LEGISLATIVE

California

Expedited Jury Trials Act Takes Effect in January 2011 (AB 2284)

As employers know too well, litigation costs in employment matters can be staggering, particularly in protracted matters. Known as the Expedited Jury Trials Act, this new bill taking effect in January 2011 may help reduce these costs and streamline procedures in litigation, including in employment disputes.

As the name suggests, this new law creates procedures for expedited jury trials in civil cases where the parties stipulate in writing to these procedures. These streamlined procedures include utilizing 8 or fewer jurors (instead of 12), limiting to 3 the number of peremptory challenges, and limiting each side to 3 hours to present its case. These procedures would also provide that parties waive their rights to appeal and to move for directed verdict, and that the parties agree the expedited jury trial is binding, subject to any written high/low agreement (as defined in the new provisions).

AGENCY

California

No Increase in Computer Professional Salary for Exemption Purposes

Labor Code section 515.5 provides that certain software employees are exempt from overtime requirements if certain criteria are met, including the performance of statutorily-enumerated duties and that the employee's hourly rate of pay is not less than the statutorily-specified rate. The Division of Labor Statistics and Research (DLSR) is responsible for annually reviewing this salary to determine if any adjustments are needed for the following year.

For the second year in a row, the DLSR has announced that the overtime exemption rate for computer professionals will remain unchanged from its current levels. Accordingly, for 2011, the minimum hourly rate for computer professionals will remain at $37.94, the monthly salary minimum will remain at $6,587.50 and the minimum annual salary requirement will remain at $79,050.00.

Federal

IRS Announces Delay in Employer Reporting of Health Plan Coverage Costs on W-2 Forms

The Internal Revenue Service recently issued a draft Form W-2 for 2011, and announced that employers will not be required to report the cost of group health plan coverage on the Form W-2 for 2011. Instead, employers will simply have the option to report these costs on the new W-2 Form, which includes the codes that employers may use to report the cost of coverage.

For background, the Patient Protection and Affordable Care Act of 2010 had added Section 6051(a)(14) to the Internal Revenue Code requiring employers to report the aggregate cost of applicable employer-sponsored coverage on the Form W-2. The IRS states this reporting requirement is to provide greater transparency to the employee about health care costs generally, and that the reported amounts will not be taxable. The IRS states this delay in requiring employer reporting is to provide employers additional time to comply with this reporting requirement.

The full-text of the IRS' announcement is available at www.irs.gov/newsroom/article/0,,id=228881,00.html and the draft 2011 Form W-2 is available at www.irs.gov/pub/irs-utl/draft_w-2.pdf.

DOL Unveils "Veterans Hiring Toolkit" for Employers to Use

As part of its "America's Heroes at Work" initiative, the Department of Labor (DOL) recently unveiled its online toolkit to assist employers in the process of hiring veterans. This DOL toolkit is primarily intended to assist employers interested in developing or enhancing a veterans hiring initiative but lacked the resources to do so. Amongst other things, this toolkit provides guidance on creating a welcoming environment for veteran employees, actively recruiting veterans, and learning how to accommodate qualified veterans and wounded warriors. This online toolkit is available at www.AmericasHeroesAtWork.gov/forEmployers/HiringToolkit.

NLRB Requires Electronic Posting and Distribution of Unfair Labor Practices Notices

The National Labor Relations Act (NLRA) requires that respondents post certain information, including notices informing employees of their rights under the NLRA, violations found by the National Labor Relations Board (NLRB), and efforts taken to remediate any such violations. Such notices are required to be posted for 60 days in "conspicuous places" where notices to employees are customarily posted, and traditionally required posting of paper copies at fixed locations such as bulletin boards or near time-clocks. Citing recent technological developments, the NLRB has recently amended its posting requirement to require not only traditional physical postings, but also electronic postings, including through emails or on the respondent's internet/intranet, if the respondent customarily uses such electronic communications to communicate with its employees or members.

The NLRB also held that questions concerning whether such electronic posting or communication should be required can be resolved at the compliance stage. The NLRB also cautioned that employer efforts to prevent employees from reading such notices on paid time or employer monitoring of which employees open and read such notices, or print and forward such electronic notices may also violate the NLRA. The lone dissenting Board member opined that requiring electronic communication, including through email, of unfair labor practices notices, effectively transformed a special remedy reserved for egregious violations into a routine practice. (J. Picini Flooring (Oct. 22, 2010) 356 NLRB No.9.)

NLRB Adopts New Policy Authorizing Compounded Daily Interest on Back Pay Awards

Citing its historical "evolutionary approach" to fashioning appropriate back pay awards, the NLRB recently adopted a new policy authorizing back pay claimants to recover interest compounded on a daily basis, thus replacing its prior method for calculating interest based on the Internal Revenue Service's method for interest calculations. Interestingly perhaps, the Board elected to make this determination in an adjudicated proceeding, rather than a formal rulemaking process, and it adopted this more generous daily compounded interest standard rather than the quarterly compound interest standard requested by those seeking the change. Accordingly, the NLRB announced back pay claimants will be entitled to interest compounded daily and that this new policy would apply retroactively to pending cases absent "manifest injustice" in this retroactive application. (Kentucky River Medical Center (Oct. 22, 2010) 356 NLRB No. 8.)

