102 Million Dollar Verdict for Wage Statement Violation!

June 10, 2019

While it may be true that employees rarely even look at their wage statements, there is one group of persons who certainly do – plaintiffs’ lawyers.  Or, more precisely, California plaintiffs’ lawyers.

And after a stunning $102 million award against Wal-Mart for wage statements that the court concluded did not fully comply with California’s onerous wage statement laws, California plaintiffs’ lawyers are likely to look at their clients’ wage statements even more closely – and to file even more class action lawsuits alleging that employers’ wage statements failed to dot every “I” and cross every “T.”

In the case known as Robert Magadia v. Wal-Mart Associates, Inc., pending in the United States District Court for the Northern District of California, the named plaintiffs brought a variety of wage-hour claims, including alleging that Wal-Mart’s California employees were not provided proper compensation for missed meal periods and did not receive compliant wage statements.

A three-day bench trial was conducted in late 2018.  And a little more than 6 months later, Hon. Lucy Koh issued her findings, awarding nearly $102 million to Wal-Mart employees.

The overwhelming majority of the award was for wage statements that Judge Koh concluded did not comply in full with California Labor Code section 226 – approximately $48 million in statutory damages and $54 million in penalties under the Private Attorneys General Act (“PAGA”).

Judge Koh’s concern was that Wal-Mart’s wage statements identified a lump sum for additional overtime that individuals received as a result of bonuses – identified as “OVERTIME/INCT” — without breaking down how that sum was calculated.

The award is almost certain to be appealed, and given the dearth of law on the issue, there is reason to believe the decision could in fact be overturned by the Ninth Circuit.

But the award itself will be enough to encourage employees and their counsel to closely scrutinize wage statements to determine if there are any possible omissions on which a class action could be based.

And for that reason alone employers with operations in California would be wise to review their wage statements closely to ensure that they comply in full with Labor Code section 226.

Note: PAGA is currently being challenged in the courts. It is a system that is extremely unfair to employers. I will keep you posted.


Investigation of Discrimination Allegations Can Save You!

June 3, 2019

The following facts and case result is an example of how a thorough internal investigation saved an employer from an adverse court decision.

The actual facts are simple enough. A bank fired two female employees for violating its vault-access policy. In turn, they filed a sex discrimination based on their allegation that three male employees had violated the same policy and had only received disciplinary action based on performance.

At first glance this would appear to be discrimination however, the two fired female employees were caught on video violating the policy and admitted to their misdeeds. The action of the three men was not as clear. Two denied it, and there was no video surveillance to prove otherwise. And the third admitted to the misconduct but claimed mitigation because a supervisor had bullied him into it. One might argue that the three men had figured out how to avoid their terminations. Let’s take a closer look.

The employer was able to convince the court that its thorough investigation into all of the allegations by the two women (before they were fired) was a fair process that supported their actions.

According to the employer, and supported by documentation, the extensive internal investigation, which included employee interviews and review of two months of cash-vault security-video.… the employer had an “honest belief” that the factual differences between the women and the two men who were not seen on video and did not admit to violating the dual-control policy and the one male employee who did violate the policy under non-pre-textual mitigating circumstances, justified their disciplinary decisions. Because there are no disputes of material fact as to the employer’s “honest belief,” the district court’s grant of summary judgment was proper.

The results of this case is a great reminder of the importance of thoroughness when investigating internal complaints of discrimination. The “honest belief rule” is one of most effective shields available to employers in discrimination cases. It means that as long as the employer has an “honest belief” in its proffered nondiscriminatory reason for discharging an employee, the employee cannot establish that the reason was pre-textual simply because, in reality, it is incorrect.

Still, if you want to be able to argue that your honest belief justifies your decision, you better be able to support your claim. Contemporaneously-made documentation, coupled with corroborating evidence developed in a thorough investigation, is best. Courts are loath to second-guess employers’ business judgment, but will not hesitate if it appears an employer slacked in its investigatory responsibilities.



Is the Use of Profanity Considered Workplace Harassment?

May 27, 2019

NOTE: The following has hard hitting explicit language being used by the court and some may find the content offensive. STOP now if you feel such language may offend you!

 Arguably, the “context” of the profanity may make a difference. Thanks to the Game of Thrones” it would appear more people are becoming more comfortable openly using generally considered highly offensive and taboo words. Employers need to react swiftly and decisively despite the popularity of the series.

