Court of Appeal: Employee Must Initiate Interactive Process

Tanya Milan worked for the city of Holtville's water treatment plant. After a work-related injury, she began a leave of absence. During the leave, her workers' compensation doctor decided she would not be able to perform her duties. She never requested an accommodation or contacted her employer to state her intention to return to work. Instead, she accepted retraining benefits from the city's workers' compensation administrator and began taking courses for a new career.

The trial court awarded damages. The court felt that when the employee's doctor opined she was unable to do her job, that triggered the city's obligation to accommodate her.

However, on appeal, the court reversed. The court noted that the claim for failure to participate in an interactive process requires the employee to initiate the process:

Section 12940, subdivision (n), requires that an employer "engage in a timely, good faith, interactive process with the employee or applicant to determine effective reasonable accommodations, if any, in response to a request for reasonable accommodation by an employee or applicant with a known physical or mental disability or known medical condition." (Italics added.)

* * *

Importantly, by its terms section 12940 subdivision (n) requires that the employee initiate the process. (Gelfo v. Lockheed Martin Corp., supra, 140 Cal.App.4th at p. 62, fn. 22.) On the other hand, "no magic words are necessary, and the obligation arises once the employer becomes aware of the need to consider an accommodation. Each party must participate in good faith, undertake reasonable efforts to communicate its concerns, and make available to the other information which is available, or more accessible, to one party. Liability hinges on the objective circumstances surrounding the parties' breakdown in communication, and responsibility for the breakdown lies with the party who fails to participate in good faith."

Here is the money quote:

In short, where, as here, an employer has not received any communication from an employee over a lengthy period of time, and after the employee has been given notice of the employer's determination the employee is not fit, an employer is not required by section 12940, subdivision (n), to initiate any discussion of accommodations. Imposition of such a duty under those circumstances would contradict the express terms of the statute which requires that the employee initiate the interactive process.

Although this case does not require it, from a preventive standpoint, it is important to document attempts to check in with employees on long term leave. Employers should also ensure it has policies requiring employees to communicate periodically regarding their status and intentions. By doing so, that bolsters the argument that the employee's failure to communicate demonstrates a lack of intention to engage in an interactive process or request accommodation.

The case is Milan v. City of Holtville and the opinion is here.

Court of Appeal Approves Nordstrom Class Settlement

Nordstrom employees filed a class action challenging a commission plan. The parties settled for nearly $9 million in cash and vouchers, and Nordstrom agreed to make changes to its commission plans.

One employee filed a valid objection, which the trial court overruled. The trial court then approved the settlement as "fair, adequate and reasonable." The objector, Kellie Taylor, appealed.

Taylor's objection primarily went to the contention that the plaintiff's claims were stronger than what the settlement justified. The court evaluated the strength of the commission claims and found Nordstrom had a number of good faith defenses to whether its commission plan was faulty. This case will be helpful in providing an overview of commission plan law. For example, the court rejected the notion that the parties' allocation of $0 to PAGA and waiting time penalties was unreasonable:

There is no willful failure to pay wages if the employer and employee have a good faith dispute as to whether and when the wages were due. (Amaral v. Cintas
Corp. No. 2 (2008) 163 Cal.App.4th 1157, 1201-1202.)

The court then explored the good faith basis for the dispute. In doing so, the court summarized cases discussing commission plans and their validity:

The right to commission wages is subject to the employment contract between an employer and employee, and Nordstrom calculated and paid its employees’ commission wages in accord with its written commission agreements with its employees. “It is undisputed that commissions are ‘wages,’ and thus that plaintiff’s claim for commissions falls within the terms of Labor Code sections 2926 and 206. [Citations.] However, for purposes of enforcing the provisions of the Labor Code, ‘[t]he right of a salesperson or any other person to a commission depends on the terms of the contract for compensation.’ [Citations.] Accordingly, plaintiff’s right to commissions ‘must be governed by the provisions of the [employment agreement].’ [Citation.] We have already concluded that, pursuant to the plain language of the written employment agreement, plaintiff was not entitled to any further commissions after he was terminated. Accordingly, defendant’s failure to pay such commissions cannot constitute a violation of the Labor Code.” (Nein v. HostPro, Inc. (2009) 174 Cal.App.4th 833, 853, fn. omitted; see also Div. of Lab. Stds. Enforcement, Enforcement Policies and Interpretations Manual (June 2002 Rev.) § 34.3 [“Commission computation is based upon the contract between the employer and the employee”] (DLSE Manual); id., § 34.3.1 [“Computation of commissions frequently relies on such criteria as the date the goods are delivered or the payment is received. Sometimes, the commission of the selling salesperson is subject to reconciliation and chargebacks if the goods are returned. If these conditions are clear and unambiguous, they may be utilized in computing the payment of the
commissions”].)

Good stuff. Then the court discussed payment of commissions when they can be calculated, rather than immediately:

If commissions cannot be calculated as of the time employment is terminated,
California law permits an employer to pay commissions after the termination date, as long as they are paid once they can be calculated. (DLSE Manual, supra, §§ 4.6, 5.2.5.) California law also permits Nordstrom’s policy of paying commissions based on net sales. (Steinhebel v. Los Angeles Times Communications, LLC (2005) 126 Cal.App.4th 696, 707 [approving process under which “an employer makes advances on commissions to employees and later reconciles any overpayments by deductions from future commissions”]; Hudgins v. Neiman Marcus Group, Inc. (1995) 34 Cal.App.4th 1109, 1122 [central issue decided was that employer could not deduct pro rata share of commissions from all employees for returns where salesperson could not be identified; “[a]s to those items of merchandise the customer decides to keep, the sales associate has clearly earned his or her commission at the moment the sales documents are completed and the customer takes possession of the purchased items. As to identified returns, the sale is reversed and the individual sales associate is required to return the commission because his or her sale was rescinded”], italics added.)

Taylor also objected to the use of merchandise coupons as partial payment because coupons cannot be used as a substitute for wages under Section 212. The court rejected this argument because the wages were not due and earned. This was a settlement of a disputed claim.

So, the Court approved the settlement. This case appears to throw some cold water on the new trend of objecting to settlements.

The case is Nordstrom Commission Cases and the opinion is here.

U.S. DOL Expands Who Can Take FMLA Leave to Care for a Child

The U.S. Department of Labor is busy writing new "interpretations" of the law, rather than promulgating regulations through the normal process. In their third effort, the DOL has decided to explain who is eligible to take Family and Medical Leave under the FMLA to care for a "son" or "daughter."

It is true that the FMLA and its regulations permit leave by employees who are not biological parents when they stand "in loco parentis." But what is "in loco parentis"? Well, the statute, the courts, and the DOL's own regulations have defined the term before. The DOL cited some of the interpretations in its letter:

In loco parentis is commonly understood to refer to “a person who has put himself in the situation of a lawful parent by assuming the obligations incident to the parental relation without going through the formalities necessary to legal adoption. It embodies the two ideas of assuming the parental status and discharging the parental duties.” . . . “The key in determining whether the relationship of in loco parentis is established is found in the intention of the person allegedly in loco parentis to assume the status of a parent toward the child. The intent to assume such parental status can be inferred from the acts of the parties.” . . . Courts have enumerated factors to be considered in determining in loco parentis status; these factors include the age of the child; the degree to which the child is dependent on the person claiming to be tanding in loco parentis; the amount of support, if any, provided; and the extent to
which duties commonly associated with parenthood are exercised.

After reciting these definitions, the DOL goes on to say in its letter: "The FMLA regulations define in loco parentis as including those with day-to-day responsibilities to care for and financially support a child. 29 C.F.R. § 825.122(c)(3). . . .

OK. But then, they say:

It is the Administrator’s interpretation that the regulations do not require an
employee who intends to assume the responsibilities of a parent to establish that he or she provides both day-to-day care and financial support in order to be found to stand in loco parentis to a child. For example, where an employee provides day-to-day care for his or her unmarried partner’s child (with whom there is no legal or biological relationship) but does not financially support the child, the employee could be considered to stand in loco parentis to the child and therefore be entitled to FMLA leave to care for the child if the child had a serious health condition. The same principles apply to leave for the birth of a child and to bond with a child within the first 12 months following birth or placement.

