LEGISLATIVE

California

Now that the June 5th deadline for bills to be passed out of their house of origin has expired, we are getting a better sense of the legislation that could impact the employment area this year. For the second straight year, it appears the economic crisis will preclude monumental changes and that most developments will be fairly incremental. For instance, bills that would have mandated paid sick leave (AB 1000) or materially altered California’s versions of the WARN Act (AB 842) or expanded CFRA’s definitions or basis for leave (AB 849 and AB 1001) have stalled in committee and appear dead for this term.

At the same time, however, bills that would have provided further scheduling flexibility (AB 141) or much-need clarity regarding meal and rest period obligations (SB 287, SB 380) also appear to have stalled.

Most of the employment bills that passed the Assembly have passed their first committee votes in the Senate, including AB 335 (prohibiting non-California forum selection clauses in employment contracts), AB 793 (California’s version of the federal Ledbetter Fair Pay Act), AB 943 (prohibiting use of Consumer Credit Reports in most employment decisions) and AB 1288 (prohibiting state agencies from mandating employer usage of E-Verify). Several other employment bills are slated for Senate committee votes shortly, including AB 527 (penalties for falsified payroll records) and AB 1562 (employment protections for wage-garnished employees). The deadline for bills to be passed by the second house is September 11, 2009, and October 11, 2009, is the deadline for the Governor to sign or veto any bills. Stay tuned.

Electronic Discovery Act Sent to the Governor, Again (AB 5)

The California Assembly and Senate have unanimously passed this bill which would amend California’s Civil Discovery Act to establish procedures for the discovery of electronically stored information. (The Federal Rules of Civil Procedure already contain such procedures.) The Civil Discovery Act presently provides procedures for the discovery of documents and tangible things, and this bill would expand these discovery rights to permit a party to obtain discovery of electronically stored information. It would also permit discovery by means of copying, testing, or sampling, in addition to inspection.

This bill would require a party opposing discovery of electronically stored information to bear the burden of proving it is not reasonably accessible or that production would be prohibitively expensive, and would still permit the court to order its production for good cause. It would also authorize trial courts to award monetary sanctions against parties and attorneys who fail to comply with these new provisions, but would not permit monetary sanctions where electronically stored information was lost, damaged, or overwritten as a result of the routine, good faith operation of an electronic information system.

This bill has been sent to the Governor and if signed, would be enacted on an urgency basis, meaning it would be immediately effective. This bill is very similar to a bill (AB 926) the Governor vetoed without comment during last year’s budget stalemate.

 

Federal

Federal Minimum Wage Increases in July

On July 24, 2009, the federal minimum wage will increase from $6.55 to $7.25 per hour. This is the third and final phased increase enacted by Congress 2007, and no further increases are currently scheduled. (President Obama has previously signaled that he would support further future increases perhaps to $9.25 but no such increases are currently scheduled.) This increase will not impact California employers since California’s minimum wage is currently $8.00 per hour, but it may impact non-California employers or employers operating in multiple states.

House Overwhelmingly Passes Wounded Veteran Job Security Act (H.R. 466)

This bill would amend the Uniformed Services Employment and Reemployment Rights Act (USERRA) to prohibit employers from discriminating or retaliating against employees being treated for service connected injuries, diseases or disabilities. USERRA currently provides broad reinstatement rights to returning veterans, and this bill would extend these protections to enable returning veterans to receive needed medical treatment for service-related injuries without fear of adverse employment action. Covered employees would also be entitled to have their seniority, status, and other employment benefits protected under this bill. Employees would be permitted to use accrued leave time (e.g., vacation, PTO, etc.) for such treatment, but employers could not force them to do so.

Employers would only be allowed to discharge veterans for service-related injuries in narrow circumstances (e.g., undue hardship, significantly changed employer circumstances, etc.). This bill overwhelmingly passed the House and now proceeds to the Senate where passage seems likely.

