert!]:

http://shawvalenza.com/about_training.php

DGV

9th Circuit Sets Low Bar on Employer Liability for Employees' Conduct

Poland was with the Customs Service in Denver. Hillberry was his supervisor. Hillberry demonstrated some anti-age animus towards Poland. Poland at some point filed a charge of discrimination. Later, Hillberry requested an administrative review of Poland's management of subordinates. The reviewers found that Poland engaged in unprofessional conduct as a manager. As a result, Poland was demoted to a non-supervisory job and transferred to Vienna Virginia.
Poland accepted the transfer, but retired 3 years before the mandatory retirement age.

Poland sued for, among other things, retaliation and constructive discharge. He said that the administrative review was retaliation for his age discrimination claim. The trial court awarded damages for constructive discharge and retaliation.

The Ninth Circuit reversed on the constructive discharge claim. 2/3 of the judges said that Poland did not establish his working conditions were intolerable merely because he was demoted and transferred. Among other things, the court noted that Poland worked 5 months in Virginia, contradicting his argument the transfer created intolerable conditions.

The really significant part of the case, though, is the Ninth Circuit's stance on liability for actions taken by innocent superiors on the basis of lower level employees' complaints. Hillberry did instigate the investigation into Poland's conduct, true. But the court did not rely on that alone and said that Hillberry's referral alone would not have been enough. Rather, the court focused on the fact that the investigators had access to Hillberry's notes, that Hillberry gave the list of witnesses to the investigators, and that the panel relied on performance reviews that had increased in frequency after Poland filed his first discrimination complaint.

In upholding Poland's claim, the court announced the rule for holding employers liable for negative, non-discriminatory actions taken on the basis of an employee's complaint that is tainted by bias:

We hold that if a subordinate, in response to a plaintiff’s protected activity, sets in motion a proceeding by an independent decisionmaker that leads to an adverse employment action, the subordinate’s bias is imputed to the employer if the plaintiff can prove that the allegedly independent adverse employment decision was not actually independent because the biased subordinate influenced or was involved in the decision or decisionmaking process.

The court added that if the investigation is "entirely independent" of the subordinate's influence, the animus of the retaliating employee is not imputed to the employer.

So, if an employee engages in protected activity by complaining against a manager, that manager cannot be the impetus for negative treatment against the complaining employee, unless an "entirely independent" investigation finds the negative treatment is justified. Otherwise, the odds of a retaliation finding are very high.

The case is Poland v. Chertoff. Opinion is here.

More Employment Law Articles

Wondering what to read at the beach this summer? Well, we've been busy writing articles.
Here are links to some of the recent ones. Wear sunscreen in case you fall asleep.

WORKPLACE BULLYING AND THE FUTURE OF THE “EQUAL OPPORTUNITY HARASSER” By Jennifer Brown Shaw and Becki Graham

ENFORCING NON-COMPETE AGREEMENTS IN CALIFORNIA AFTER ADVANCED BIONICS V. MEDTRONIC
By D. Gregory Valenza

INDEPENDENT CONTRACTORS: A DYING BREED?
By D. Gregory Valenza

FREE SPEECH AND ENGLISH-ONLY POLICIES IN THE WORKPLACE
By Jennifer Brown Shaw and Matthew J. Norfleet

DGV

EEOC Revises Age Discrimination Regulations

The Equal Employment Opportunity Commission has revised its regulations regarding enforcement of the Age Discrimination in Employment Act. The text of the affected regulations as revised is here. The purpose of the revisions is to conform them with the U.S. Supreme Court's decision in General Dynamics Land System, Inc. v. Cline, 540 U.S. 581 (2004). There, the Supreme Court held that the ADEA prohibits only age discrimination against employees that are older than there comparators. That means that an employee over 40 cannot complain that an older employee was favored over him or her, even though the over-40 employee is covered by ADEA.
The new text of the regulation makes clear:

Favoring an older individual over a younger individual because of age is not unlawful discrimination under the ADEA, even if the younger individual is at least 40 years old. However, the ADEA does not require employers to prefer older individuals and does not affect applicable state, municipal, or local laws that prohibit such preferences.

U.S. Supreme Court Roundup 2006-2007

Here is our article summarizing the Supreme Court's labor and employment law decisions during the 2006 Term. We also note the three pending cases that will be addressed next Term, beginning in October 2007.

Greg

California Supreme Court: CEO's Malicious Prosecution Action OK

Sometimes plaintiffs and their lawyers like to sue the CEO or another high level executive for what they call "in terrorem" effect. You know, it's an attention getter. Other times individual defendants are added to defeat the possibility of federal court jurisdiction.

They say, though, if you go for the king, make sure you kill him. Because if you don't, he has the resources to sue you all the way to the Supreme Court.

Thomas Siebel is one such CEO. Debra Christoffers sued him and Siebel Systems for a variety of claims, many of which may not be asserted against individual managers as a matter of settled law. After Mr. Siebel won on the claims asserted against him as an individual, he sued Christoffers' attorneys, E. Rick Buell II and Carol L. Mittlesteadt for malicious prosecution. The trial court threw the case out. The court of appeal reinstated Siebel's case.

The complication here was that all parties settled Christoffers' underlying lawsuit and the cross-actions while that suit was on appeal. Mittlesteadt therefore argued that Mr. Siebel could not sue for malicious prosecution because he did not receive a "favorable" judgment in the underlying case.

The Supreme Court, 7-0, decided Mr. Siebel was free to proceed on his malicious prosecution claim even though the parties settled the underlying lawsuit. The opinion is here. The case is Siebel v. Mittlesteadt.

Those plaintiff attorneys who sue individual defendants based on frivolous legal theories may take away something from this decision. To be honest, in my experience, most plaintiffs' lawyers are more professional than that.

Greg

New (Federal) Minimum Wage Poster

New federal minimum wage? New federal minimum wage poster! And it's a beauty. Here.
Your current FLSA minimum wage poster is good through July 24, 2007.

DGV