Arbitration Agreements are Enforceable for Wage & Hour Claims!

August 29, 2017

Last week, a California Court of Appeal confirmed that employment arbitration agreements require arbitration not only of employment claims filed in court but also of administrative wage claims filed before the Department of Labor Standards Enforcement (“DLSE”).  You may recall, that in 2013, the California Supreme Court held (after effectively being directed to do so by the U.S. Supreme Court) in Sonic-Calabasas v. Moreno that there is no blanket exemption for wage claims from an otherwise enforceable arbitration agreement, and that employees are not necessarily entitled to have their wage claims adjudicated in an administrative hearing (known as a “Berman hearing”) before the DLSE.  However, the California Supreme Court left some wiggle room in its opinion by qualifying it to say that if an arbitration agreement provides an “affordable and accessible” alternative forum for resolution of the wage claim, then the agreement is enforceable and applies to require the wage claim to be arbitrated.   Because of this wiggle room, lawyers continue to litigate the issue of whether administrative wage claims are subject to arbitration.  In Oto, LLC v. Kho, the court held that the answer is yes.

In Oto, the plaintiff-employee filed a wage claim with the DLSE.  The employer attended a settlement conference before the DLSE and attempted to settle the claim, but no settlement was reached.  As such, the claim was set for a hearing (to decide the merits of the claim) before the DLSE.  Just before the hearing (the same day), the employer filed a petition to compel arbitration of the claim with the Superior Court.  An employer representative showed up at the hearing and asked that it be cancelled based on the pending petition to compel arbitration.  The DLSE hearing officer refused to cancel the hearing and proceeded without the employer being present.  Unsurprisingly, the DLSE ruled in favor of the employee and awarded six figures to the employee.  The employer appealed the award.  Meanwhile, the Superior Court denied the employer’s petition to compel arbitration, finding the applicable arbitration agreement unconscionable and unenforceable.  The employer appealed.

Last week, the Court of Appeal issued its opinion agreeing with the employer that the arbitration agreement was enforceable and that the Superior Court erred in refusing to grant the employer’s petition to compel arbitration.  The court applied Sonic-Calabasas and held that under that case, the arbitration agreement should have been enforced as long as it provided an “affordable and accessible” alternative forum (arbitration) for resolving the employee’s wage claim.  The Labor Commissioner’s office, which appeared on the employee’s behalf, argued that the agreement did not provide an affordable or accessible forum and was thereby unconscionable.  The Labor Commissioner primarily argued that the agreement did not expressly say that the employer would bear the cost of the arbitration or that the employee could recover attorneys’ fees if he prevailed on his claims in arbitration.  Because of this, the Labor Commissioner argued that the employee arguably would have to pay for half of the arbitration and would have to pay for an attorney.  (The Labor Commissioner argued that it would not be practical for an employee to represent himself in arbitration, as he could in an informal DLSE hearing).  The court rejected these arguments because the arbitration agreement held that the claims would be decided under applicable law – which the employer conceded meant that it would have to bear the costs of the arbitration and that a prevailing employee on a wage claim could be awarded attorneys’ fees.

This is a positive development for employers fighting to enforce their employment arbitration agreements where wage claims are involved.

Can an Employee Be Terminated for Political Protesting?

August 21, 2017

It does not take much to turn on the news and see the amount of emotional turmoil this nation is facing. The political activist are weighing in by the thousands and Charlottesville is just another example. The issue is whether one of these political protesters can be fired if his/her face appears on the news or some social media outlet. Employers need to take a hard look at the intersection of social media, employee privacy, free speech, and an employer’s right to discipline or terminate for that speech.

Let’s keep in mind that the work environment is protected under Title VII of the Civil Rights Act of 1964. Specifically, to keep the work environment free of any type of discrimination. Now, fast forward to Charlottesville where in fact one individual’s employer saw an employee protesting on the side of a Neo-Nazi group. The employer subsequently sent the individual a notice of termination.

The times are changing. The workplace essentially now has extended beyond the walls of the workplace. Arguably, there may not be a difference than if a group of employees goes out for happy hour after work and a male employee gets too frisky with a female employee and grabs her inappropriately. If the female employee goes to HR or a supervisor sees it and does nothing, the company’s got issues.

HR has an obligation to employees that work together, whether it is a work event or not, or within the workplace or out. Social media has just broken those walls down further and maybe brought the outside world further into the workplace.

Honestly, before Charlottesville and other such political clashes there has not been a protection for political speech (with one exception if an individual worked on a political campaign).

My opinion is I disagree with the termination. The work environment is the key. As long as a person does not bring his or her ideologies into the workplace in their speech or actions I cannot endorse a termination. I will agree it could create a morale issue and cause other issues especially if, as an example, that Neo-Nazi is a manager or supervisor. Let’s face it, every action that individual takes against a minority employee would probably be viewed as racist.

With the above in mind, an employer does have the right to control morale in their workplace and could probably take action based upon that issue and not necessarily against the behavior outside of the workplace. We shall see.

NOTE: Please follow me on Twitter (JimPotts@JimPottsAuthor). I put out Tweets on different issues throughout the week.


Court Holds: No Paid Vacation in the First Year!

