California
Governor Vetoes "Card Check" Bill for Agricultural Workers (SB 104)
Governor Jerry Brown recently vetoed this bill which would have permitted agricultural employees to select their labor representatives by submitting a petition to the Agricultural Labor Relations Board signed by a majority of the bargaining unit (rather than under the current process using secret ballot elections. Former Governor Schwarzenegger had vetoed similar bills on multiple occasions, but it was unclear how Governor Brown would respond. In his veto message, Governor Brown acknowledged the frustrations prompting this bill's passage and pledged to be personally involved in addressing issues in this area, but cited a desire to carefully consider and involve all interested parties in this discussion before enacting a bill that would fundamentally transform California's Agricultural Labor Relations Act (ALRA), which Governor Brown had helped implement during his prior tenure.
AGENCY
Federal
IRS Increases Mileage Reimbursement Rate to 55.5 Cents per Mile Effective July 1, 2011 Through December 31, 2011
In response to increased gasoline prices, on June 23, 2011, the Internal Revenue Service announced it was increasing the optional standard mileage rate from 51 cents to 55.5 cents from July 1, 2011 through December 31, 2011. This optional business standard mileage rate is used to compute the costs of operating an automobile for business use in lieu of tracking actual costs, and is used as a benchmark by the federal government and many businesses to reimburse their employees for mileage.
Department of Defense Extends Arbitration Prohibitions in Final Rule
In the 2010 Appropriations Bill, the Department of Defense (DOD) included a provision precluding contractors or subcontractors that receive more than $1 million in contracts appropriated by the Act from requiring employees, as a condition of employment, to agree to arbitrate any claim under Title VII or any tort related to or arising out of sexual assault or harassment. In June 2011 the DOD issued a Final Rule extending these restrictions for DOD appropriations in 2011, and stated these restrictions will be an ongoing requirement and automatically apply to all subsequent fiscal year appropriations unless subsequently revoked.
NLRB Proposed Changes to Streamline and Expedite Union Election Process
On June 21, 2011, the National Labor Relations Board (NLRB) announced new proposed rules designed to streamline and expedite union election procedures under the National Labor Relations Act (NLRA). The NLRB has stated these proposed rule changes are intended to fix flaws in current procedures that result in unnecessary delays and wasteful litigation, but some have suggested these administrative changes are intended to implement through agency action provisions of the legislatively-dormant Employee Free Choice Act.
The NLRB has published a "fact sheet"(http://www.nlrb.gov/node/525) outlining these proposed changes, which include the following:
The NLRB has scheduled a public hearing for July 18-19, 2011 in Washington D.C., and it will accept written comments on these proposed rules until August 22, 2011. The entire proposed rule is available at http://federalregister.gov/a/2011-15307.
OSHA Proposes to Expand Illness and Injury Reporting Requirements
The Occupational Safety and Health Administration (OSHA) has recently unveiled a proposed rule to make several changes to the occupational injury and illness recording and reporting requirements. Specifically, this rule would update its list of industries that are partially exempt from maintaining records of occupational injuries and illnesses due primarily to their relatively low rate of occupational injury or illness. (A complete list of these partially exempt industries is contained in Appendix A to Subpart B of the Injury and Illness Recording and Reporting regulation). This rule would update Appendix A by replacing it with a list of industries based on the North American Industry Classification system rather than the current Standard Industrial Classification system.
