Some California Employment Case Law Developments in February 2019 and more...

Here are some key court decisions affecting California employers in February 2019.

Remember last year when the Ninth Circuit held that the federal Equal Pay Act prohibited any consideration of an applicant’s prior salary?  Me neither, but we posted about it here.  As the post explains, the En Banc Court’s narrow majority went further than the EEOC, and even California law.  The case was styled Rizo v. Yovino.  The court’s en banc opinion is here. 

Well, that opinion has been overturned by the U.S. Supreme Court. Interestingly, the Court did not address the merits, ie, whether salary history is one factor that an employer may consider when setting compensation of a new employee.  Rather, the high Court ruled that the opinion was invalid because the author, Senior Circuit Judge Stephen Reinhardt, died before the opinion issued.  The money quote:

The Ninth Circuit’s opinion, being more generous to employees than federal or state law as it was previously understood, was significant. The vote in the Ninth Circuit’s en banc opinion was close. There were several opinions besides the majority’s, in which several judges indicated discomfort with the breadth of the new rule the court announced. The Ninth Circuit now will have to vote again with a panel of eligible judges.  That could result in a modified opinion. In the meantime, California employers should continue to follow California law, in particular, Labor Code section 432.3. The Supreme Court’s per curiam opinion in Yovino v. Rizo is here. 

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The Court of Appeal held in Marquez v. City of Long Beach, opinion here, that the State of California may dictate a statewide minimum wage and apply it to charter cities, which are granted broad power to manage their own affairs.  In the case, some employees of Long Beach were paid less than the California minimum wage.  Long Beach argued it had the power to set its own minimum wage.  The Court disagreed, focusing on the conclusion that a minimum wage is a matter of statewide concern.  The Court explained that other laws deemed matters of municipal concern were not as universally applicable as the state minimum wage. Rather, the minimum wage was more like the Workers’ Compensation Act, which the California Supreme Court held applies to charter cities. 

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The Court of Appeal held that PAGA penalties must be distributed to all of the employees whom the named plaintiff claims are “aggrieved.”  If you are not sure about PAGA penalties, they are wage-hour penalties that an individual collects on behalf of the state Labor Commissioner. The plaintiff keeps 25% of the recovered amount, and pays the state 75%.  But when the plaintiff sues on behalf of others, in a “representative action,” the plaintiff collects penalties for violations that occurred to these other employees.  In this case, Moorer v. Noble LA Events, Inc. (opinion here), the plaintiff sued for wage-hour violations on behalf of himself, and PAGA penalties on behalf of violations that occurred to other “aggrieved” employees.  After Moorer obtained a default judgment, he insisted that the 25% portion of the penalties belonged to him alone, and not the other employees on whose behalf he sued. After giving Moorer 8 chances to submit a correct default judgment, the trial court dismissed the case.  Regarding Moorer’s argument that he was entitled to keep the entire 25% of the PAGA penalties (over $100,000), the Court held that the California Supreme Court twice has held that penalties must be distributed to the aggrieved workers. 

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Caution: some content in this post may be considered at least a little snarky.  But if your organization requires employees to call-in to see if they’re required to work later that day, it’s probably worth the read.    

Two out of three justices of the court of appeal just decided “reporting time” pay is due when employees have to call to see if they are on the schedule for that day.  As a result of this decision, employers who require employees to do so may be on the hook for substantial liability unless the Supreme Court rights this wrong by republishing the case or granting review.  Here’s why:

Reporting Time Pay

Most of the California Industrial Welfare Commission Wage Orders applicable to non-exempt employees contain a provision like this one, quoted in part:

The majority and dissent traced the history of this provision.  Plainly, it applied only to employees who arrived at work and were sent home without work, or sent home after less than half the usual shift. But the two justices in the majority don’t think call-in requirements are fair to employees. So, they extended the reporting time obligation.  

Whether or not requiring employees to call in for shifts is “fair,” and I certainly see why it’s a burden on employees, it’s up to the Legislature to create a remedy or not after holding hearings and engaging in the legislative process.  Two judges do not have the ability to weigh the costs and benefits and hear from constituents and stakeholders.  Oh, that’s not me talking, that’s the dissenting justice in this case:

the uncertainty of not knowing whether an employee will have to work an on-call shift can constitute a significant hardship to that employee. I also assume employers like Tilly’s have legitimate business reasons for needing the flexibility to schedule employees based on unexpected surges or lulls in customers, absences of other employees due to illness or family emergencies, and the like. It would be surprising if retailers maintain on-call policies just to torture employees. Balancing these competing needs and interests of employers and employees is a task for the Legislature, not this court. The Legislature can give notice to all interested parties, learn the social costs and benefits of various alternatives, and engineer compromises acceptable to all. We cannot. 