JUDICIAL

California

California Appellate Court Holds Employers Need Only "Provide" Meal Periods, Not "Ensure" They are Taken

As discussed in prior newsletters, considerable legal uncertainty exists regarding an employer's obligations regarding meal periods under Labor Code section 512, particularly whether an employer need only "provide" an opportunity for a meal period, or must "ensure" the meal period is taken. The California Supreme Court is presently considering this exact issue in two pending cases (Brinker Restaurant v. Superior Court and Brinkley v. Public Storage) and employers hope a final decision will be issued in 2011.

In the interim, a California Court of Appeal has recently held that employers need only provide an opportunity to take a meal period, but need not ensure it is actually taken, to comply with Labor Code section 512. The appellate court first cited the statutory language of Labor Code section 512 and Industrial Wage Order 5-2001 (at issue in that case), both of which require employers to "provide" a meal period. The court also noted that the Division of Labor Standards Enforcement's (DLSE) current enforcement position is that employers need only "provide" meal periods to employees. Notably, the court also concluded requiring large employers to "ensure" meal periods are taken would create an unpractical standard and an undue burden on employers.

The appellate court also held the trial court properly denied class certification in this wage and hour class action involving 3000 employees in over 130 restaurants. The court noted that individual issues would predominate since absent a universal practice regarding breaks, plaintiffs would have to explain violations on a restaurant-by-restaurant and supervisor-by-supervisor basis. The trial court also correctly noted that the employees' proffered statistical evidence would not support class proceedings because employees would still need to explain how and why breaks were missed. Lastly, the court held substantial conflicts of interest existed amongst class members as the hourly employees often temporarily assumed supervisory duties, including providing meal and rest breaks, meaning employees would be accusing one another of violating Labor Code provisions. (Hernandez v. Chipotle Mexican Grill (2010) ___ Cal.App.4^th ___, 2010 Cal.App.LEXIS ___.)

(NOTE: this decision is likely to be short-lived as the California Supreme Court will likely grant review pending final decision in Brinker and Brinkley).

Wage and Hour Class Action Settlement Agreement Barred Former Class Member's Subsequent PAGA Suit

Immediately after the trial court approved a wage and hour class action settlement regarding overtime violations and dismissed the suit, a class member filed another claim against the employer seeking civil penalties under the Private Attorneys' General Act (PAGA). The California court of appeal held the prior class action settlement barred the subsequent PAGA-related claims even though the PAGA action involved additional Labor Code violations (e.g., meal and rest period violations, failure to provide itemized wage statements, etc.) not included in the prior overtime-related class action.

The appellate court applied the legal doctrine of res judicata under which a valid, final judgment on the merits bars a subsequent cause of action by the parties or their privies on the same cause of action. The court noted that in California, the term "cause of action" is defined by the "primary right" theory, meaning a suit to redress a legal harm effectively includes all the legal theories or different remedies available for that particular legal injury. Accordingly, a valid, final settlement bars re-litigation not only of the specific claims asserted in the first action, but also claims or issues that could have been raised in the first action. Although the court declined to hold the class action settlement necessarily precluded any subsequent suits based on any Labor Code claims, it held it did bar this Plaintiff's PAGA-based claims premised upon overtime violations as well as other Labor Code claims premised upon an alleged failure to pay wages owed because these claims were or could have been raised in the first class action.

The court observed that a class action member has several choices upon receiving notice of a potential settlement: (1) object to the proposed settlement (including on grounds it should have included other Labor Code claims); (2) intervene in the class action to pursue these other claims; or (3) opt out of the settlement and preserve his right to bring an independent action. The class member could not, however, remain in the class action and collect the settlement proceeds, and then file suit for additional penalties on the same or related claims. (Villacres v. ABM Industries, Inc. (2010) ___ Cal.App.4^th ___, 2010 Cal.App.LEXIS 1812.)

Appellate Court Invalidates Arbitration Agreement Automatically Awarding Attorneys' Fees to Prevailing Employers in FEHA Suits

In this FEHA age discrimination suit, a California appellate court refused to enforce the employer's arbitration agreement finding it procedurally and substantively unconscionable. The court found the agreement procedurally unconscionable because it was presented as a mandatory condition of employment (i.e., no opportunity to negotiate), the arbitration clause was not more conspicuous than other provisions in the employment agreement, and the agreement referenced, but did not attach, the American Arbitration Association's employment arbitration rules.

