Federal Court Rules Employers Do Not Have to Return Employees From an FMLA Leave

July 29, 2012

In Winterhalter v. Dykhuis Farms, Inc., a Federal Court of Appeals recently noted the FMLA has an express requirement that entitles any eligible employee who takes FMLA leave “to be restored by the employer to the position of employment held by the employee when the leave commenced” or “to be restored to an equivalent position with equivalent employment benefits, pay, and other terms and conditions of employment.” But, the court further noted that “these provisions do not create a greater right to reinstatement or protection against termination than the employee would receive if he had not taken FMLA leave.”

The Court found that Dykhuis, a pig farmer, produced sufficient evidence to support its assertion that severe economic hardship forced it to eliminate numerous positions and that Winterhalter was the highest-paid, lowest-performing worker at the farm. This evidence included a November 2009 Employee Newsletter that stated that Dykhuis had started a pig reduction plan as part of a long range strategy”; deposition testimony of Winterhalter’s prior supervisors, notes documenting Winterhalter’s performance deficiencies; and Winterhalter’s performance evaluations describing his performance as below standards in three of six categories reviewed. The former employee urged the Court to find pretext based on Dykhuis’ new employee hires; however, upon closer review, the evidence showed that Dykhuis hired six new employees ─ five of which were part-time or seasonal positions as compared to the thirteen terminated full-time employees. Winterhalter also challenged Dykhuis’ economic-hardship claim by pointing to the company’s “moments of optimism,” which included its celebration of “rising hog prices” and announcement that “it looks like we will turn profitable next year.” The Court ultimately threw out Winterhalter’s claim, finding that his evidence, even if true, did not create an issue of fact as to Dykhuis’ claim of economic hardship because Winterhalter did not respond to Dykhuis’ evidence of the bank’s directive, demonstrate that pay disparities and his poor performance did not actually motivate the company’s decision to terminate him or put forth any evidence that Dykhuis actually turned profitable. Turning to Winterhalter’s FMLA entitlement/interference claim, the Court noted that the former employee failed to prove that he was entitled to job restoration. Because there was no dispute that Dykhuis was going through a period of financial hardship at the time it terminated Winterhalter and that Winterhalter was the highest-paid, yet lowest-performing of the three workers at the farm, the court found that Winterhalter did not prove he was entitled to job restoration.

The lesson for employers is simple: Document well, and remember that just because an employee takes FMLA leave, he or she is not insulated from termination or lay-off. The FMLA does not give an employee a greater right to reinstatement or a protection against termination than the employee would get if the employee had not taken FMLA leave. An employer seeking to terminate (or not restore) an employee while on or shortly after returning from FMLA leave is going to need sufficient documentation to justify taking that action. Here, that attention to documentation enabled the employer to win its FMLA case even though it had terminated an employee the day he returned from FMLA leave.

Note: This is a federal case. Before terminating any employee on a protected leave please contact your legal representative to ensure you have all of the proper documentation in place before deciding not to return an employee on a legally protected leave.

New Pending Employment Laws

July 23, 2012

California employers may want to be aware of a number of employment-related bills still pending before the California Legislature, each of which is listed below.  This list does not include employment bills that have already died in various committees during this legislative session.  Pending bills must be passed by each house by August 31.  After that, the Governor has until September 30 to sign or veto the legislation.

AB 2386:  This bill would expand the definition of “sex” under the Fair Employment and Housing Act to include breastfeeding and medical conditions relating to breastfeeding, making discrimination on those grounds a violation of FEHA with a correlating private right of action.

AB 2373:  This bill would add a new section to the Labor Code setting forth 17 factors to consider to determine whether a worker is an employee or an independent contractor.  The enumerated factors are similar to those employed by California courts analyzing independent contractor/employee status.

AB 1450:  This bill would make it unlawful for an employer to exclude from the applicant pool or refuse to hire someone based on their unemployed status.  It would also prohibit job advertisements stating that current employment is a requirement for consideration for the job.

AB 1999:  This bill would add “family caregiver status” as a protected class under FEHA, thereby prohibiting discrimination in employment against a person based on the person being a family caregiver.  For purposes of the legislation, “family caregiver” is defined as an individual who provides medical or supervisory care for a child, parent, spouse, domestic partner, parent-in-law, sibling, grandparent or grandchild.

AB 2039:  This bill would expand the circumstances under which employees could take leave under the California Family Rights Act (CFRA) by (1) eliminating current age and dependency requirements from the definition of “child,” thereby permitting an employee to take leave to care for an adult child, (2) expanding the definition of “parent” to include parents-in-law, and (3) permitting an employee to take leave to care for a grandparent, sibling, or grandchild.