This Case

Tilly’s is a retailer, governed by IWC Wage Order 7.  Tilly’s required employees  “on call” to call in 2 hours before the shift to see if they were scheduled for that day.  If they were called in, they naturally were paid.  But employees who called in and found out they were not on schedule sued, claiming they were due reporting time pay of “half the usual or scheduled day’s work,” at least 2 hours but no more than 4.  

In a nutshell:

Plaintiff contends that when on-call employees contact Tilly’s two hours before on-call shifts, they are “report[ing] for work” within the meaning of the wage order, and thus are owed reporting time pay. Tilly’s disagrees, urging that employees “report for work” only by physically appearing at the work site at the start of a scheduled shift, and thus that employees who call in and are told not to come to work are not owed reporting time pay. 

Even the plaintiff’s lawyer conceded that an employer’s requiring employees to check their schedule in advance, by itself, was not compensable time. Rather, the issue was the two-hour, same-day window; the fact that the employee did not know until two hours before the shift began whether he or she would be required to work. Those issues offended the Court of Appeal’s majority, justifying the judicial extension of a provision that has nothing to do with the facts:

on-call shifts burden employees, who cannot take other jobs, go to school, or make social plans during on-call shifts—but who nonetheless receive no compensation from Tilly’s unless they ultimately are called in to work. This is precisely the kind of abuse that reporting time pay was designed to discourage.

The court failed to explain how requiring employees to call in to see if they are on the schedule is more burdensome than requiring employees to wear a beeper over the weekend or at night, without compensation, in case they are needed to come to work.  The latter scenario is uncompensated time, unless the employer places too many restrictions on the employee’s activities. We wrote an article examining the factors courts consider here. 

The Majority’s Analysis

The Court admitted:

Wage Order 7 does not reference telephonic reporting, nor is there evidence that the IWC ever considered whether telephonic reporting should trigger the reporting time pay requirement.

Nevertheless, the Court decided that increased technology, such as the use of cell phones, made it easier for employees and employers to reach each other by telephone. Therefore, whether the employee “reported” to work on the phone, or “reported to work” in person, no longer was significant. 

Telephonic reporting requirements appear to be of recent vintage, and, indeed, the cell phone technology that makes such telephonic reporting feasible did not exist until many decades after the reporting time pay requirement was enacted. We therefore agree with Tilly’s and the dissent that “ ‘at least in 1947, the phrase ‘report [for] work’ meant physically showing up.’ ” (Dis. & conc. opn. of Egerton, J., p. 3, post, citing Casas v. Victoria’s Secret Stores, LLC (C.D. Cal., Dec. 1, 2014, No. CV 14-6412-GW) 2014 WL 12644922, at *4 (Casas).) Put simply, that is how an employee reported for work in the 1940’s.

And

neither the practice of on-call scheduling nor the cell phone technology that makes such scheduling possible existed when the IWC adopted the reporting time pay requirement in the 1940’s. 

With all due respect, many people in the 1940’s could call in on a landline or a payphone (Google it). If the employee complement did not have phones, the employer would likely not require them to call in or they’d have no labor pool. Now they can call-in to see if they are on the schedule on a landline or cell phone. As the dissent pointed out

Nothing turns on whether a cord or a cell tower connects the phone. The notion that phones were unfamiliar in the 1940s is ahistorical: spend some enjoyable time listening to Glenn Miller’s 1940 hit PEnnsylvania 6-5000. (The Andrews Sisters’ rendition is delightful.)3 When the Legislature defunded the IWC effective July 1, 2004,4 cellular or mobile phones had been in use for some time. 

After assuming history to support their conclusion that the Wage Order covers a practice that the IWC did not consider, the Court decided that the IWC would have extended reporting time pay to calling in, if it had anticipated the use of the phone instead of physically reporting to work. 

We conclude that had the IWC confronted the issue, it would have determined, as we do, that the telephonic call-in requirements alleged in the operative complaint trigger reporting time pay. 

The point of this is that the reporting time requirement as drafted was targeted at employers who scheduled employees for actual work, only to deny them the work when they showed up.  The pay offset the inconvenience and expense of commuting to a job that did not materialize, and discouraged over-scheduling “just in case.”  Had the Legislature or IWC wished to compensate employees for calling in to see if they were on the schedule at all, they would have said so. 