Huh? It may be news to parents that they can "intend to assume the responsibilities of a parent," without providing "financial support." It may also be news to the person who wrote the sentence right before the language quoted above, since the word "and" connects "day-to-day responsibilities"and "financially support."

And that last part of the above quote suggests that boyfriends can take "leave for the birth" of a girlfriend's child and for "bonding"? That sort of undercuts the entire statute and regulatory scheme. Why include "parent" in the statute at all when just about anyone can qualify as standing "in loco parentis?"

Here's another interesting quote from the DOL attempting to explain its interpretation:

Neither the statute nor the regulations restrict the number of parents a child may have under the FMLA. For example, where a child’s biological parents divorce, and each parent remarries, the child will be the “son or daughter” of both the biological parents and the stepparents and all four adults would have equal rights to take FMLA leave to care for the child.

If I read this right, any step-parent automatically can take FMLA leave even when the step-parent does not indicate any interest in acting as the parent of the other spouse's biological child from a previous relationship? What if the divorced parents meet their soul mates and choose not to remarry? Is that enough to confer "in loco parentis" status on the non-biological soul mate?

Can it be that anyone with a significant other who has a child can grab some job-protected leave, ostensibly to care for the child? Of course not. The DOL has stringent verificiation requirements to ensure that only persons really and truly standing in loco parentis can have leave:

Where an employer has questions about whether an employee’s relationship to a child is covered under FMLA, the employer may require the employee to provide
reasonable documentation or statement of the family relationship. A simple statement asserting that the requisite family relationship exists is all that is needed in situations such as in loco parentis where there is no legal or biological relationship. See 29 C.F.R. § 825.122(j); 73 Fed. Reg. 67,952 (Nov. 17, 2008).

OK, not so stringent. There is no documentation requirement other than a "simple statement": "My girlfriend has a child who has a serious health condition and I need leave to take care of her." No chance for abuse there.

If you sense I'm annoyed, it's not about whether bona fide FMLA leave is important for parents and children. The issue is that some may be tempted to seek refuge in taking FMLA leave for no reason other than to shield themselves from discipline. Yes, this has actually happened. The DOL has opened up a gaping hole permitting abuse of a well-intentioned law, but without issuing regulations and without persuading Congress to amend the statute.

Administrator Interpretation 2010-3 is here.
DGV

U.S. Supreme Court Declines to Take Up San Francisco Healthcare Law

Back in 2008, the Ninth Circuit Court of Appeals held that San Francisco's Healthcare Security Ordinance was not preempted by ERISA. We posted on that here. Fast-forward (chuckle) to yesterday, when the U.S. Supreme Court refused the Golden Gate Restaurant Association's petition for review. So, looks like those pesky surcharges disclosed at the bottom of menus throughout San Francisco are here to stay.

DGV

U.S. Supreme Court Issues Two More Arbitration Decisions

The U.S. Supreme Court closed out its employment cases for the 2010 Term with two arbitration decisions. The Court held in one opinion that the arbitrator must resolve an arbitrability issue. The Court reached the opposite result in the other. Here's what happened.

In Granite Rock Co. v. Teamsters, the company and its union agreed on a new contract. But the Company would not agree to hold the union harmless for strike-related damage. The union continued to strike. The company argued the strike violated the "no-strike" clause in the parties' new contract, which also contained an arbitration clause. The union believed the agreement was not properly ratified and, therefore, not a contract when the strike occurred.

Granite sued the Teamsters in federal court alleging breach of contract against the local union, and interference with contract against the International. District court allowed a jury to decide when the agreement was ratified - which determined if the strike was arbitrated or resolved in court. Once the jury decided the agreement was properly ratified, the district court sent the case to arbitration over the merits of the breach of contract issue. The Ninth Circuit, though, held that the arbitrator should have decided the ratification issue.