Secondly, OSHA's regulations (specifically section 1904.39) require an employer to report to OSHA, within eight hours, all work-related fatalities and in-patient hospitalizations of three or more employees. The proposed rule would require an employer to report to OSHA, within eight hours, all work-related fatalities and all work-related in-patient hospitalizations (i.e., dispensing with the three employee threshold), and require reporting to OSHA within 24 hours all work-related amputations. OSHA will accept written comments on this proposed rule until September 20, 2011. The full text of this proposed rule can be found at 29 CFR Part 1904 or at www.gpo.gov/fdsys/pkg/FR-2011-06-22/html/2011-15277.htm
JUDICIAL
California
California Supreme Court Holds Labor Code's Overtime Provisions Apply to Non-California Residents Working in California
Several non-California residents sued their California-based employer under the California Labor Code for unpaid overtime for work performed while on assignment in California. These employees generally worked in the employer's Arizona and Colorado locations but periodically worked in California and other states. After a lengthy and complicated procedural history, the California Supreme Court unanimously held that California's overtime provision (Labor Code section 510) applies to work performed by non-residents while in California, including for work in excess of eight hours a day, or more than forty hours a week. The Court also held that failure to pay overtime under Labor Code section 510 for work performed in California could serve as the predicate for claims under California's unfair competition law (UCL) (Business and Professions Code section 17200), but that employees could not sue under the UCL for overtime compensation under the federal Fair Labor Standards Act (FLSA) for work performed in other states.
The Court noted that whether California's overtime provision (Labor Code section 510) applied to work performed by non-resident employees in California involves two separate inquiries: (1) whether the relevant provisions of the Labor Code apply as a matter of statutory construction; and (2) whether "conflict of law" principles require California law to be applied to extent other states have laws regulating work performed by its residents while in California. On the statutory construction issue, the Court noted the Labor Code's relevant overtime provisions (sections 510 [outlining when overtime is owed] and 1194 [enforcement actions for overtime violations] were drafted broadly to apply to "any work" and "any employee" and contained no language suggesting they applied only to California residents.
The Court also noted salient public policy goals supported applying Labor Code section 510 to all non-exempt overtime work within California regardless of residence, including California's stated goals of protecting health and safety of workers, protecting employees in weak bargaining positions from overwork, and expanding the job market by providing an economic incentive to hire more workers rather than incur overtime obligations. In contrast, the Court noted that "to exclude nonresidents from the overtime laws' protection would tend to defeat their purpose by encouraging employers to import unprotected workers from other states."
Interestingly, the Court noted that Labor Code section 510 might not apply to non-resident employees who enter California temporarily during the course of a workday before returning to their state, but concluded it did not need to reach that issue since plaintiffs in this case were suing only for entire days and weeks worked in California. Interestingly also, the Court noted its conclusion that the Labor Code's overtime provision applied to non-resident employees did not necessarily mean the state's other wage and hour provisions (including those governing pay-stubs [section 226] and vacation accrual [section 227.3] would also apply because those issues were not before the Court. The Court also side-stepped the employer's argument this holding would impose significant burdens on out-of-state employers noting this employer was based in California.
Applying choice of law principles, the Court concluded California's overtime provisions should still apply. The Court noted that while California's overtime provisions differed from plaintiffs' states of residence (Arizona and Colorado) which did not authorize daily overtime, there did not appear to be a conflict since none of those states' overtime provisions regulated work performed by their residents in other states (e.g., in California). Even if a conflict existed, the Court observed California's overtime provisions would still apply to work performed in California given the public policy goals mentioned above.
The Court next noted that it had previously held failure to pay required overtime compensation falls within the UCL's definition of an "unlawful business act or practice," and, thus, non-resident employees could sue under the UCL for work performed entirely in California. However, the Court declined to allow suit under the UCL for alleged violations of the FLSA occurring in other states, even if the employer was headquartered in California. The Court noted that the adoption of an allegedly erroneous classification policy is not unlawful in the abstract, and that what creates liability under the FLSA is the failure to pay required overtime and the plaintiffs had not demonstrated the underpayment for work performed outside of California had occurred in California. In other words, the mere fact an employer is headquartered in California does mean it is necessarily subject to UCL liability for FLSA violations occurring in other states, even if the violation allegedly flowed from a policy adopted in the California headquarters.
(Sullivan v. Oracle Corp. (2011) ___ Cal.4th __, 2011 Cal.LEXIS 6537.)