The dissenting justice in essence believed that the majority was simply “legislating from the bench,” as they say:

The legislative history of the phrase “report for work” reflects the drafters’ intent that―to qualify for reporting time pay―a retail salesperson must physically appear at the workplace: the store. As one federal judge has observed, our “fundamental task in interpreting Wage Orders is ascertaining the drafters’ intent, not drawing up interpretations that promote the Court’s view of good policy.” (Casas v. Victoria’s Secret Stores, LLC (C.D.Cal., Dec. 1, 2014, No. CV 14-6412-GW) 2014 WL 12644922, at *5 [nonpub. opn.] (Casas).) It is our Legislature’s responsibility to enact any necessary legislation to address any hardship to employees who are required to call their employers to discover if they must report for work.

The dissent also explained why it’s not appropriate for the majority to make a policy deicision and issue a new rule such as this:

How are we―an appellate court limited to the narrow record before us―to determine how much notice is enough to avoid a violation of the wage order? What if employees are required to call in eight hours in advance instead of two? How about 12 hours? Twenty-four? Three days? A week? At oral argument, Ward’s counsel seemed to offer a concession that a requirement employees call in 24 hours in advance would be legal. But a concession by one attorney in one case cannot bind all of the plaintiffs’ lawyers across the state who might choose to file similar lawsuits. 

And what about a situation in which an on-call employee is needed to come in to the store because another employee called in sick, or has a family emergency, or just didn’t show up? Does the rule we announce today apply to all retailers in our state of 40 million people, regardless of how many employees or locations it has? Does it apply to almost every other industry in our state? Fifteen of California’s 18 wage orders6―governing everything from manufacturing to transportation to “amusement and recreation” to “handling products after harvest”―contain the identical phrase: to report for work. 

What to Do?

As I wrote at the beginning, it may be the California Supreme Court  decides to “depublish” this opinion, or accepts review if the employer seeks it.  The 2-1 margin increases the likelihood of review, as does the retroactivity of the decision, and the wholesale rewriting of the wage order.  If this case stands, and is deemed to apply retroactively, it could lead to liability for unpaid reporting time, waiting time penalties, failure to pay for hours worked, and more.  We shall see. 

It also bears noting that the Legislature has recently considered bills that would require employers to schedule workers in advance, and to pay them for changes without sufficient notice. The majority and dissent noted these efforts in the opinion.  Also, local jurisdictions such as San Francisco have enacted “fair scheduling” ordinances.  So, the days of uncompensated call-in time may be numbered, even without this opinion. 

As things stand, employers requiring employees to call-in to find out if they are working later that day must consider changing their practices (assuming the applicable Wage Order contains a reporting time provision as most do).

As of now, absent an ordinance like San Francisco’s, there is no legal requirement to issue a fixed schedule, or to provide advance notice of changes.  There also is no need to require employees to call-in to see if they’re on the schedule. The Court’s opinion here could be rendered irrelevant if employers simply call employees into work without requiring the employees to do the calling. (That is, unless the San Francisco ordinance applies to your business, or the Legislature enacts a statewide law.)  Employers could compile a list of workers who want more shifts, or who would be willing and able to come in on short notice. They might even offer a wage differential to those employees who agree to do so. If the need for more workers arises on a given day, employers could call in employees on those lists. Not a perfect solution, but one that does not require reporting time pay.

Employers also are free to schedule workers to appear at work, and provide them with more than half of their shift without incurring reporting time pay obligations. They can assign work to excess employees that might otherwise not get done. Employers also can schedule employees and then cut workers after they show up, and pay the reporting time.  I imagine workers would have appreciated the opportunity to call and find out if they’re needed, but the Court has spoken.

If you’d like to read the opinion in Ward v. Tilly’s, Inc. it’s available here.  We’ll have an article on this issue in the near future. Sign up for our newsletter or browse our hundreds of articles on employment law issues at shawlawgroup.com. 

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The Court of Appeal’s decision in Furry v. East Bay Publishing , LLC (opinion here) covers two important wage and hour issues: time records, and meal period liability. 

Terry Furry was employed as an advertising salesperson, and then “marketing director”  with East Bay Publishing.  He worked regular business hours at the office.  But he also worked at night and on weekends, and attended events outside work hours and was due overtime for that work.  If East Bay intended to classify him as an executive, exempt from most wage and hour laws, it didn’t pay him a sufficient salary regardless of his duties. So, there was no basis for excluding overtime or failing to comply with the Wage Statement requirements contained in Labor Code section 226.  He also was entitled by law to meal periods.

