Federal Case Update

Ninth Circuit Finds Private Employer’s Mining Leases with Navajo Nation may Assert a Hiring Preference for Navajo Indians which is a Political Classification, and Not a Classification based on National Origin under Title VII

To conclude a long-standing battle by the EEOC involving tribal hiring preferences, the Ninth Circuit affirmed an Arizona district court’s summary judgment in favor of the Employer, a private mining company, whose leases with the Navajo Nation required the Employer to give preference in employment to Navajo Indians.  The leases involved the mining of coal on Navajo reservation land.  Several members of the Hopi and Otoe tribes filed national origin discrimination charges with the EEOC under Title VII, alleging that they had applied for employment with the Employer and, despite being qualified for the job sought, were not hired because they were not Navajo.

The court held that the Navajo hiring preference in the current leases was based on a tribal affiliation which was a political classification, and not a classification based on national origin prohibited under Title VII.

(EEOC v. Peabody Western Coal Co. (9th Cir. 2014) — F3d –, Opinion Slip No. 12-17780.)

The Federal Aviation Administration Authorization Act of 1994 (FAAAA) Does Not Preempt California’s Meal and Rest Break Laws

The Ninth Circuit Court of Appeals filed an order and amended opinion, denying the defendant employers’ petition for an en banc rehearing of the court’s previous ruling, which stated that the Federal Aviation Administration Authorization Act of 1994 (FAAAA) does not preempt California’s meal and rest break laws as applied to motor carriers in the intrastate context because the meal and rest break laws are not sufficiently “related to” prices, routes or services.  As a result of this order, the ninth circuit maintained its reversal of the district court’s dismissal, based on federal preemption, of claims brought by a certified class of drivers alleging violations of California’s meal and rest break laws. 

(Dilts v. Penske Logistics, LLC (9th Cir. 2014) 2014 U.S.App.LEXIS 17476.)

Ninth Circuit Affirms Certification of Rule 23(b)(3) Class based on “Unofficial Policy” of Denying Overtime Payments and Statistical Sampling of Class Members to Accurately and Efficiently Resolve Questions of Liability

An employee filed a class action against an employer alleging unpaid overtime, missed meal and rest breaks, untimely payment of wages upon termination, noncompliant wage statements, and unfair competition under the UCL.  The action was premised on the employer’s reclassification of a category of its employees from exempt salaried positions to hourly positions.  After the reclassification, the selected employees’ workload did not substantially change, their compensation was still referred to as an annual salary, and hourly payment rates were not shared with other current or prospective employees.  Following the reclassification, the employees did not keep time records, and although the manager of each office had the ability to file a timekeeping “deviation” or “exception” from the default expectation of eight hours per day and 40 hours per week, this adjustment only occurred if approved and each office had a non-negotiable budget that created a functional limit on the amount of overtime a manager could approve.

The district court certified the class with respect to the unpaid overtime, timely payment, and unfair competition claims.  The court found that whether defendant had an unofficial policy of discouraging reporting overtime, defendant’s failure to reduce class members’ workload following reclassification, and defendant’s policy of treating employees’ salaries as exempt from overtime common to the class.  Furthermore, under Rule 23(b)(3), the district court held that statistical sampling of class members could accurately and efficiently resolve the question of liability, while leaving the issue of individualized damages to a later date.  The ninth circuit granted interlocutory appeal.

The ninth circuit affirmed on all counts.  The court stated that whether the common questions were ultimately resolved in favor of one party or another was immaterial at class certification, as they go to the merits of the claims.  On the due process issue, the court stated that many circuit courts (including the ninth circuit) have held that statistical sampling and representative testimony are acceptable ways to determine liability so long as these techniques are not expanded into the realm of damages.  Thus, the court found the district court’s decision did not contradict Dukes or Comcast, and Leyva v. Medline Industries, 716 F.3d 510 (9^th Cir. 2013) was controlling.

(Jimenez v. Allstate Ins. Co. (9th Cir. 2014) 2014 U.S. App. LEXIS 17174.)