 

The following employment-related bills have recently been introduced at the federal level:

Breastfeeding Promotion Act of 2009 (H.R. 2819/S.1244)

This bill would amend Title VII to require employers with more than 50 employees to provide reasonable unpaid break time for mothers to express milk for a nursing child. Employers would be required to make reasonable efforts to provide a reasonably private space, other than a restroom, and would also be entitled to a tax credit for expenses incurred in providing an appropriate environment and equipment for breastfeeding purposes. Similar versions of this bill have been introduced in the last five Congressional sessions.

Please note, California’s Labor Code (sections 1030 to 1033) already requires California employers to provide reasonable time and space for nursing mothers to express milk, so this bill would largely bring federal law into line with California law. (The California Assembly recently failed to pass a bill (AB 514) that would have required time spent expressing milk be considered paid break time).

Proposed Amendments to Title VII to Prevent Sexual Orientation Discrimination (H.R. 2981)

Known as the Employment Non-Discrimination Act of 2009, this bill would amend Title VII to prohibit discrimination against employees based upon their sexual orientation or gender identity, and prohibit retaliation against individuals who report unlawful discrimination. This bill would require employers to provide reasonable access to adequate facilities consistent with an employee’s gender identity, but would not require employers to construct new or additional facilities. This bill would not apply to religious organizations or to the Armed Forces. Prior versions of this bill have stalled, but support appears to be growing and then-Senator Obama has previously signaled support for earlier versions.

AGENCY

California

DLSE Opinion Letter Regarding Meal Periods for Hazardous Waste Drivers

The Division of Labor Standards Enforcement (DLSE) recently issued an opinion letter (Opinion Letter 2009.06.09) discussing the application of California’s meal period requirements to employees engaged in the transportation of hazardous explosive materials. Specifically, the DLSE examined whether truck drivers who could not leave the trucks unattended due to federal safety regulations would be so restricted that any meal period would not be an off-duty meal period, and if so, whether these restrictions were such that they would qualify for an on-duty meal period.

The DLSE concluded the restrictions imposed upon the drivers during deliveries (i.e., they could not leave truck unattended and they had to stay within certain visual distance of truck at all times) were such that the employee would not be considered sufficiently relieved of all duty to have an off-duty meal period. The DLSE noted this result is the same regardless of whether these restrictions were imposed directly by the employer or indirectly by federal regulations or by third-parties (e.g., service stations receiving the delivery) since these restrictions ultimately were for the employer’s benefit (i.e., they precluded accidents thus avoiding liability or suit.) Accordingly, the DLSE concluded that hazardous material drivers who could not be relieved of all duty because of the Federal Hazardous Materials Act would not receive an off-duty meal period as provided for under Wage order 9-2001. Thus, the drivers would be entitled to an additional hour of pay at the employee’s regular rate of compensation unless the conditions were met for an on-duty meal period, in which case the period would be counted as time worked.

The DLSE concluded the application of these federal regulations may, in some circumstances, satisfy the requirements for an on-duty meal period. The DLSE reiterated that the following three requirements must be met to qualify for an on-duty meal period: (1) the nature of the work prevents an employee from being relieved of all duty; (2) the employer and employee have agreed in writing to an on-the-job paid meal period; and (3) the written agreement states that the employee may, in writing, revoke the agreement at any time. The DLSE noted these drivers generally could not be relieved of all duties without exposing the company to liability for federal safety regulations or potential loss of valuable product, and it would be impossible or impractical to send another employee to relieve the driver of duties for 30 minutes. However, the DLSE noted that just because these requirements would often be met did not mean they always would be met (e.g., if the drivers were not subject to federal regulations on particular day, or if there was another driver or a employer-owned facility where they could park truck and take lunch.)

Applying the recent federal court decision in McFarland v. Guardsmark (N.D. Cal. 2008) 538 F.Supp.2d 1209, the DLSE also opined these drivers, who typically worked 12-hour shifts and would be entitled to a second meal period, could take two on-duty meal periods during their shift. In other words, the DLSE noted the Wage Orders did not require that the second meal period be an “off duty” meal period provided the conditions for an on-duty meal period remained. Lastly, the DLSE opined that if the requirements for on-duty meal periods were met, the employer and employee could enter into a blanket agreement for on-duty meal periods, and would not have to enter into separate agreements for each meal period. The DLSE reaffirmed that these on-duty meal periods must state in writing that the employee may revoke the agreement, but it provided no guidance on how much notice must be provided and what the employer’s remedies would be if the employee did revoke. The full text of this Opinion Letter may be found on the DLSE’s website: www.dir.ca.gov/dlse/opinionletters.