(NOTE: in light of Sullivan's holding California's overtime provision (Labor Code section 510) applies to non-resident employees working in California, employers need to be familiar with this section and how it may differ from federal law and the state in which the employee normally resides. Very simply summarized, Section 510 requires overtime compensation at the rate of one-and-a-half times the regular rate of pay for work in excess of eight hours in one workday, 40 hours in one workweek, and the first eight hours on the seventh workday in one workweek (and increases to double the regular rate for more than twelve hours in a single workday, and in excess of eight hours on the seventh workday.) Moreover, while the Court also specifically declined to address whether the same rule would apply to other Labor Code provisions (ex. itemized wage statements) since not confronted with that issue, employers should become familiar with these other wage and hour provisions to assess whether they might also apply.)
Employee Subjected to Demeaning Sexual Taunting by Supervisor Could Not Pursue FEHA Sex Harassment Claim, but Permitted to Proceed with Co-Worker Retaliatory Harassment Claim
A male ironworker sued for FEHA sexual harassment after his male supervisor made a number of offensive and demeaning comments to him one day at work (e.g., repeatedly referring to him as a "B****," suggesting he had a "nice a**"and that he wanted to "f*** him in the a**"). The employee also sued for FEHA retaliation claiming that following his complaint, his co-workers harassed him because of his complaint about the supervisor's conduct. The California court of appeal affirmed summary judgment on the FEHA harassment claim, but allowed the employee to proceed with the co-worker retaliatory harassment theory.
The appellate court noted FEHA prohibits so-called "same sex" sexual harassment (i.e., male vs. male, etc.), but also observed FEHA does not prohibit all sexual discussions or vulgar language, and only prohibits the disparate treatment of an employee on the basis of sex. The court noted an employee could show such disparate treatment through various methods, including explicit or implicit proposals of sexual activity, or the sex-specific and derogatory terms reflected a general hostility to a particular sex, or if the employee demonstrates the harasser treats both sexes differently.
The court noted, however, there was no evidence this supervisor was motivated by sexual desire or that his sexual jokes were intended to be taken literally (i.e, that he actually wanted to have sex with the male subordinate), but rather they simply reflected anger at or an attempt to embarrass the employee. The court agreed these comments were "crude, offensive and demeaning," but emphasized that in this particular construction environment, "sexually taunting comments by supervisors and employees were commonplace, including gay innuendo, profanity and rude, crude and insulting behavior."
Regarding the post-complaint co-worker interactions, the court reiterated that mere ostracism will not create an adverse employment decision for retaliation purposes, but active workplace harassment might if sufficiently severe or pervasive. The court noted that FEHA's retaliation provision does not specifically address employer liability for retaliation by non-management employees. However, analogizing to the co-worker harassment context, the court concluded an employer may be liable for a co-worker's retaliatory conduct (including harassment and physical threats) if the employer knew or should have known of the co-workers retaliatory conduct and either participated in and encouraged the conduct, or failed to take reasonable actions to end the retaliatory conduct. In this case, the employer did not orchestrate the co-workers retaliation campaign, but it failed to respond to the complaining employee's reports of ongoing retaliatory harassment. (Kelley v. The Conco Companies (2011) ___ Cal.App.4th___, 2011 Cal.App.LEXIS ___.)
(NOTE: Employers should be careful about relying too heavily upon this court's analysis of the same-sex harassment claims. First, as a practical matter, employers have an affirmative obligation to investigate harassment claims, which in this case was genuinely held even if mistaken on the law, and this conduct clearly also violated the employer's harassment/professional conduct policies. Second, this court specifically declined to follow two reported appellate court decision reaching a different conclusion on very similar facts, and this split in appellate court decision may attract the California Supreme Court's attention, assuming this case remains on the books.)