AB 1844:  This bill would prohibit an employer from requiring or requesting that an employee or applicant disclose user name or password information for personal social media, or to divulge any personal social media.

SB 1255:  This bill would specify circumstances under which “injury” would be presumed to an employee as a result of an employer not providing wage statements, or providing incomplete wage statements.  Presumed injury would allow the employee to recover penalties and/or actual damage.  Presumed injury could be shown by the failure to provide a wage statement at all, or by the failure to include the employee’s name and last 4 digits of the social security number.  It could also be shown by failing to provide complete wage information, causing the employee to be unable to determine (from the statement alone) gross and net wages earned, deductions there from, and the name and address of the employer.

AB 1744:   This bill would require temporary services employers to include additional information on itemized wage statements for employees, including the rate of pay for each assignment, the name and address of the entity that secured the services and total hours worked for each entity.

AB 2674:  This bill would amend section 1198.5 of the Labor Code relating to employee rights to inspect personnel files.  The bill would require employers to maintain employee personnel files for at least 3 years following termination of employment, and to permit current and former employees (or their designated representatives) to inspect and copy personnel records, within 30 days of a request to do so by the employee.  The bill specifies that an employer is not required to comply with more than 50 requests for copies of personnel records by a representative of employee(s) in one calendar month.

AB 1964:  This bill would add to the current requirement under FEHA that employers reasonably accommodate religious beliefs and observances of employees, by specifying that a religious dress practice or grooming practice are covered “beliefs and observances.”

AB 1875:  While not technically an employment bill, this bill would impact employment litigation by limiting depositions in state court cases to 7 hours (as is the limitation in federal court).

As you can see, most if not all of these bills have the effect of adding new prohibitions on employment actions and increasing burdens on California employers, simultaneously giving rise to new potential legal claims for violations.  Bills that aimed to reduce burdens on California employers, add flexibility to the workplace, and/or reduce litigation were largely killed by the California Legislature.  I will continue to keep you updated on the progress of these bills as the close of the legislative session nears.


Court Holds Employers Can Chargeback Commissions

July 16, 2012

A California court has recently held that a commission plan providing for chargebacks against commissions did not violate California law.  The plaintiff in the case was a sales representative for Verizon Wireless and as such, his job was to sell cell service plans to customers.  He was paid a base wage plus commissions for his work.  Verizon’s commission plan clearly stated that commissions would be advanced to sales representatives based on securing signed contracts from customers, but that commissions were not actually earned and vested until expiration of a prescribed chargeback period (up to 365 days in some cases).  If a customer cancelled their service during the chargeback period, any commission advanced to the sales representative on that contract would be charged back against future commission advances.  The plaintiff filed a lawsuit alleging a PAGA violation and related Labor Code claims, all stemming from the central allegation that the chargeback practice violated Labor Code section 223 (which prohibits employers from secretly paying a wage less than that agreed to).  Verizon argued that its chargeback policy was lawful and the trial court agreed, throwing out the plaintiff’s claims on summary judgment.  The plaintiff appealed, and yesterday a court of appeal agreed with the trial court.  The court reasoned that commission plans are matters of contract and the Verizon plan clearly explained that commissions were not earned or vested (and hence, not “wages”) until the specified chargeback period expired without cancellation by the customer.  The plan also made clear that commissions paid to employees prior to the expiration of that period were merely advances on commissions and would be subject to chargeback in the event of cancellation during the chargeback period.   The court found that Verizon had clearly communicated the written plan to the plaintiff and also trained plaintiff and other representatives on the plan.  As such, the contract terms could not support a finding that Verizon was underpaying “wages” or otherwise violating the compensation agreement by virtue of its chargeback policy. 

The plaintiff also argued that the chargeback policy was unconscionable because it operated to shift business losses to the employees, and plaintiffs disputed that they had any responsibility for customer cancellations during the chargeback period.  The court rejected this argument as well, reasoning that to find a contract term unconscionable, it has to be of such a nature as to “shock the conscience,” as opposed to being found merely “unreasonable.”  The court held that Verizon’s chargeback policy did not rise to the level of shocking the conscience and had some business justification because the net compensation a sales representative received bore direct relation to the product (cell phone service contract) sold and any chargebacks were tied directly to the representative responsible for the sale.

