1. AGENCY UPDATES

See WTK’s Special Report on California’s Paid Sick Leave law and California Family Rights Act regulatory amendments, both of which go into effect on July 1, 2015:  http://www.wilsonturnerkosmo.com/index.cfm/news/ 

Los Angeles City Council Approves Minimum Wage Increase to $15 Per Hour by 2020

On May 19, 2015, the Los Angeles City Council agreed to draft an ordinance raising the $9 an hour minimum wage to $15 by 2020, joining Chicago, San Francisco, and Seattle and other major cities that have approved similar increases.  A final vote on the measure will take place next month and Mayor Eric Garcetti has already promised to sign the wage increase into law.  The minimum wage increase will take place gradually, with citywide wages increasing to $10.50 on July 1, 2016, followed by annual increases through 2020. Increases after 2020 will be tied to the consumer price index.  Specific provisions and exemptions are still being debated.     

1. JUDICIAL DEVELOPMENTS

Arbitration Agreements That Allow “Express Choice” by Employees Likely Enforceable  

Ashbey v. Archstone Prop. Mgmt., Inc. (9th Cir. 2015) 2015 U.S. App. LEXIS 7819, *9

An employee sued for violation of Title VII and “related state claims.”  The employer compelled arbitration, which the employee defeated at the district court level.  The ninth circuit reversed, granting the motion to compel.

In 2009, the employee signed a document acknowledging directions to access the company policy manual, including its Dispute Resolution Policy.  This signed acknowledgement included an understanding of adherence to the Dispute Resolution Policy.  The Dispute Resolution Policy itself stated it was governed by the Federal Arbitration Act. It applied to the resolution of disputes that otherwise would be resolved in a court of law, and required all such disputes between employee and the employer to be resolved only by an arbitrator through final and binding arbitration and not by way of court or jury trial.  The policy also applied, without limitation, to disputes arising out of the employment relationship under the Civil Rights Act of 1964 and all other state statutory and common law claims

The court of appeals found that this arbitration agreement complied with the requirement of allowing employees to make an “express” choice.  The court specifically found the Dispute Resolution Policy was not ambiguous on that point because: (1) the policy stated it “is governed by the Federal Arbitration Act”; (2) the policy stated “all . . . disputes between Employee and the Company [are] to be resolved only by an arbitrator through final and binding arbitration and not by way of court or jury trial”; and (3) the policy stated it “applies, without limitation, to disputes arising out of the employment relationship . . . including, without limitation, disputes over . . . harassment and claims arising under the . . . Civil Rights Act of 1964.” The employee was notified of the terms of the policy, the full text of the policy was available to the employee, and it was clear that entering into the Dispute Resolution Agreement waived specific statutory remedies.

An Inability to Work with a Particular Supervisor is Not a Disability

Higgins-Williams v. Sutter Medical Foundation (2015) ___Cal.App.3rd__; 2015 Cal. App. LEXIS 455

An employee reported to her personal physician that she was “stressed” because of interactions at work.  Her doctor diagnosed her as having “adjustment order with anxiety” and shortly thereafter the employee requested and was granted a stress-related disability absence under the California Family Rights Act (CFRA) and the federal Family and Medical Leave Act (FMLA).

The employee returned to work after her statutory leave was exhausted.  The employee then complained that her supervisor was singling her out for negative treatment including acting “curt and abrupt” with her and assigning a disproportionate share of work.  After suffering from a panic attack after her supervisor “grabbed [her] arm” and yelled at her, she left work.

The employee requested and was granted another leave of absence.  After her leave of absence was extended multiple times, the employee was terminated after she failed to produce documentation detailing when she would be able to return to work or how further leave would facilitate a return to work.

The employee consequently filed a lawsuit, bringing four claims under the Fair Employment and Housing Act (FEHA) for disability discrimination, failure to reasonably accommodate, retaliation for her assertion of disability rights, and disability-related wrongful termination.  The employee filed two similar claims under the CFRA.  The alleged disability was the employee’s adjustment disorder with anxiety.  

The trial court granted summary judgment in the employer’s favor.  The court of appeal affirmed the lower court's dismissal of the employee’s wrongful termination and disability discrimination claims holding an inability to work under a particular supervisor is not a disability under state law. 

Prevailing Defendants in FEHA Discrimination Actions Are Not Entitled to Award of Costs Absent Showing Plaintiff’s Action Was Groundless

Williams v. Chino Valley Independent Fire Dist. (2015) 61 Cal.4th 97

An employee brought an action against his employer for disability discrimination in violation of the FEHA.  The trial court granted summary judgment for the employer and awarded it court costs.  The employee appealed.

The court of appeal affirmed the trial court’s award of costs, explaining that the governing statute was Code of Civil Procedure section 1032(b), which allows a prevailing party to recover its court costs as a matter of right, rather than Government Code section 12965(b), which makes such an award discretionary.  The court also distinguished between attorneys’ fees and ordinary costs.

The California Supreme Court reversed, concluding that Government Code section 12965(b) constitutes an express exception to Code of Civil Procedure section 1032(b) and, as a result, trial courts have discretion to award both attorney’s fees and costs to prevailing parties in FEHA actions.  The Court further concluded that, in exercising discretion, trial courts must follow the rule set forth in Christiansburg Garment Co. v. EEOC (1978) 434 U.S. 412.  Under that standard, a prevailing plaintiff should ordinarily recover his or her attorneys’ fees and costs, but a prevailing defendant should not recover its fees and costs unless the court finds the action was “frivolous, unreasonable, or groundless, or that the plaintiff continued to litigate after it clearly became so.”  Therefore, the Court held that the court of appeal erred in affirming the trial court’s award of costs to the employer despite the absence of any finding the action was objectively groundless.