Federal

E-Verify Requirements for Federal Contractors Delayed Until September 8, 2009

The United States Citizenship and Immigration Services Department (USCIS) has announced the effective date for federal contractors to use E-Verify has been delayed again, this time until September 8, 2009. As discussed in prior issues, this rule was originally scheduled to take effect on January 15, 2009, and would require eligible (as defined) federal contractors to use the federal government’s otherwise voluntary E-verify program for determining employee eligibility. This final rule has now been delayed four times due to various legal objections. In the interim, the USCIS has posted on its website (www.uscis.gov) some “frequently asked questions” and answers regarding the e-verify requirements for federal contractors under this proposed final rule.

 

JUDICIAL

California

California Supreme Court Rules Class Action Requirements Do Not Apply To Private Attorneys General (PAGA) Actions

In this case the California Supreme Court examined whether a plaintiff suing on behalf of other employees in a “representative action” pursuant to California’s unfair competition law (Business and Professions 17200 et seq.) and California’s Private Attorneys General Act (PAGA, Labor Code section 2698 et seq.) must meet the requirements for a class action to pursue claims under each of those laws. As to California’s unfair competition law, the Supreme Court held that plaintiffs must comply with the class action requirements in order to sustain a claim under section 17200. The Court held that the clear intent of the voters in passing 2004’s Proposition 64 was to require plaintiffs bringing 17200 claims to meet the requirements for a class action.

The Court reached a different conclusion regarding the requirements for an action under PAGA. The Court held that the class action requirements do not apply to every form of “representative action,” and that an “aggrieved employee” need not meet class action requirements in order to pursue a PAGA representative action on behalf of other similarly situated employees. The Court held that an action under PAGA, seeking only statutory penalties, need not be brought as a class action “[b]ecause an aggrieved employee’s action under [PAGA] functions as a substitute for an action brought by the government itself, a judgment in that action binds all those, including nonparty aggrieved employees, who would be bound by a judgment in an action brought by the government.” That is, because PAGA recovery is limited to penalties, a PAGA plaintiff stands in the shoes of the government and may represent all employees for purposes of penalty recovery without meeting the requirements of a class action. (Arias v. Superior Court (ex rel. Angelo Dairy) (2009) __ Cal.4th ___, 2009 Cal.LEXIS 6017.)

California Supreme Court Rules Labor Unions Or Other Associations Cannot Sue Under The Unfair Competition Law Or PAGA On Behalf Of Employees -- To Sue Under These Laws, The Plaintiff Must Have Suffered An Actual Injury Or Be An Aggrieved Employee

Two labor unions sued two employers for violations of the unfair competition law and claimed that defendants were subject to penalties under the Labor Code Private Attorneys General Act of 2004 ("PAGA") for failing to provide meal or rest periods to union members. The unions claimed that they had standing to sue on behalf of the employees because they were representatives of the defendants' employees, and because over 150 current and former employees had assigned their rights under these laws to the plaintiff unions. The Court found that a labor union could not sue under these laws either as the assignee of employees who had standing to sue, or as an association whose members had suffered actual injury.

In regard to the unfair competition law, the Court found that the law, as amended by the voters through Proposition 64, only allows a claim to be brought by a "person who has suffered injury in fact." The Court found that allowing a noninjured assignee of an unfair competition claim to bring an action on behalf of an injured party would go in direct violation of this statutory language. The Court further found that the doctrine of associational standing was inconsistent with the clear statutory language requiring a plaintiff to have suffered actual injury. For these reasons, the unions had no standing to sue. Likewise, in regard to PAGA, the Court found that an action may only be brought by an "aggrieved employee" which is defined as "any person who was employed by the alleged violator and against whom one or more of the alleged violations was committed." The Court found that PAGA is simply a procedural statute allowing an aggrieved employee to recover civil penalties. It has long been the law in California that the right to recover a statutory penalty may not be assigned. The Court further found that the doctrine of associational standing could not be applied because the Act expressly requires suit to be brought by an aggrieved employee -- and plaintiff unions were not employees of defendants. (Amalgamated Transit Union, Local 1756 v. Superior Court (2009) ___ Cal.4th ____, 2009 Cal.LEXIS 6015.)