National Bank Act Preempts FEHA Provisions that Exceed its Federal Counterparts
A national bank argued Section 24 of the National Bank Act, which allows national banks to appoint and dismiss its officers "at pleasure," preempted a former vice president's FEHA disability discrimination claim. Applying standard preemption analysis, the California court of appeal concluded Section 24 did not completely preempt state law discrimination claims, but rather only preempted them to the extent they exceeded the equivalent federal discrimination statutes (i.e., the ADA), which impliedly amended Section 24. The appellate court concluded Section 24 did not preempt FEHA's longer statute of limitations period (one year compared to the ADA's 300-day period to file an administrative charge) since the ADA expressly incorporates state law discrimination procedures under its work-sharing arrangements, but it did preempt the FEHA harassment claim against the bank's supervisor since the ADA does not authorize individual liability. (Quinn v. US Bank NA (2011) ___ Cal.App.4th ___, 2011 Cal.App.LEXIS ___.)
Federal
United States Supreme Court Precludes Title VII Class Action Involving 1.5 Million Plaintiffs from Proceeding against Wal-Mart
One-and-a-half million current and former Wal-Mart female employees filed a Title VII gender discrimination class action lawsuit alleging Wal-Mart's policy of allowing its local managers to exercise substantial discretion in promotion decisions had an unlawful disparate impact on female employees. The federal district court and the Ninth Circuit Court of Appeals certified the proposed class, but in a potential landmark 5-4 decision, the United States Supreme Court reversed holding these plaintiffs could not demonstrate the requisite commonality to proceed on a class action basis.
The Court observed that "commonality" requires more than class members working for the same company and alleging the same type of injury (e.g., Title VII gender discrimination); rather, their claims must arise from a common contention (e.g., discriminatory bias by a common supervisor or a corporate policy of discrimination). The Court suggested such commonality may be demonstrated in a Title VII case by demonstrating the employer used a biased testing procedure to evaluate candidates or employees, or alternatively, by "significant proof" the employer operated under a general policy of discrimination if the discrimination manifested itself both in hiring and promotion practices through entirely subjective decision-making processes.
In this case, however, the Court noted Wal-Mart had an express policy prohibiting sex discrimination and imposing penalties on individuals who violated this policy, thus largely negating any claim of a common corporate-wide policy of discrimination. The Court rejected Plaintiffs' contention that Wal-Mart's policy of vesting local supervisors with discretion constituted a common policy of discrimination; to the contrary, the Court observed this policy creating individualized decisions at the store or district level effectively constituted a policy against having uniform employment practices for class action purposes. The Court also concluded Plaintiffs could not establish commonality through statistical analysis or anecdotal testimony from approximately 120 of the 1.5 million employees, noting these anecdotes about violations at particular stores or regions did not demonstrate a company-wide policy of discrimination.
The Court also unanimously concluded that the class action plaintiffs' claims for back pay were improperly certified under Federal Rule of Civil Procedure 23(b)(2). The Court noted that Rule 23(b)(2) applies only when a single injunction or declaratory judgment would provide relief to each class member. The Court observed monetary damage awards involve individualized inquiries that may be certified under Rule 23(b)(3) and its different procedural protections and standards (e.g., mandatory notice and the right to opt out), but not under Rule 23(b)(2). (Wal-Mart Stores, Inc. v. Dukes (2011) ___ S.Ct. ___, 2011 U.S.LEXIS 4567.)
Supreme Court Limits Prevailing Defendant's Ability to Recover in Civil Rights Cases
While federal law authorizes a court to award reasonable attorney's fees to a "prevailing party" in certain civil rights cases, federal courts have held prevailing plaintiffs are entitled to recover these fees as a matter of right while prevailing defendants may only recover if the suit was frivolous. These courts have also held that a prevailing defendant may recover its fees without providing that the plaintiff's entire lawsuit was wholly frivolous (i.e., the inclusion of a non-frivolous claim will not completely insulate from fees for the frivolous aspects). In this case, the Court held that where a plaintiff asserts both frivolous and non-frivolous claims, the prevailing defendant may recover fees but only for those costs the defendant would not have incurred but for the frivolous claims. (Fox v. Vice (2011) ___ S.Ct. ___, 2011 U.S.LEXIS 4182.)