The appellate court found the agreement substantive unconscionable because it awarded attorneys' fees automatically to the "prevailing party," whereas in FEHA cases generally an employer may recover attorneys' fees only if the plaintiff's claims were frivolous or unreasonably prosecuted. The agreement also found a provision allowing either side to seek injunctive relief with a civil court as part of the arbitration proceedings unconscionable because the employer is more likely to seek such relief, notwithstanding the court's conclusion this provision was no broader than the relief authorized under the California Arbitration Act (C.C.P. § 1281.8(b).) The court also refused to sever these two provisions, instead opting to invalidate the entire arbitration agreement thus allowing the employee to pursue his claims in state court. (Trivedi v. Curexo Technology Corp. (2010) ___ Cal.App.4^th ___, 2010 Cal.App.LEXIS 1802.)

Arbitrator Properly Reinstated Accused Sexual Harasser Where Employer Failed to Apply Discipline Within MOU's Timelines

A California appellate court concluded an arbitrator acted properly in ordering an accused sexual harasser reinstated because the employer failed to take disciplinary action within the six-month period identified in the applicable collective bargaining agreement. The appellate court cited the strong presumption in favor of arbitral finality and the very limited statutory grounds for vacating an arbitrator's award, none of which applied in this case. The court also observed courts are even more limited in reviewing arbitration decisions in the labor-management field, and that applying the CBA's shortened time-frame for initiating disciplinary action did not violate public policy. However, the employer's failure to initiate timely disciplinary proceedings under the CBA did not necessarily mean it had failed to take appropriate corrective action since these are distinct concepts. (City of Richmond v. Service Employees Internat. Union, Local 1021 (2010) ___ Cal.App.4th ___, 2010 Cal.App.LEXIS 1827.)

Employer Liable for Meal Period Violations despite Wage Order 16's Exemption from Meal Period Requirements

Union-represented construction workers subject to Wage Order 16 filed a class action alleging meal period violations under Labor Code section 512 and an entitlement to premium pay wages under Labor Code section 226.7. The employer argued it was exempt from Labor Code section 512's meal period requirements under Section 10(E) of Wage Order 16 which states section 512 does not apply to union employees covered by a collective bargaining agreement containing certain-enumerated provisions. Notably, the California court of appeal observed the employer had correctly interpreted Wage Order 16's exemption for meal periods, but held the employer had potentially still violated the law because this particular Wage Order provision was invalid and exceeded the Industrial Welfare Commission's (IWC) quasi-legislative authority. In effect, the employer should have known this particular Wage Order exemption was invalid.

The appellate court noted the California legislature had enacted Labor Code section 514 which, in turn, had expressly created an exemption from the Labor Code's overtime and alternative workweek schedules (sections 510 and 511) for employees covered by a collective bargaining agreement containing particular provisions. However, the legislature had also enacted Labor Code section 516 authorizing the IWC to adopt or amend wages orders regarding many subjects, "except . . . Section 512," California's meal period provisions. Accordingly, the court held the IWC had exceeded its authority in adopting a collective bargaining agreement exception to the meal period requirements which the California legislature had not authorized. In short, while union-represented employees are potentially exempt from overtime and alternative workweek schedule requirements, they remain subject to the Labor Code's meal period requirements notwithstanding the provisions in the collective bargaining agreement or the applicable Wage Order.

The appellate court also rejected the employer's argument its reliance on the Wage Order's provisions insulated it from liability under section 226.7 for each meal period missed. The court concluded employers should have known since Labor Code section 516 was enacted in 2000 that the IWC lacked authority to create meal period exemptions for union-represented employees, thus the employees could recover the meal period premium pay for any violations within the statutory period (three years under Kenneth Cole) preceding their complaint. (Lazarin v. Superior Court (ex rel Total Western, Inc. (2010) 188 Cal.App.4th 1560.)

(NOTE: as discussed in last month's newsletter, California has enacted a new law (AB 569) amending Labor Code section 512 regarding meal periods, and exempting certain union-represented industries whose collective bargaining agreements contain particular provisions, including regarding meal periods. In this regard, as of January 1, 2011, Labor Code section 512 will have a similar, albeit seemingly narrower, exemption for union-represented employees that previously existed for overtime and alternative workweek schedules.)

Labor Code's Meal and Rest Period Provisions Inapplicable to Public Employees

In this wage and hour class action, a California court of appeal held the California Labor Code provisions concerning meal periods and penalties for non-compliance (Labor Code sections 512 and 226.7 respectively) are inapplicable to public employees. The appellate court reaffirmed the general rule of statutory construction that Labor Code provisions apply only to private employers unless the provision is specifically made applicable to public employer. The court concluded these particular Labor Code provisions contained no language making them specifically applicable to public employers, and observed that applying these provisions to public sector employees would infringe upon the state's sovereign power to regulate its workforce. (California Correctional Peace Officers' Assoc. v. State of California (2010) 188 Cal.App.4^th 646.)

(NOTE: in 2009, another California Court of Appeal similarly concluded the Labor Code's meal period provisions did not apply to public sector employees. (See e.g., Johnson v. Arvin-Edison Water Storage Dist. (2009) 174 Cal.App.4^th 729, 734-735).