August 14, 2017

California has a unique law regarding vacation benefits.  Unlike the laws of many other states, California law requires an employee to be paid for all earned but unused vacation benefits at the time of termination of employment.  California law thus prohibits “use it or lose it” policies and policies that otherwise provide for forfeiture of earned vacation benefits.  That said, California law does not require employers to provide paid vacation benefits to employees, and employers generally are permitted to decide whether to provide paid vacation, how much to provide, and which employee classifications will be eligible for the benefit.  Employers may impose reasonable “caps” on the maximum carryover and accrual of vacation benefits and may control the scheduling of vacations.  Employers may also choose to pay out accrued, unused vacation benefits at the end of each year in lieu of allowing carryover of unused benefits.  As long as an employer provides clear written notice of its vacation policy terms and conditions to employees, those terms generally will be enforced – as long as they do not provide for a forfeiture of earned vacation.  This sounds simple enough, but sloppy drafting of a policy can lead to a claim that a policy operates to cause an illegal forfeiture of vacation benefits.  A recent case, Minnick v. Automotive Creations, Inc., illustrates this.

In Minnick, the employer had a vacation policy providing that employees do not earn vacation during their first year of employment.  However, once they completed their first year, they would be eligible to take one week of vacation, and after completing two years, they would be eligible to accrue up to two weeks of vacation.  The plaintiff worked for the employer for just six months.  Pursuant to its policy, the employer did not pay the plaintiff for any accrued vacation time on his final paycheck because the plaintiff had not earned any vacation.  The plaintiff sued on behalf of himself and all similarly situated employees, alleging that the employer’s policy violated California law by causing employees who worked for them for less than one year to forfeit “earned” vacation benefits.  The plaintiff’s theory was that even though the policy stated on its face that employees did not earn or accrue vacation during their first year of employment, they implicitly did, in fact, earn such vacation because the policy allowed them to take one week’s vacation upon completing their first year.  Thus, the vacation time “must have” been earned during the first year of employment and, as such, it should not have been subject to forfeiture.  The plaintiff argued that he should have been paid six months’ worth of accrued vacation benefits on termination of employment.

The trial court disagreed with the plaintiff, throwing out his claims on a motion to dismiss.  The Court of Appeal agreed with the trial court, finding that the employer’s policy was lawful and did not operate to cause an illegal forfeiture of vacation benefits.  In so holding, the court explained that an employer is free to impose conditions on the right to earn vacation benefits, including a condition that an employee be employed for at least one year before earning any vacation benefits.  The court focused heavily on the express wording of the employer’s policy and the fact that it explicitly stated that employees do not earn or accrue vacation during their first year of employment.  Based on this language, the court held that the plaintiff did not have a valid legal claim that he had earned or accrued any vacation benefits during his first six months of employment.  Also based on the clear language of the policy, the court rejected the plaintiff’s argument that the policy nevertheless “implied” that employees earn vacation during their first year of employment and that there was really just a waiting period (one year) before they could “take” the vacation they had already earned.  The court reasoned that an employer is free to “front load” vacation benefits (making the entire amount available for use at the beginning of a benefit year rather than having benefits accrue over time) and that it appeared that the employer’s policy did just that (even though the policy later talked about employees with two years of service “accruing” a “maximum” of two weeks of vacation).

Although this case resulted in a positive outcome for the employer, it still serves as a good reminder that vacation pay claims are alive and well in California, and that California has unique laws prohibiting forfeitures of earned vacation.  Careful and clear drafting of vacation policies is of critical importance to ensure that any waiting periods for vacation eligibilty (as well as certain accrual caps) are lawful and will not be deemed a subterfuge for an illegal forfeiture policy.

Follow me on Twitter (jimpotts@jimpottsauthor). I give important updates.

New I-9s Update

August 6, 2017

Sorry, there was not a Blog last week! I was on the Alaskan cruise and some technical difficulties prevented my posting.

The United States Citizen and Immigration Services (“USCIS”) has issued a new Form I-9. The only significant change is to add a new List C document, a Consular Report of Birth for a U.S. citizen board abroad. Employers must begin using the new form by September 18, 2017. The new Form I-9 is now available online.

On another note, the federal Department of Labor (“DOL”) is seeking public comment on possible revisions to the federal overtime exemption rules. As employers will recall, last year a new overtime rule was published that dramatically increased the salary threshold to qualify for exempt status under the executive, administrative, and professional exemptions to over $47,000 per year. However, just prior to the rule’s effective date, a Texas court enjoined the rule. The DOL (still under the Obama administration at that time) appealed the injunction ruling and that appeal is currently pending before the Fifth Circuit. Many wondered whether the DOL, now under the Trump administration, would abandon the appeal. It did not do so, but it did recently file a reply brief before the Fifth Circuit defending the DOL’s authority to adjust the salary level threshold for exempt status under the Fair Labor Standards Act, but stating that it did not intend to enforce the $47,000 salary threshold set forth in the challenged 2016 rule. Instead, the DOL indicated that it intended to solicit public comment on a different salary threshold and to propose a new rule. It is unclear how the Fifth Circuit ultimately will rule.
In the meantime, the DOL recently issued its request for public comment on both the 2016 rule and on other possible revisions to the overtime exemption rules. The request seeks comments on several topics, including whether the salary threshold should be adjusted for inflation and, if so, what the measure of inflation should be; whether changes to the duties test are warranted; whether exempt status should be determined solely based on a duties test and not on a salary threshold; whether there should be multiple salary thresholds that vary depending on employer size and/or locale; the impact of the 2016 rule changes on employers; and whether the compensation level for the highly compensated employee exemption should be indexed to inflation.
Employers may submit comments electronically or by mail between now and September 24, 2017. Send comments to the U.S. Department of Labor.