ADA Access Plaintiff Not Required To Prove Intentional Discrimination To Recover Statutorily-Enumerated Damages

California’s Unruh Civil Rights Act (Unruh Act) entitles a victorious claimant to recover statutorily-enumerated damages (e.g., the greater of treble damages or $4,000) and attorneys’ fees for civil rights violations, including any violation of the Americans with Disabilities Act (ADA). In recent years, many disabled individuals have sued California businesses under the Unruh Act claiming the business denied them equal access, often because of architectural or transportation barriers (e.g., inability to access bathroom or parking lot). In this particular case, the restaurant defendant acknowledged the technical violations but concluded it had not intended to discriminate and, thus, could not be liable for statutory penalties.

The California Supreme Court concluded a plaintiff need not prove an intentional ADA violation to recover statutorily enumerated damages under the Unruh Act. The Court noted the Unruh Act incorporated Title III of the ADA which prohibits not only “outright intentional exclusion” but also “the discriminatory effects of architectural . . . barriers” and the “failure to make modifications to existing facilities.” Accordingly, a plaintiff suing under the Unruh Act need only prove an ADA access violation, not an intentional ADA access violation, to recover statutory damages. (Munson v. Del Taco, Inc. (2009) 46 Cal.4th 661.)

Appellate Court Reverses $86 Million Tip Pooling Judgment Against Starbucks

Last year, a San Diego trial court judge concluded Starbucks had violated Labor Code section 351 by allowing shift supervisors to share in tips placed by customers in a collective tip box, and awarded $86 million in restitution. The California court of appeal reversed holding Labor Code section 351 does not prohibit shift supervisors from sharing in collective tips customers leave for a service team that included both shift supervisors and baristas. The court noted section 351 precludes management, including shift supervisors, from collecting portions of tips left for other employees, but it does not preclude shift supervisors from receiving their portion of a collective tip left for them based upon the service they provided along with others.

The appellate court also noted the lower court had improperly based its ruling on cases addressing the circumstances under which an employer can force employees to share tips given directly to that employee with other members of a service team (i.e. “tip pooling”). The appellate court found that the Starbucks case was more properly described as a “tip allocation” case, rather than a “tip-pooling” case. (As mentioned in last month’s newsletter, the California Supreme Court has recently granted review in several “tip-pooling” cases.)

While a favorable result for employers (and the shift supervisors in that case), employers should note this case involved some unique and undisputed facts including: (1) the customers left money in collective tip boxes for a service team that included both baristas and shift supervisors, (2) shift supervisors spent over 90 percent of their time doing the exact same duties as baristas, (3) customers would not be capable of distinguishing between baristas and shift supervisors, (4) Starbucks had a seemingly fair policy for allocating tips in proportion to the number of hours worked, (5) Starbucks’ policies prohibited store management (store managers and assistant managers) from participating in the collective tip, and (6) baristas did not have to share tips handed directly to them for personal service. (Chau v. Starbucks (2009) 174 Cal.App.4th 688.)

Vacation Policy Requiring Six Months Of Employment Prior To Vacation Being Earned Or Vested Is Lawful

Plaintiff brought a putative class action against her former employer challenging its vacation policy. First, Plaintiff argued the employer's requirement that employees complete six months of continuous employment before they begin earning and vesting in paid vacation was unlawful. Second, Plaintiff argued the employer's vacation accrual schedule, whereby vacation was not accrued and vested until May 1 of each year, was unlawful. The employer prevailed on summary judgment and the appellate court affirmed.