The case is Deleon v. Verizon Wireless LLC, and although the outcome in this case is a favorable one for employers with similar commission plans, it also serves as a good reminder that commission plans must be in writing, with some evidence of receipt by the covered employees, and the commission plan should clearly spell out the circumstances under which commissions are deemed earned and payable. 

Reminder: Effective January 1, 2013, all employers in the state of California MUST have all commission plans in writing.

Court Decision: Employers Do Not Have to Provide “Suitable Seats”

July 9, 2012

In a much anticipated decision, a federal judge in California’s Southern District recently determined that CVS Pharmacy was not required to provide its cashiers with seats to use while operating cash registers. The plaintiff is a former customer service representative (“clerk/cashier”) at CVS who filed a lawsuit on behalf of all California customer service representatives alleging that CVS violated Wage Order 7–2001, section 14(A) when it failed to provide its clerks/cashiers with suitable seats during the performance of their job duties. Section 14 of Wage Order 7–2001 provides:

  1. All working employees shall be provided with suitable seats when the nature of the work reasonably permits the use of seats.
  2. When employees are not engaged in the active duties of their employment and the nature of the work requires standing an adequate number of suitable seats shall be placed in reasonable proximity to the work area and employees shall be permitted to use such seats when it does not interfere with the performance of their duties.

The court first considered the interplay between subsections 1 and 2, and ultimately held that the two subsections were mutually exclusive. In doing so, the court rejected the plaintiff’s argument that the phrase “nature of the work” refers to any particular duty that an employee performs during the course of her work. Instead, the court agreed with the defendant that the “nature of the work” performed by an employee must be considered in light of that individual’s entire range of assigned duties in order to determine whether the work permits the use of the seats or requires standing. It is not enough to simply look at certain tasks in isolation to determine whether those tasks could be performed while seated, the court held. Instead, the court’s inquiry was whether or not the job as a whole permitted the use of a seat or required standing. The court held that if the nature of the work requires standing, subsection 2 applies.

In determining the nature of the work for a clerk/cashier at CVS, the court noted that it was undisputed that many of the duties at issue required employees to stand while performing them (i.e., stacking, helping customers with locating items, sweeping or other cleaning, retrieving items from a high shelf, and retrieving photographs or cigarettes from other parts of the store). In fact, the plaintiff herself testified that many of the tasks she performed could not be performed while seated. The court also found it appropriate to consider the employer’s “business judgment” in attempting to discern the nature of an employee’s work. While the court did not go so far as to find that CVS’s business judgment was necessarily entitled to deference, the court did find that the expectation that the majority of duties would be performed while standing was relevant to understanding the nature of a clerk/cashier’s work. The undisputed facts confirmed that CVS expected its employees to place a premium on customer service and in doing so trained its employees to be ready to perform any one of a multitude of job duties that required being on their feet. The plaintiff’s own experience confirmed the standing requirement as she was instructed that she would be required to stand while operating a cash register during her job interview.

The court ultimately concluded that if the majority of employees’ assigned duties must be performed while standing, and the employer expects and trains employees to stand while performing their duties, the “nature of the work” requires standing. When applied to the plaintiff, the court concluded that CVS need not comply with subsection A as the nature of the work of a clerk/cashier at CVS does in fact require standing.

Homeland Security Giving Out 2 Year Work Permits to Undocumented Workers

July 2, 2012

The U.S. Department of Homeland Security (DHS) has recently made a major announcement, indicating that beginning sometime in the next 60 days certain undocumented individuals who have continuously resided in the U.S. for at least 5 years will be eligible for deferred action from deportation and will be given work permits for 2 years.  And their status and work permits will be renewable.   

To be eligible, the individuals (1) must have entered the U.S. prior to age 16 and be under age 30, (2) they must be in high school, have graduated high school, or  received an honorable discharge from the U.S. military, and (3) must have good moral character. 

This goes beyond the previously proposed “Dream Act” which contemplated requiring the individual to be in college or have a U.S. college degree.   Deferred Action means that the Government recognizes that the person is deportable but will defer any action to deport the individual.

Estimates are that up to 800,000 young individuals in the U.S. may qualify for this benefit.  California generally has at least 25% of the U.S. foreign national population which means this could affect over 200,000 Californians. 

The Obama Administration used their executive authority to grant deferred action as the legal basis to offer this benefit.  The rule underscores how date sensitive immigration cases are.  Individuals who won’t qualify include those who entered the U.S. on or after age 16, or have not yet lived here continuously for 5 years, or are age 30 or over.    

The Government will be issuing more details in the ensuing weeks.  What can I say! You think this is a “vote getter!”