California Case Update

Employer Can Terminate Employee for Failing to Participate in Fitness For Duty Examination After Other Employees Reported that that Employee’s Behavior was Frightening Them

The employee, a tenured professor at a university, sued the university and the Assistant Vice President of Human Relations for violations of FEHA, the Unruh Act, the Confidentiality of Medical Information Act, his right to privacy, and defamation after he was terminated for failing to participate in a Fitness for Duty (FFD) examination following reports from faculty members and school administrators that his behavior was frightening them.  The employee argued that the employer’s demand for an FDD was unlawful and in retaliation for the employee’s earlier internal grievances (race-based discrimination and harassment against the employer), was unnecessary because the employee was willing to submit a letter stating that he did not intend to harm anyone, and was unsupported by any objective evidence because the employer refused to give more details as to the events underlying the request.  The trial court granted a nonsuit against the employee on the defamation cause of action and a jury ruled in favor of the employer on the other claims.

The court of appeal affirmed on all counts.  With regard to the FEHA claim, the court stated that the requirement for an interactive process was not implicated because the employee never acknowledged having a disability or sought any accommodation for one.  Further, the court found substantial evidence that the FDD was job-related because multiple people reported multiple instances of threatening behavior on the employee’s part.  On the Unruh Act claim, the court found there was substantial evidence that the employer had a legitimate concern because the thrust of the evidence showed that the employer did not know what was causing the employee’s behavior, not that the employer had determined the behavior resulted from a disability.  On the Confidentiality of Medical Information claim, the court stated that because the FFD was job-related and consistent with business necessity, the discharge was “necessary” within Cal. Civ. Code section 56.20(b) because the employee refused to release medical information required for the FFD.  Finally, the defamation claim was upheld given the defense verdicts on the other allegations.  The court also found that the trial court did not err when it denied the employee’s motion in limine to exclude evidence that he could have mitigated his damages, nor did the trial court err by excluding the employee’s request for production of evidence, which the employee argued could have supported a spoliation of the evidence jury instruction.

(Kao v. University of San Francisco (2014) 229 Cal. App. 4th 437.)

State and Local Regulatory Update

San Diego’s Minimum Wage and Paid Sick Leave Ordinance Stayed Until at Least June 2016

This summer the San Diego City Council overrode Mayor Kevin Faulconer’s veto of an ordinance to increase the minimum wage and to require paid sick leave for employees working within the City of San Diego (adding Article 9, Division 1, sections 39.0101 through 39.0115, to Chapter 3 of the San Diego Municipal Code).  Quickly summarized, this ordinance would have increased San Diego’s minimum wage to $9.75 on January 1, 2015 (compared to $9.00 in California), and increased it to $10.50 on January 1, 2016 and to $11.50 on January 1, 2017, with automatic CPI-based increases annually starting January 1, 2019.  It would also have required employers provide forty hours annually of paid sick leave, thus exceeding the twenty-four hours now required for other California employers.

However, the San Diego business community has obtained the signatures needed to require a city-wide referendum on this ordinance.  This referendum likely will not occur until June 2016, effectively staying this ordinance until at least that point, and it is possible the San Diego City Council may rescind this Ordinance before then or attempt to negotiate a different minimum wage increase.  San Diego employers should stay tuned, but for now at least, they will not have to deal minimum wage or paid sick leave requirements different than the state-wide versions.

California Department of Industrial Relations Announces 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 duties are met, including the performance of statutorily-enumerated duties and an hourly rate of pay not less than the statutorily-specified rate.  The Division of Labor Statistics and Research (DLSR) is responsible for annually reviewing this rate to determine if any adjustments are needed for the following year, and usually makes such determination by the end of October.  On October 10, 2014, the DLSR adjusted the computer software employee’s minimum hourly rate of pay exemption from $40.38 to $41.27, the minimum monthly salary exemption from $7,010.88 to $7,165.12, and the minimum monthly salary exemption from $84,130.53 to $85,981.40, effective January 1, 2015.