The court of appeal reasoned that Labor Code section 227.3, upon which Plaintiff's claims were predicated, does not require employers to provide any vacation, and where an employer does provide vacation benefits, such benefits are to be provided in accordance with the employer's policy. The court explained that the legislature left it to the employer to determine variables such as when vacation accrues and vests. Therefore, the employer's policy providing that no vacation time is earned during the first six months was lawful, as was its policy that vacation benefits accrued and vested beginning May 1 of each year. (Owen v. Macy's, Inc. (2009) __ Cal.App.4th__, 2009 Cal.App.LEXIS 1058.)

Labor Code Provisions Generally Inapplicable to Public Agencies, Unless Expressly Made Applicable

Employees filed a class action against their water district employer claiming they had not been paid overtime under Labor Code section 510 and had not been provided meal periods owed under Labor Code section 512. The water district argued it had complied with the federal Labor Standards Act which requires overtime only for more than 40 hours per week (not for working more than 8 hours in a day) and does not require meal periods, and that California’s Labor Code provisions did not apply to it. The California court of appeal agreed with the public employer and dismissed the class action complaint.

Applying traditional statutory construction rules, the appellate court held California Labor Code provisions generally apply only to private sector employers unless they are specifically made applicable to public employees. In this case, Labor Code sections 510 and 512 did not contain language making them expressly applicable to public employers. The appellate court also noted these Labor Code provisions, if applied to public employers, would impermissibly infringe upon its sovereign powers. The water district’s status as a “municipal corporation” also exempted it from the Labor Code provisions (sections 201-203) regarding “final pay.” (Johnson v. Arvin-Edison Water Storage Dist. (2009) 174 Cal.App.4th 729.)

Employment Agreement’s Terms Precluded Recovery of Post-Termination Commissions

A sales representative sued to recover commissions allegedly owed on a transaction he negotiated pre-termination, but which was consummated after his termination. The California court of appeal granted the employer’s summary judgment motion because the employment agreement expressly stated he was eligible for commission pay “so long as he remains employed with the Company.” The appellate court concluded the parties’ written agreement, as written, precluded recovery of post-termination commissions.

The court also rejected the employee’s Labor Code claims since the rights of the salesperson to a commission depend upon the parties’ agreement, which in this case barred post-termination commissions. Notably, the plaintiff did not raise, and thus the court did not address, several commonly asserted arguments, including whether this post-termination forfeiture might be unconscionable, so employers should be careful in relying too heavily upon this ruling. (Nein v. Hostpro, Inc. (2009) 174 Cal.App.4th 833.)

Employer’s Bad Faith Pursuit of Trade Secrets Claims against Former Employees Justified $1.4 Million Attorneys Fees Award

California’s Uniform Trade Secrets Act (Civil Code section 3426 et seq.) authorizes the imposition of attorneys’ fees and costs for trade secret actions initiated or prosecuted in bad faith. In this case, the California court of appeal upheld a $1.4 million attorneys’ fees award against a former employer finding its trade secret claims against two former employees were objectively specious and subjectively in bad faith. The appellate court noted the employer had acted in objective bad faith by initiating the action solely to prevent the former employees from competing, even lawfully, by continuing to prosecute the action long after the target employees’ deal with a third party had fallen through, and by relying upon a legal theory (the “inevitable disclosure” doctrine) long rejected by California courts.

The court noted the employer acted in subjective bad faith by continuing to prosecute the action after it learned the employees had not taken trade secrets, by seeking legal relief not available in California, and by insisting upon unlawful settlement conditions (i.e., non-compete and non-solicitation provisions). The appellate court noted trade secret injunctions should be limited to actual or objectively reasonable concerns of trade secret theft, and not simply to prevent lawful competition. (Flir Systems, Inc. v. Parrish (2009) ___ Cal.App.4th ___, 2009 Cal.App.LEXIS 943.)