The courts have addressed this issue in the past. In Reeves v. C.H. Robinson Worldwide, the issue was decided if vulgar language, to which all employees (male and female) are equally exposed, is actionable as sexual harassment.

The court made a clear distinction between general, gender-nonspecific swear words, such as shit and fuck, (maybe improper, but not necessarily unlawful) as compared to gender-specific epithets such as bitch, whore, and, the granddaddy of them all, cunt (unlawful harassment).

The context may illuminate whether the use of an extremely vulgar, gender-neutral term such as “fucking” would contribute to a hostile work environment. “Fucking” can be used as an intensifying adjective before gender-specific epithets such as “bitch.” In that context, “fucking” is used to strengthen the attack on women, and is therefore relevant to the Title VII analysis. However, the obscene word does not itself afford a gender-specific meaning. Thus, when used in context without reference to gender, “fuck” and “fucking” fall more aptly under the rubric of general vulgarity that Title VII does not regulate. …

“Words and conduct that are sufficiently gender-specific and either severe or pervasive may state a claim of a hostile work environment, even if the words are not directed specifically at the plaintiff. … It is enough to hear co-workers on a daily basis refer to female colleagues as … “cunts,” to understand that they view women negatively, and in a humiliating or degrading way. The harasser need not close the circle with reference to the plaintiff specifically: “and you are a ‘bitch,’ too.” …”

“Cunt,” is the essence of a gender-specific slur. …

The social context at C.H. Robinson detailed by Reeves allows for the inference to be drawn that the abuse did not amount to simple teasing, offhand comments, or isolated incidents, but rather constituted repeated and intentional discrimination directed at women as a group, if not at Reeves specifically. It is not fatal to her claim that Reeves’s co-workers never directly called her a “bitch,” a “fucking whore,” or a “cunt.” Reeves claims that the offensive conduct occurred “every single day,” and that the manager “accepted and tolerated that same behavior” over her repeated complaints. If C.H. Robinson tolerated this environment, it may be found to have adopted “the offending conduct and its results,” just as if the employer affirmatively authorized it.

Therefore while general vulgarities are not typically actionable as harassment, severe or pervasive gender-specific words or phrases are actionable even if the words are not specifically directed at one employee, but are merely generally used in the workplace. The aforementioned “c-word” is the perfect example.

The takeaway for employers? Words are sometimes not just words, and businesses should respond to complaints about coarse or vulgar language as they would to any other complaint of harassment. An employer cannot just assume that words are harmless and ignore the complaint. Such language should, at a minimum, be considered unprofessional and a violation of company policy.

Reminder: EEOC Pay Data Due by May 31, 2019

May 20, 2019

Employers with 100 or more employees, and federal contractors with 50 or more employees, historically have been required to file annual Employer Information Reports (“EEO-1 Reports”) disclosing their number of employees by job category, race, and sex.  In 2016, the Obama administration’s EEOC expanded the required EEO-1 reporting data to include pay and hours worked data.  The intention of this expanded reporting requirement was to help the agency identify discriminatory pay gaps.  Under this expanded rule, covered employers would have been required to submit the pay data by March 31, 2018.  However, in 2017, the Trump administration EEOC abandoned the expanded EEO-1 reporting requirement in favor of simply continuing existing EEO-1 reporting requirements.  Advocacy groups, including the National Women’s Law Center, then sued the EEOC and OMB in an effort to reinstate the pay data reporting rule.  In a surprising move, a federal district court judge in Washington, D.C. issued a ruling last night agreeing with the National Women’s Law Center that the government’s elimination of the pay data reporting rule was unlawful.  In short, the judge held that the government had to have a “reasonable explanation” for changing course on the rule and that they had failed to present one.  The judge’s remedy was to vacate the government’s action in rescinding the rule, thereby effectively reinstating the EEO-1 pay data reporting requirement.  Employers would have had only until March 31, 2019 to file their expanded annual EEO-1 reports, but the deadline previously was extended to May 31, 2019 as a result of the government shutdown.  Following the court ruling that reinstated the reporting requirement, the EEOC pronounced that, in accordance with the court ruling, employers will be required to submit pay data (Component 2 data) for the years 2017 and 2018 by September 30, 2019.  (Historically required reporting information (Component 1 data) on the number of employees by job category, race, and sex remains due May 31, 2019).