The Supreme Court held the district court got it right. The court was required to decide if the parties agreed to arbitrate the breach of the no-strike clause issue, because courts enforce arbitration only to the extent the parties agreed. The date the contract was ratified amounted to a dispute over the applicability of arbitration to the dispute. If ratified, there would be a valid contract. Here's how the court put it:

a court may order arbitration of a particular dispute only where the court is satisfied that the parties agreed to arbitrate that dispute. See First Options, supra, at 943; AT&T Technologies, supra, at 648−649. To satisfy itself that such agreement exists, the court must resolve any issue that calls into question the formation or applicability of the specific arbitration clause that a party seeks to have the court enforce. See, e.g., Rent-A-Center, West, Inc. v. Jackson, ante, at 4−6 (opinion of SCALIA, J.). Where there is no provision validly committing them to an arbitrator, see ante, at 7, these issues typically concern the scope of the arbitration clause and its enforceability. In addition, these issues always include whether the clause was agreed to, and may include when that agreement was formed.

So, the court, not the arbitrator, had to decide when the contract was ratified.

This decision was 7-2, authored by Justice Thomas. Justices Sotomayor and Stevens dissented from this part of the opinion, but joined in the unanimous decision that there is no claim for tortious interference under federal law.

The opinion in Granite Rock Co. v. Teamsters is here.

Just a couple of days earlier, though, the Court held in Rent-a-Center West, Inc. v. Jackson that the arbitrator must decide arbitrability, albeit in a different context. Granite was decided under Section 301 of the LMRA. Rent-a-Center is a Federal Arbitration Act case. But the Court cites FAA decisions in Granite, too. So, the analysis is probably the same.

Jackson sued for employment discrimination in Nevada federal court. Rent-a-Center sought to compel arbitration. Jackson argued the agreement was "unconscionable" under Nevada law, which is a defense to the enforceability of the arbitration agreement.

But the arbitration agreement provided: "[t]he Arbitrator, and not any federal, state, or local court or agency, shall have exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability or formation of this Agreement including, but not limited to any claim that all or any part of this Agreement is void or voidable."

So, unlike in Granite, the parties' agreement expressly gave the arbitrator the authority to determine whether the agreement was void, or enforceable. The Court held that, given the parties' "clear and unmistakable" agreement, any dispute over this provision was itself a question for the arbitrator to resolve:

The delegation provision is an agreement to arbitrate threshold issues concerning the arbitration agreement. We have recognized that parties can agree to arbitrate"gateway" questions of "arbitrability," such as whether the parties have agreed to arbitrate or whether their agreement covers a particular controversy.

The Court then analyzed whether the FAA permitted the court to permit the arbitrator to decide if the agreement was unconscionable. The Court held that the FAA did permit this. In particular, the court decided that Jackson alleged the entire arbitration agreement was invalid, not exclusively the provision conferring on the arbitrator the right to decide unconscionability. Had Jackson been able to argue this delegation provision alone was unconscionable (and how would he do that?) the court may have come down a different way.

Therefore, Jackson's challenge to the arbitration agreement as "unconscionable" must be decided by the arbitrator.

If arbitration agreements reserve the power to decide unconscionability to the arbitrator, that will certainly affect courts' power to decide "unconscionability" claims by plaintiffs seeking to avoid arbitration agreements.

This one was 5-4. The dissent argued the majority simply got it wrong, synthesizing the law as follows:

questions related to the validity of an arbitration agreement are usually matters for a court to resolve before it refers a dispute to arbitration. But questions of arbitrability may go to the arbitrator in two instances: (1) when the parties have demonstrated, clearly and unmistakably, that it is their intent to do so; or (2) when the validity of an arbitration agreement depends exclusively on the validity of the substantive contract of which it is a part.