Ninth Circuit Holds Unlicensed Accountants are not Categorically Excluded from California's Professional Exemption
Two thousand unlicensed junior accountants filed a wage and hour class action seeking unpaid overtime claiming they were ineligible for the professional overtime exemption because they were unlicensed. In 2009, a California district court issued a published decision concluding these unlicensed individuals were categorically excluded from California's professional exemption because they were not licensed or certified. (See Campbell v. PricewaterhouseCoopers LLP(E.D. Cal. 2009) 602 F.Supp.2d 1163, 1185.) The Ninth Circuit Court of Appeals reversed concluding that the absence of a license precluded these individuals from meeting the first prong of the professional exemption, but did not necessarily preclude them from satisfying the second prong which exempts the so-called "learned or artistic" professional.
The ninth circuit noted Wage Order 4-2001 contains two subsections outlining individuals who might be considered "professionals:" subsection (a) which requires an individual to be licensed or certified and to work in one of eight specifically enumerated professions (law, medicine, dentistry, optometry, architecture, engineering, teaching or accounting)) and subsection (b) for individuals primarily engaged in an occupation commonly recognized as a learned or artistic occupation. In this case of first impression, the ninth circuit noted these two subsections are alternative, not exclusive, tests for the eight professions enumerated in subsection (a). In other words, the fact an employee from one of these professions lacks a license and could not satisfy subsection (a) did not categorically preclude them meeting subsection (b) if they satisfied the elements of that section, including engaging in work that is "predominantly intellectual and varied in character." The court concluded sufficient factual disputes existed concerning these individual's actual work duties for subsection (b) purposes that a jury trial was warranted to determine whether plaintiffs qualified for either the professional or administrative overtime exemptions. (Campbell v. PriceWaterHouseCoopers, LLP (9th Cir. 2011) ___ F.3d ___, 2011 U.S.App.LEXIS ___.)
(NOTE: while this case involved the "accounting" profession, the Ninth Circuit's opinion suggested that a similar analysis applies to the other seven professions identified in subsection (a), meaning unlicensed professionals in medicine (e.g., medical school residents), law (attorneys who have not yet passed the bar), etc. might still qualify under subsection (b).)
Ninth Circuit Clarifies Who May be Sued for ERISA Violations Under 29 U.S.C. § 1132
Section 1132(a)(1)(B) of the Employee Retirement Income Security Act (ERISA) authorizes a participant or beneficiary to pursue a civil action to recover benefits due or to enforce his rights under the plan, but does not specify which parties may be proper defendants in that civil action. In this case, a former executive sued the insurer for her employer's disability benefits program after the insurer refused to pay disability benefits based on the higher salary retroactively agreed to by her and the employer to settle a Title VII sex discrimination claim. The federal district court dismissed the ERISA claim concluding only the plan or plan administrator (but not the third-party insurer) could be sued under section 1132, but the Ninth Circuit Court of Appeals reversed. The appellate court observed section 1132 neither enumerated nor limited the potential defendants but instead focused upon act or practice which violates any ERISA provision, and concluded that this third-party insurer potentially could be a defendant if the plaintiff established all other elements for liability purposes. (Cyr v. Reliance Standard Life Ins. Co. (9th Cir. 2011) ___ F.3d. ___, 2011 U.S.App.LEXIS 12601.)
Public Employer Failed to Demonstrate Threat of Workplace Disruption to Justify Demoting Employee Simply for Associating with Former Boss
Courts have attempted to balance a public employer's ability to discipline public employees for conduct disrupting the workplace against the public employee's First Amendment rights to free speech and association. Accordingly, the courts have afforded public employers considerable discretion to discipline public employees for conduct that disrupts or reasonably threatens to disrupt the workplace; on the other hand, given the Constitutional rights implicated, the employer cannot simply rely upon speculation or conjecture about future problems. In this case, the Ninth Circuit Court of Appeals concluded the mere fact a public employee sat next to her former boss during a disciplinary meeting involving that boss did not disrupt the workplace or provide reasonable prediction of future disruption to justify demoting that public employee. (Nichols v. Dancer (9th Cir. 2011) 2011 U.S.App.LEXIS 12783.
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