The EEOC’s action does not mean that the agency agrees with the court ruling; rather, the EEOC was ordered by the court to issue compliance deadlines for the reinstated reporting rule and that’s what it did.  Meanwhile, on Friday, the EEOC appealed the court’s ruling.  It is expected that the EEOC will file a motion with the appellate court seeking a stay of the ruling pending resolution of the appeal.  However, there currently is not a stay and the September 30, 2019 pay data reporting deadline remains in effect.  This means that large employers need to start (if they have not done so already) gathering the pay data needed to be in compliance with the reporting rule.  We will keep you posted of developments on the appellate front, particularly if a stay of the reporting rule is issued (which would mean that employers need not comply with the pay data reporting rule until the EEOC’s appeal is resolved).


Another Decision on Arbitration Agreements by the U.S. States Supreme Court!

May 13, 2019

The issue of arbitration agreements continue to be addressed by the courts. Now, the United States Supreme Court has once again had to jump into the arena on this continuing saga by overturning a 9th Court Circuit of Appeals ruling in Lamps Plus v Varela.

In overturning the lower appeals court, the high court recently held that a class action may not be ordered to arbitration unless the parties’ arbitration agreement expressly states that class claims may be arbitrated. The Ninth Court had held that the parties could head to arbitration to argue a class action claim. The erroneous ruling by the Ninth Circuit was based on its determination that the arbitration agreement was “ambiguous” as to whether class claims could be arbitrated and, as a matter of traditional contract law, ambiguities are resolved against the drafter of the agreement (in this case, the employer).  The high court disagreed with the reasoning of the lower Appeals Court arguing that under the Federal Arbitration Act, arbitration is purely a matter of agreement between the parties and that parties to an arbitration agreement cannot be ordered to arbitrate claims that they did not clearly agree to arbitrate.

Furthermore, in support of their position, the high court also concluded that ambiguity cannot be used to imply that the parties agreed to arbitrate class claims in arbitration because class litigation is not the type of action that is suitable for the streamlined adjudication process traditionally associated with the arbitral forum.

The decision is consistent with prior decisions by the Supreme Court in which the Court similarly held, almost a decade ago, that parties to an arbitration agreement may not be compelled to arbitrate class claims unless their agreement clearly evidences that they intended such claims to be subject to arbitration.

There is no grey area here. The lower courts are trying to figure out how to get around prior decisions by the Supreme Court but to no avail. The Justices in Washington D.C. are there for a reason—they are smarter! They are consistent with their decisions but that does not mean a lower court will not come up with a decision that might give the high court a moment of pause. But this was not the one.

Supreme Court precedent clearly holds that silence or ambiguity in an arbitration agreement cannot be a basis for concluding that the agreement covers class claims. That is pretty clear at this point and as such, it is clear that arbitration agreements must expressly state that class, collective, and/or representative claims may not be arbitrated and that no arbitrator shall have authority to preside over any arbitration on a class, collective, and/or representative basis on behalf of more than one employee.

Let’s wait and see. The issue of arbitration agreements continues to be a talking point at the highest judicial levels.


Retroactive Decision for Independent Contractor Relationships! Not Good!

May 6, 2019

I have been preaching for years about employers having independent contractors (1099) working for/with them. These misclassifications are costing employers dearly. Now, it is going to get even more difficult.

Last week, the Ninth Court Circuit of Appeals, issued its decision in Vazquez v. Jan-Pro Franchising, Inc., holding that last year’s California Supreme Court decision in Dynamex Operations West v. Superior Court applies retroactively.  This is the first published decision addressing the retroactivity of the Dynamex decision.

In Dynamex, the California Supreme Court created a brand new test for assessing whether a worker qualifies as an independent contractor for purposes of California wage and hour laws.  That test is very narrow, making it difficult for the vast majority of traditional freelance workers to continue qualifying as independent contractors.  And, although it cannot genuinely be disputed that Dynamex created “new” law in this regard, the California Supreme Court did not indicate (despite an express request for it to do so) whether it intended its ruling to apply prospectively only or whether it intended it to operate retroactively as well.  This is a very important issue, of course, because retroactive application means that an employer can be held liable for classifying workers as independent contractors prior to the April 30, 2018 Dynamex decision, if those workers do not meet the new narrow independent contractor test prescribed by the Dynamex Court (even though that test did not exist before April 30, 2018).  This is true even if the workers qualified as independent contractors under the pre-Dynamex, multi-factor Borello test, and even though employers did not even know about the Dynamex test (in order to comply with it) prior to its issuance.  Such a result smacks of unfairness, if not an obvious violation of constitutional due process.