The majority believed this rule required arbitration because both prongs were satisfied. But the dissent argued (1) because the agreement was alleged to be unconscionable, Jackson could not have "clearly and unmistakably" submitted arbitrability to the arbitrator. The dissent also argued

when a party raises a good-faith validity challenge to the arbitration agreement itself, that issue must be resolved before a court can say that he clearly and unmistakably intended to arbitrate that very validity question. This case well illustrates the point: If respondent’s unconscionability claim is correct—i.e., if the terms of the agreement are so one-sided and the process of its making so unfair—it would contravene the existence of clear and unmistakable assent to arbitrate the very question petitioner now seeks to arbitrate. Accordingly, it is necessary for the court to resolve the merits of respondent’s unconscionability claim in order to decide whether the parties have a valid arbitration agreement under §2. Otherwise, that section’s preservation of revocation issues for the Court would be meaningless.

The bottom line: unless or until Congress overturns this decision, it appears employers will be able to avoid courts' rulings on unconscionability and have arbitrators decide them instead.

The opinion in Rent-a-Center West, Inc. v. Jackson is here.

Happy Anniversary to Us (Again)

Yes, it's a slight detour into self-indulgence. Thank you for your patience.

So, four years ago, two wide-eyed kids, with barely a tuna sandwich and $3.00 between them, decided to stake out their little corner of the American Dream and start a small business of their own.... Oh, and Jennifer and I started Shaw Valenza four years ago today, too! What a coincidence! (I hope those two scrappy kids made it.)

Anyhoo, after perfectly timing our decision to start a business a few months in advance of the worst time to start a business in history, we're grateful to still be here. We know why we made it, too. Coffee and toner? Sure. But we're also thankful for our clients, prospective almost-clients, and even former clients, who have made our survival possible. We are grateful to our colleagues / co-workers / employees, who have helped us flourish. Thank you, too, to our vendors and everyone else who have helped us along the way. And a big thanks to the courts, legislatures, and regulators, who continue to provide us with an ever-expanding, confusing, and conflicting body of employment laws!

By the way, SV's 4th anniversary also means that this blog celebrates its fourth year of existence. This is post number 368, and I've enjoyed every one of them. So, thank you, adoring public, for reading along with us. :::echo....echo....echo....::::

See you next year. I hope.

DGV

U.S. Supreme Court Partially Punts in Electronic Monitoring Case

We posted about Quon v. Arch Wireless here when it was just a Ninth Circuit case. There, the court of appeals held that a deputy sheriff had a reasonable expectation of privacy in his text messages sent on an employer-provided PDA.

On review, the U.S. Supreme Court ducked on the reasonable expectation of privacy issue that the courts below focussed on. The Supreme Court is concerned that the use of electronic data in the workplace and in society is still in flux and it does not want to pass judgment too soon on how privacy is maintained and expected in electronic communications. So we won't know about what policies are valid, whether a supervisor's oral statement could modify a written policy, and whether employers can destroy an expectation of privacy merely by furnishing the equipment. Another day, perhaps.

Instead, the court did hold that the City of Ontario was within its rights to look at Quon's text messages to see if he was using too much bandwidth for personal use. The court assumed there was a sufficient expectation of privacy without deciding the issue, and simply held that the search was "reasonable."

Because the search was motivated by a legitimate work related purpose, and because it was not excessive in scope, the search was reasonable under the approach of the O’Connor plurality. 480 U. S., at 726. For these same reasons—that the employer had a legitimate reason for the search, and that the search was not excessively intrusive in light of that justification—the Court also concludes that the search would be “regarded as reasonable and normal in the private-employer context” and would satisfy the approach of JUSTICE SCALIA’s concurrence. Id., at 732. The search was reasonable, and the Court of Appeals erred by holding to the contrary. Petitioners did not violate Quon’s Fourth Amendment rights.

Bottom line - this case would have more relevance to private sector employers in California if the Court had addressed the "reasonable expectation of privacy" issue. However, the court's discussion also concludes that employee monitoring is "regarded as reasonable and normal in the private-employer context."

For public sector employers, this case is significant because it clarifies the standard for the government-as-employer performing workplace monitoring even where employees have a reasonable expectation of privacy.

The case is City of Ontario v. Quon and the opinion is here.