Overtime and Recordkeeping

East Bay did not track Furry’s hours worked.  The trial court conducted a bench trial on Furry’s wage hour claims, including for unpaid overtime and associated other claims.  The trial court found for East Bay, in part finding:

East Bay did not keep detailed records of the hours worked by Furry and failed to meet its burden of proof that Furry was exempt from the laws pertaining to overtime, minimum wage, and meal and rest breaks. However, the trial court concluded that Furry was not entitled to unpaid overtime pay because he “failed to present sufficient evidence regarding the amount and extent of his work to allow the Court to draw a just and reasonable inference that he engaged in any work for which he was not paid.” The trial court found Furry’s testimony regarding his work hours to be “uncertain, speculative, vague and unclear.” The court also noted that Furry “failed to account for hours worked for which he was compensated by the commissions he received from the events described above.”  *** Any attempt by this Court to determine the amount, if any, of uncompensated overtime hours, even a rough approximation of said hours, would be pure guess work and unreasonable speculation on the Court’s part.” 

The Court of Appeal reversed the trial court on Furry’s overtime claim.  Contrary to the trial court, the Court of Appeal believed Furry’s time estimates would be sufficient to calculate overtime due:

“[W]here the employer has failed to keep records required by statute, the consequences for such failure should fall on the employer, not the employee. In such a situation, imprecise evidence by the employee can provide a sufficient basis for damages.” (Hernandez, supra, 199 Cal.App.3d at p. 727.) “ ‘[A]n employee has carried out his burden if he proves that he has in fact performed work for which he was improperly compensated and if he produces sufficient evidence to show the amount and extent of that work as a matter of just and reasonable inference. The burden then shifts to the employer to come forward with evidence of the precise amount of work performed or with evidence to negative the reasonableness of the inference to be drawn from the employee’s evidence. If the employer fails to produce such evidence, the court may then award damages to the employee, even though the result be only approximate.’ ” (Ibid., citing Anderson v. Mt. Clemens Pottery Co. (1945) 328 U.S. 680, 687–688 (Mt. Clemens Pottery).)  * * * * 

“Once an employee shows that he performed work for which he was not paid, the fact of damage is certain; the only uncertainty is the amount of damage.  …”  * * * *  That Furry had to draw his time estimates from memory was no basis to completely deny him relief. In Hernandez, the employee testified based on his recollection that he was required to be on his employers’ premises from 8:00 a.m. until 9:00 p.m. or during the store’s regular hours. (Hernandez, supra, 199 Cal.App.3d at pp. 727–728; see Wirtz v. Dix Box Co. (9th Cir. 1963) 322 F.2d 499, 500–501 [allowing employees to estimate average hourly earnings from piecework to supply information missing from employer’s records].) It was the employee’s memory that satisfied the initial burden, shifting the onus to the employer to either provide a specific detail on the amount of overtime or to disprove by evidence what was not correct with the employee’s figures. That does not appear to have happened here. 

So, this means that employers who do not keep adequate time records may be subjected to liability based on the employee’s estimated hours worked.  The employee’s estimates need not be perfect. And the employer has an opportunity to prove the actual hours worked.  Of course, having classified Furry as exempt, East Bay likely would not have seen the need to keep time records for Furry.  Hence, the danger of misclassification. 

Meal Periods

The Court of Appeal also addressed Furry’s claim that East Bay did not pay him for missed meal periods, including for the time worked as well as the premiums for non-compliant meal breaks.

Furry admitted that he knew he had the opportunity to take meal breaks in compliance with state law.  However, he argued that the Company knew he was eating at his desk and, therefore, he was not “duty free.”

The Court noted that if Furry worked through provided meal periods, at most he would be due the “straight time” for the hours worked, but only if the Company ‘knew or reasonably should have known that the worker was working through the authorized meal period.’ ” (Brinker, supra, 53 Cal.4th at p. 1040, fn. 19.) 

The Court also found that Furry did not prove that the Company “knew or should have known” he was working through meal breaks.  Merely because he ate at his desk by his own choice was not dispositive proof of a non-compliant meal break.  So, no pay was due for Furry’s time allegedly worked during meal breaks. 

To defeat meal period claims, it is important to ensure the meal period policy fully “provides” the opportunity to take meal periods.  To avoid arguments that an employee worked through a meal and that the Company knew about it, it is best to require employees to leave the work area, invite employees to report missed meals, and ensure management never instructs employees to work through a meal period without paying the premium due.  There’s more to it, but the blog is not legal advice, etc.

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Here are some summaries of recent developments.