Court Examines Scope of Fair Employment and Housing Act Harassment Protection for Persons Providing Services Pursuant to a Contract

Hirst v. City of Oceanside (2015) ___Cal.App.4th__

An employee of a nurses group (AFN) brought a FEHA claim against the City of Oceanside, alleging she was sexually harassed by a police officer, while providing phlebotomy services on behalf of the Oceanside Police Department.  The case went to trial, and the jury awarded the nurse $1.5 million in damages against the city. 

Oceanside moved for a new trial and for a judgment notwithstanding the verdict (JNOV).  Oceanside contended that the damages award was unsupported by the evidence, and that the nurse was not entitled to recover under the FEHA because she was not a city employee, special employee, or a “person providing services pursuant to a contract” under Government Code section 12940(j)(1).  Rather, Oceanside argued that its contract was with AFN, not the nurse.  The trial court denied the JNOV motion, but granted the new trial motion finding the damage award was excessive.   

The nurse did not appeal the new trial order, but Oceanside appealed from the denial of its JNOV motion, again arguing that the nurse had no standing to recover damages on her FEHA claim.  The appellate court denied the city’s appeal, holding  that the nurse was a “personal providing services pursuant to a contract” because she met all three definitions of such a person under the FEHA.  Namely, (1) she had the right to control the performance of the contract for services and discretion as to the manner of the performance; (2) she was customarily engaged in an independently established business; and (3) she had control over the time and the place the work was performed, the tools and instruments used, and the work required a particular skill not ordinarily used in the course of the city’s work.        

California Supreme Court to Review Legality of “On-Call” Rest Breaks

Augustus v. ABM Security Services, Inc. (2014) 233 Cal.App.4th 1065 (SC S224853/B243788 rev. granted 4/29/15)

The California Supreme Court has granted review in a high profile case involving on-duty rest periods.  A group of security guards brought a class action lawsuit against their employer alleging the employer’s policy of requiring them to be “on-call” during rest breaks violated California law. The trial court granted summary judgment for the employees, concluding an employer must relieve its employees of all duties during rest breaks, including the obligation to remain on-call. The superior court said “what is relevant is whether the employee remains subject to the control of the employer.”  The employees also moved for summary judgment on the issue of damages, seeking unpaid wages, interest, penalties, attorneys’ fees and an injunction.  Finding no triable issue as to whether the employer was subject to approximately $90 million in statutory damages, interest, penalties, and attorneys’ fees, the court granted the motion and subsequently awarded attorneys’ fees and costs.  The employer appealed.

The court of appeal disagreed with the trial court’s analysis noting a distinct difference between the language in the applicable Wage Orders regarding meal periods and rest breaks. Since the Wage Order does not specifically state the employee is to “be relieved of all duty” during a rest break, the court found there is no such requirement: “If the [Industrial Welfare Commission] IWC had wanted to prescribe that an employee be relieved of all duty during a rest period, it knew how to do so. That it did not indicates no such requirement was intended.” The court reasoned that since all rest periods are to be paid, this implies that rest periods are normally taken while on-duty and subject to the employer’s control. Finding the trial court relied on an incorrect interpretation of law, the court of appeal reversed the grant of summary judgment and summary adjudication in the security guards’ favor.

The California Supreme Court has identified two issues for review.   First, do Labor Code, section 226.7 and Industrial Welfare Commission Wage Order No. 4-2001 require that employees be relieved of all duties during rest breaks? Second, are security guards who remain on-call during rest breaks performing work during that time under the analysis of Mendiola v. CPS Security Solutions, Inc. (2015) 60 Cal.4th 833.  (Mendiola found that all time must be compensated and that employers could not carve out sleeping time for on-call security guards as uncompensated.)  The stakes are high. 

Default Judgment Exceeding Damages Pled in Complaint is Void

Rodriguez v. Cho (2015) ___Cal.App.2d__

An employee filed a lawsuit against the company and its owner alleging unpaid overtime under the Private Attorneys General Act of 2004 (PAGA) and retaliation in violation of various provisions of the Labor Code. The prayer for relief requested general, special, compensatory, and punitive damages in an amount to be proved at trial, a civil penalty in the amount of $10,000 (Lab. Code, § 1102.5, subd. (f)), civil penalties under PAGA, and reasonable attorneys’ fees and costs. The employee also served a statement of damages with the complaint.

Defendants failed to respond to the complaint and the employee requested an entry of default, which the court granted.  Subsequently the court entered a default judgment for the employee in the amount of $129,673.48, which consisted of $123,680 in damages; $2,368 in prejudgment interest at the rate of 10 percent; $3,060.48 in attorneys’ fees; and $565 in costs. Two years later the individual defendant filed a motion to set aside the default judgment claiming the judgment was void because the amount of damages was excessive; the employee did not demand an amount of damages in the complaint, and a default judgment may award only what the employee demanded in the complaint. The trial court denied the motion and the individual defendant appealed. 

The court of appeal held the motion to set aside the judgment should have been granted on the ground

that the default judgment is void because it exceeded the amount demanded in the complaint.  The employee argued that the statement of damages should control because her complaint included a claim for wrongful termination in violation of public policy which constitutes a “personal injury.” The court of appeal disagreed and held that a wrongful termination claim is not a personal injury claim and therefore, the statement of damages was not controlling. Rather, the court could only look at the damages specifically pled in the complaint to determine the judgment amount. Therefore, since the only damages specifically pled were $10,000 in penalties, this was the maximum judgment that could have been entered.