Letter Informing Employees of Termination Not Protected First Amendment Activity Under Anti-SLAPP Statute

Two talent agents terminated the day after they filed a declaratory relief action challenging their employment contract’s non-solicitation provisions amended their complaint to include retaliation and wrongful termination claims. The employer filed a motion to strike these new claims under California’s anti-SLAPP (Strategic Lawsuit Against Public Participation) statute, Code of Civil Procedure section 425.16, arguing these new claims were premised upon its termination letter, which constituted First Amendment free speech. The California court of appeal rejected this argument noting the agents’ wrongful termination claims were premised upon the employer’s actions (e.g., terminating their employment), not the letter communicating this allegedly unlawful action. The court observed that an oral statement informing an employee they were terminated would not be protected First Amendment speech, and a letter would be no different simply because in writing.

The appellate court noted communications “directly related” to a pending lawsuit might be protected for SLAPP Act purposes, but concluded this termination letter also was not directly related to the already-pending lawsuit simply because it was sent after the initial claim had been filed. (McConnell v. Innovative Artists Talent and Literary Agency, Int’l (2009) ___ Cal.App.4th ___, 2009 Cal.App.LEXIS 1011.)

Federal

United States Supreme Court Holds “Mixed Motive” Defense Inapplicable Under the ADEA

An employee filed suit under the Age Discrimination in Employment Act (ADEA) alleging his demotion was motivated by age. At trial, the judge applied the United States Supreme Court’s decision in Price Waterhouse v. Hopkins (1989) 490 U.S. 228, and instructed the jury that if plaintiff showed age was a “motivating factor” in the challenged decision, then the burden shifted to the employer to prove it would have made the same decision regardless of age (a so-called “mixed motive” instruction.) The jury awarded nearly $50,000 in compensatory damages, but the Eighth Circuit Court of Appeals reversed concluding the “mixed motive” instruction should not have been given until plaintiff first provided so-called “direct” evidence of discrimination (i.e., “a specific link between the alleged discriminatory animus and the challenged decision.”)

The United States Supreme Court initially granted review to determine whether plaintiffs must present “direct” evidence before a mixed-motive instruction could be given in an ADEA case. However, in a 5-4 decision, the Supreme Court answered a slightly different issue, and concluded that “mixed motive” instructions are never applicable in ADEA cases and that the employee always maintains the burden of proving age was the “but for” cause of an adverse employment decision.

The majority opinion noted that Price Waterhouse involved a Title VII claim, not an ADEA claim, and that following Price Waterhouse Congress had amended Title VII to specifically include a “mixed motive” defense after an employee showed a protected classification was a “motivating factor” in the challenged decision. The majority opinion also noted, however, that Congress had not made corresponding amendments to the ADEA, and that the ADEA’s statutory language prohibits discrimination “because of” age, whereas Title VII precludes employment decisions where a protected classification is a “motivating factor.” The Court noted that according to ordinary usage and the Random House Dictionary, “because of” means “by reason of” and that the employee must show age had a “determinative” influence on the outcome (i.e., that it was the “but for” cause of the employer’s adverse decision.) These statutory differences, the Court noted, compelled the conclusion that Title VII permits a “mixed motive” instruction while the ADEA does not.

The majority opinion, which included two dissenting justices from Price Waterhouse(Justices Scalia and Kennedy) also voiced considerable skepticism regarding Price Waterhouse’s “deficiencies,” and refused to extend its rationale to the ADEA.

In short, the Court concluded a plaintiff suing under the ADEA must prove that age was the “but for” cause of the challenged employment action, and that the burden does not shift to the employer to prove it would have taken the same action regardless of age, even if the plaintiff produce some evidence suggesting age was one “motivating factor” in that decision. Ultimately, however, this decision likely will have little impact on California employers since California’s FEHA treats age equally with all other protected classifications, while federal law protects age in the ADEA separately from Title VII. Secondly, it is foreseeable the United States Congress will soon introduce legislation to effectively nullify this decision, just as it did the Court’s recent decision in Ledbetter v. Goodyear Tire and Rubber Co. (2007) 550 U.S. 618. (Gross v. FBL Financial Services, Inc. (2009) ___ U.S. ___, 2009 U.S.LEXIS 4535.)