Cal-OSHA Logs. First, it’s Groundhog Day.  And you know what that means! The annual obligation to post OSHA logs.  Here’s a handy press release issued by Cal-OSHA about the requirement and the process.   

Arbitration – It is important to draft your arbitration agreement to cover all claims against all potential defendants.  A court will compel arbitration even if the plaintiff tries to dodge the agreement by excluding from a lawsuit the employer that actually signed the agreement. In this case, the plaintiff worked for an agency that provided labor to farmers. The plaintiff sued a farmer client without suing the agency, which had in place an arbitration agreement with its employee.  But the agreement covered disputes that arose between employees and the agency’s clients, so to arbitration he will go. The case is  Vasquez v. San Miguel Produce and the option is here. 

Retaliation. A plaintiff claimed she reported her employer to the government for its failing to pay taxes correctly, and was fired in violation of Labor Code section 1102.5 and public policy.  She wanted the employer’s tax returns produced in discovery, but was denied them on the basis of taxpayer privilege. The employer then moved for summary judgment, but never bothered to provide a legitimate business reason and evidence negating “pretext.”  Rather, the employer argued only that without the tax returns, the plaintiff could not prove her case, and the tax returns were privileged.  Nice try.  The real issue in a retaliation case is whether the plaintiff reported an honest belief of wrongdoing to management or the government, and whether there’s a connection between that report and the negative action.  The court of appeal correctly held that the plaintiff could prove her case without the tax returns, through evidence she made a good faith report, and that the employer took negative action against her because of her complaint. This case is  Siri v. Sutter Home Winery and the opinion is here.  

Piece Rate:  The Court of Appeal denied a challenge to Labor Code section 226.2, which imposes a number of requirements concerning the use of “piece rates.”  As opposed to an hourly rate, a piece rate compensates employees by the unit produced, the task completed, etc.  Section 226.2 has vexed employers and payroll service companies for a couple of years now, and can lead to significant liability for minimum wage, overtime, rest period penalties, and other penalties as well.  The plaintiffs in this case, employers that paid piece rate along the lines of their industries, claimed the law was unconstitutional because it was vague.  A challenge to a statute’s constitutionality on the basis of “vagueness” is not easy; that is, about as difficult as riding a unicorn to Valhalla.  The Court held “the statutory language is discernable of meaning both in terms of plain English and in the context of the statutory scheme and applicable case law upon which the statute was based.”  So, section 226.2 is here to stay and employers must follow it, along with prior case law.  This case is Nisei Farmers League v. CA Labor & Workforce Dev. Agency and the opinion is here. 

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Employers that use background check companies to administer credit or other background checks:  take note.  The Ninth Circuit Court of Appeals further limited what qualifies as a “clear and conspicuous” disclosure that “solely” consists of the disclosure under the federal Fair Credit Reporting Act (“FCRA”).   Those forms that include both federal and state disclosures on the same form are invalid under not only the FCRA, but also under California law.  As a result employers must create new disclosure forms (or ensure their vendors do so). 

By way of background, Desiree Gilberg applied for employment with Checksmart Financial LLC.  As part of the application process, she completed a background check application and disclosure.  Like many background check disclosures, this form contained not only the disclosure required under the FCRA, but also various state law disclosures.  These state laws mainly did not apply to Gilberg, who was a California employee.  The text of the form is laid out in the opinion, and a copy of the actual form is attached as an appendix to the opinion.

The Ninth Circuit previously held

in Syed v. M-I, LLC, 853 F.3d 492 (9th Cir.2017), that FCRA contains “clear statutory language that the disclosure document must consist ‘solely’ of the disclosure.” Id. at 496.

But the Court in Syed did not address whether state disclosures could be combined with the federally required one.  

The Court held that the federal disclosure has to be separate from the state law disclosures:

Consistent with Syed, we now hold that a prospective employer violates FCRA’s standalone document requirement by including extraneous information relating to various state disclosure requirements in that disclosure.

So, the combined disclosure form Gilberg signed violated this rule.  

The Court also held that a combined disclosure violates California law, which specifically provides for a separate document “solely” consisting of the disclosure.  So, employers violate California law by including California’s disclosure with other states’.

The FCRA requires the disclosure to be both “clear” and “conspicuous.”  Because the document included states that had no relevance to Gilberg, and because the form included some mumbo jumbo, the Court decided it was not “clear,” but it was sufficiently “conspicuous.”

So, this case will require revisions to background check forms, like pronto.

The case is Gilberg v. Cal. Check Cashing Stores and the opinion is here. 

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