Despite the significant unfairness of retroactive application of the new independent contractor standard, the Ninth Circuit has now held in a published decision that Dynamex applies retroactively.  In the specific case before the Ninth Circuit, which raises a number of unrelated but complex factual and legal issues, the district court had dismissed the plaintiffs’ claims.  Post-dismissal, the Dynamex ruling was issued.  Plaintiffs argued to the Ninth Circuit that the dismissal had to be vacated and the case decided on the merits under the new Dynamex standard.  The Ninth Circuit agreed, holding that Dynamex applies retroactively.  That ruling is binding on all federal district courts in California.  It is not binding on California state courts, but still may be considered persuasive by a California state court.  Additionally, it should be noted that two trial courts in California have similarly concluded, albeit in unpublished (not binding or of precedential value) rulings, that they too believe that Dynamex applies retroactively.  Strangely, the courts do not seem concerned or bothered by the fact that retroactive application of brand new legal standards is patently unfair to the companies who have to pay costly judgments for misclassification based on a standard that did not even exist at the time the classification decisions were made (and of which companies had no prior notice).  The Ninth Circuit addressed the due process concerns raised by the employer, but dismissed them as unmeritorious, reasoning that retroactive application “ensures that Plaintiffs can provide for themselves and their families,” and “ensures that California will not be burdened with supporting Plaintiffs because of the ‘ill effects’ that ‘result from substandard wages.’”

If you have 1099/Independent contractors you need to have those relationships looked at very closely by professionals. Do not assume because you have some “one or two page” agreement that you are good to go. I can assure you it is not the document but how you interact as well.


U.S. Supreme Court to Decide if Title VII Protects LGBTQ Employees

April 29, 2019

Last week I discussed whether “heterosexuals” were a protected class. Well, the Supreme Court must have read my blog! Last week the Justices agreed to hear appeals in three cases, to decide whether Title VII’s prohibition against “sex discrimination” expressly includes prohibitions against LGBTQ discrimination.

Currently, only 21 states have statutes that protect against both sexual orientation and gender identity discrimination in employment in the public and private sector. For the other 28 states how SCOTUS decides these issues under Title VII has huge legal consequences.

To recap where we are: Title VII does not expressly prohibit discrimination on the basis of LGBTQ status. However, a majority of courts that have looked at this issue (but not all), and the EEOC, conclude that Title VII’s definition of sex includes LGBTQ rights.

Barstock and Zarda stand on opposite sides of this issue—the former holding that Title VII’s definition of “sex” does not, as a matter of law, include “sexual orientation,” and the letter saying otherwise. Harris Funeral Homes reached the same conclusion as Zarda, but on the issue of gender identity (i.e., transgender status and transitioning identity).

It’s too early to say how SCOTUS will rule, but the Justices to watch are Chief Justice John Roberts, the current ideological center of the Court, and Justice Kavanaugh, the Court’s newest Associate Justice.

Chief Justice Roberts wrote a passionate dissent against a constitutional right to same-sex marriage in Obergefell v. Hodges. Will his ideology change when the issue moves from the bedroom and the Constitution to the workplace and a statute? Only time will tell.

Justice Kavanaugh, who never offered a public opinion on this issue, is very much a wildcard because he has never ruled on an LGBTQ rights case and has made very few public statements on LGBTQ issues, so it is hard to determine what his views are. He also may be disinclined to lead in very different directions than Justice Kennedy, who was his mentor, for whom he clerked, who swore him in, and whose seat he is filling.

However, keep in mind, as an employer you could short-circuit all of this legal wrangling simply by not discriminating on the basis of sexual orientation and gender identity. Your employees are your best asset no matter who they are. No employee should suffer at work because of the gender of the person they love, or because of the gender with which they identify. Nothing SCOTUS says about this issue will change the way people feel about another but within the confines of the workplace it is important for every employee to be respected.

Some states, like California, now require employers to conduct sexual orientation training for employees. Again, in my opinion, this is not a bad thing. The more education managers receive, the less litigation a business may encounter. Do the math.