United States Supreme Court Holding Fear of Litigation Does Not Justify “Reverse” Race Discrimination

On June 29, 2009, in a 5-4 decision, the U.S. Supreme Court held that throwing out test results based on the racial distribution of the results is disparate treatment and that fear of a disparate impact lawsuit is not a valid defense under Title VII of the Civil Rights Act. The case stems from a lawsuit filed by 17 white firefighters from New Haven, Connecticut who all passed an exam for a job promotion only to have the test results thrown out by City officials because none of the 27 African-American candidates received a high enough score to be considered for promotion.

City officials said they wanted to diversify the fire department’s management ranks. The City made special efforts to design a test that would reduce any bias that might disadvantage minority candidates. But when no blacks qualified for consideration for the management jobs, the city decided to scrap the entire test. The firefighters who passed the test sued, claiming the city violated their constitutional right to equal treatment. They also charged that the city violated Title VII by discriminating against them solely because they were not black.

Title VII prohibits acts of employment discrimination based on race, color, religion, sex, and national origin (disparate treatment), as well as policies or practices that are not intended to discriminate but in fact have a disproportionately adverse effect on minorities (disparate impact). Once a plaintiff has established a prima facie case of disparate impact, the employer may defend by demonstrating that its policy or practice is “job related for the position in question and consistent with business necessity.” If the employer meets that burden, the plaintiff may still succeed by showing that the employer refuses to adopt an available alternative practice that has less disparate impact and serves the employer’s legitimate needs.

The Supreme Court’s analysis begins with the premise that the city’s actions would violate Title VII’s disparate-treatment prohibition absent some valid defense. The evidence demonstrates that the city rejected the test results because none of the African American candidates passed the test. Without some other justification, such express race-based decision-making is prohibited. The question is whether avoiding disparate-impact liability excuses what otherwise would be prohibited disparate-treatment discrimination. The city argued that had it certified the test results it would have violated civil rights law, subjecting the city to a lawsuit by the minority firefighters. As the district court pointed out, it is well-established that the desire to avoid such a disparate impact counts as a nondiscriminatory reason for an employer.

However, Justice Kennedy, writing for the majority of the Court stated that fear of litigation alone cannot justify the city’s reliance on race to the detriment of individuals who passed the examinations and qualified for promotions. Discarding the test results was impermissible under Title VII, and summary judgment is appropriate for the white firefighters on their disparate-treatment claim. Finally, the Court stated that if, after it certifies the test results, the city faces a disparate-impact suit, then in light of the Supreme Court’s holding the city can avoid disparate-impact liability based on the strong basis in evidence that, had it not certified the results, it would have been subject to disparate-treatment liability.

The Supreme Court’s ruling overturned the three-judge court of appeal decision, written by Sonia Sotomayor, President Obama’s current nominee to the Supreme Court. Judge Sotomayor had ruled against the firefighters. (Ricci v. DeStefano (2009) ___ U. S. ___, 2009 U.S.LEXIS 4945.)

Federal Court Concludes Employers May Have to Make More Than One Premium Payment per Day for Missed Breaks

Labor Code section 226.7 requires an employer to pay an employee one additional hour of pay (so-called “premium pay”) for each work day that a required meal or rest period is not provided. A debated issue is the number of hours of premium pay an employee can collect in a single day, with employees arguing they are entitled to an hour of premium pay for each missed break or meal period in a day, and others arguing the employer need only make one payment per day regardless of the number of breaks missed that day. There are no published California cases squarely addressing this issue.

The federal district court for the central district of California recently addressed this issue in a wage and hour class action and concluded employees may be entitled to two premium payments in a single day under certain circumstance (one for missed meal periods and one for missed rest periods.) The district court noted the language of section 226.7 and its legislative history arguably supported both the employee’s and the employer’s arguments regarding the number of collectible premium payments. The court also noted, however, that Labor Code section 226.7 is based upon the wage orders which set out the requirements for meal and rest breaks in two separate sections, each of which provides one hour of compensation for violation. The court concluded this signaled an intent to provide separate remedies for meal period violations and rest period violations.

Accordingly, the court held employees could recover up to two additional hours of pay on a single work day if both a meal period and rest break violation occurred (one for the meal period violation and one for the rest period violation.) However, if more than one rest period violation occurs in a single work day, and no meal violations, the employee would be limited to one hour of pay (one hour for all rest period violations combined). Similarly, multiple meal period violations in the same day would result in just one hour of additional pay. (Marlo v. United Parcel Service, Inc. (C.D. Cal. 2009) 2009 U.S. Dist. LEXIS 41948.)

Employer Must Have Actual or Constructive Knowledge to Trigger Indemnification Obligations under Labor Code Section 2802

Plaintiffs sought reimbursement for expenses related to use of their personal vehicles to perform inter-company store transfers. The issue before the court was whether an employee must first make a request for reimbursement with his or her employer before the employer's duty to indemnify under Labor Code section 2802 is triggered.

Since Labor Code section 2802 is inherently vague about when the duty to reimburse is triggered, the court analogized to overtime cases where both federal and state courts have held that plaintiffs seeking unpaid overtime must prove that the employer "had actual or constructive knowledge of [the] alleged off the clock work." Drawing a parallel between overtime liability and expense reimbursement, the court held that before an employer's duty to reimburse is triggered, it must either know or have reason to know that the employee has incurred an expense.

In this case plaintiffs had not established that the employer knew or had reason to know employees were incurring mileage expense just because they used (and the company expected them to use) their personal vehicles to perform inter-company store transfers. To prevail, Plaintiffs would have to show who logged such information or otherwise received it and whether those persons' knowledge was imputable to the company. Simply having a mileage reimbursement policy was not enough. (Stuart v. RadioShack Corporation (N.D. Cal. 2009) 2009 U.S. Dist. LEXIS 41658.)

Learned Professional Exemption Does Not Include Unlicensed Accounting Assistants

Plaintiffs, unlicensed associates performing accounting work, alleged defendant misclassified them as exempt employees, failed to pay them overtime and failed to provide other benefits that an employer must provide to non-exempt employees under California law. Plaintiff's primary obligation was to verify financial statement items by obtaining and reviewing their underlying documentation. They worked under the control and supervision of Certified Public Accountants. Defendant argued such employees were exempt under the professional exemption as "learned" professionals pursuant to subsection 1(A)(3) (b) of the wage orders. Plaintiffs argued that defendant's interpretation would render the "enumerated professional" exemption contained in subsection 1(A)(3)(a) surplusage. In essence plaintiffs contended that unlicensed members of the enumerated professions could not be considered to be exempt under the "learned professional" exemption.

Although the court found both positions to be meritorious, it ultimately adopted plaintiffs’ interpretation and held that unlicensed accounting assistants do not fall within the learned professions exemption. (Campbell v. PricewaterhouseCooper, LLP (E.D. Cal. 2009) 602 F.Supp.2d 1163.)

Employer Required to Pay Agreed-to Liquidated Damages to Illegal Aliens

To resolve several unfair labor practice charges, an employer entered into a Formal Settlement Stipulation under which it agreed to reinstate some employees and to pay a certain amount of backpay for each employee. The employer subsequently refused to pay the backpay to several employees it learned were unauthorized aliens, claiming the payment would violate state and federal immigration laws and the United States Supreme Court decision in Hoffman Plastic Compounds v. NLRB (2002) 535 U.S. 137, which held the National Labor Relations Board (NLRB) could not order backpay for unauthorized aliens. The Ninth Circuit Court of Appeals ordered the employer to pay the agreed-to amounts, noting the employer had voluntarily agreed to pay this amount and that it could comply with this bargained-for agreement without violating federal or state immigration laws. In effect, the court concluded the NLRB was not ordering the backpay, but the court was simply enforcing the parties’ voluntary agreement. However, the court noted the NLRB could relieve the employer of the reinstatement obligations once it received proper proof of the employee’s unauthorized status. (NLRB v. C & C Roofing Supply, Inc. (9th Cir. 2009) ___ F.3d ___, 2009 U.S. App.LEXIS 13667.)