The NLRB Adopts Broader Joint Employer Standard

(Browning-Ferris Industries of California Inc. et al. v. Sanitary Truck Drivers and Helpers Local 350, International Brotherhood of Teamsters, NLRB case number 32-RC-109684)

In a 3-2 split decision, the National Labor Relations Board (NLRB) revised its standard for determining joint employer status and concluded that Browning-Ferris Industries was a joint employer of workers provided by a staffing agency.

The standard leading up to this decision was based on a 1982 Third Circuit Court of Appeals decision.  In its majority decision, the NLRB noted that additional requirements for finding joint employer status, which were not grounded in the third circuit ruling or the National Labor Relations Act, had been imposed over the years.  The Board stated these additional requirements for finding joint employer status significantly limited the circumstances in which a joint employer relationship could be found, prompting the majority to revise the standard for joint employer status.

The revised standard holds that two or more entities are joint employers of a single workforce if: (1) they are both employers within the meaning of the common law;  and (2) they share or codetermine those matters governing the essential terms and conditions of employment.  In evaluating whether an employer possesses sufficient control over employees to qualify as a joint employer, the Board will—among other factors—consider whether an employer has exercised control over terms and conditions of employment indirectly through an intermediary, or whether it has reserved the authority to do so.  As such, instead of requiring direct and immediate control for there to be a joint employer relationship, indirect control may establish joint employer status.

Note:  This revised joint employer standard expands the number of entities that could face unfair practice liabilities and bargaining obligations.  Employers should consider re-evaluating their business relationships with this broader joint employer definition in mind.

Employer-Friendly Terms Render Arbitration Agreement Unenforceable

(Carlson v. Home Team Pest Defense, Inc. (2015) _____ Cal.App.4th_____)

An arbitration agreement which required employees to pay a share of arbitration fees and costs, limited attorneys’ fee awards to the employer only, and stated only the employer could file lawsuits for certain claims, was held unenforceable.  Additionally, the agreement contained provisions forcing a waiver of claims on employees that were not imposed on the employer and put a moratorium on representation by counsel (for employees) during a mandatory (but undefined) alternative dispute resolution. 

Procedurally, the employer’s practice of providing the agreement on a “take-it-or-leave-it” basis without time for reflection or the ability to negotiate terms was also found to be unconscionable.

The court of appeal held that an arbitration clause must, among other things: (1) provide both sides with the same rights and remedies; (2) cannot require the employee to pay any portion of the arbitration, or otherwise “discourage an employee” from bringing a claim based on costs; (3) must allow adequate time to review the arbitration clause; and (4) employees must have an opportunity to seek changes to the agreement.

California Supreme Court Provides Further Clarification Regrading the Enforcement of Arbitration Agreements (KNW)

(Sanchez v. Valencia Holding Co. (2015) ____ Cal.App.4th ___)

While not an employment case, in Sanchez v. Valencia Holding Co. the California Supreme Court provided an in-depth analysis of class action waivers and the enforceability of select provisions in arbitration agreements, thereby providing clarity regarding the unconscionability standard.  The plaintiff filed a class action against a car dealership alleging the dealership made false representations regarding the condition of the automobile and failed to make other required disclosures.  The dealership moved to compel arbitration based on an arbitration clause in the sale contract, which contained a class action waiver, in addition to stating that the appealing party was responsible for all fees and arbitration costs, and that both parties retained any self-help remedies and the right to seek remedies in small claims court.  The agreement further stated that any party could appeal an award of $0 or anything in excess of $100,000, in addition to an award of injunctive relief.  Plaintiff initialed the front side of the agreement several times and signed at the bottom of the front side of the agreement.  Plaintiff did not sign or initial the back of the document, where the arbitration agreement was located.  Prior to the United States Supreme Court’s decision in AT&T Mobility LLC v. Concepcion (U.S. 2011) 131 S. Ct. 1740, the trial court denied the motion to compel finding the class action waiver unenforceable.  The court of appeal, following Concepcion, declined to rule on the enforceability of the class action waiver and affirmed on other grounds.

The California Supreme Court reversed.  The Court reasoned that unconscionability requires a substantial degree of unfairness beyond a simple old-fashioned bad bargain, that “[n]ot all one-sided provisions are unconscionable,” and that the terms “overly harsh,” “unreasonably favorable” and “shock the conscious,” were essentially the same.  As a result, the Court found the dealer was not obligated to explain or even point out the arbitration agreement to plaintiff, and that “any state law imposing such an obligation would be preempted by the FAA.”  With respect to a party’s ability to appeal, the Court found the dollar amounts did not make the agreement unconscionable, as both awards were outliers in automobile disputes.  The Court cautioned that the same would not hold true for employment disputes, where awards tended to be higher.  With respect to costs on appeal, the Court distinguished mandatory employment arbitration of unwaivable statutory rights, by stating that in the area of consumer litigation, arbitration fees can be shifted.  The Court stated, “[a] family in search of a job confronts a very different set of burdens than one seeking a new vehicle.”   

Where Parties Failed to Specify Law Applicable to Arbitrability Disputes, Federal Law Applies

(Brennan v. Opus Bank  (9th Cir. 2015) 2015 U.S.App.LEXIS 14039)           

An employee filed suit in federal court accusing the employer of violating his employment contract.  The employer sought arbitration pursuant to the arbitration agreement contained in the subject employment agreement.  The arbitration agreement called for the application of California law to the underlying claims.  The question for the federal court to decide was which laws governs the question of arbitrability.  The court concluded that since the arbitration agreement specified only the law applicable to the arbitration itself, but not the law to be used to determine arbitrability, the federal arbitration rules were to apply, and also pursuant to the parties’ agreement the arbitrator will be tasked with deciding arbitrability.

District Courts Must Consider Consolidated Class Actions as a Single Proceeding for Purposes of Removal Under The Class Action Fairness Act

(Bridewell-Sledge v. Blue Cross of California (9th Cir. 2015) 2015 U.S.App.LEXIS 14624)

Plaintiffs, represented by the same counsel, filed separate putative class actions (Bridewell-Sledge v. Blue Cross of California and Crowder v. Blue Cross of California) in the same court against the same defendants on the same day.  The first action alleged wage inequalities on the basis of race and gender.  The second action alleged denials of promotions on account of race and gender.  The state court ordered both cases consolidated “for all purposes.”  After plaintiffs amended their complaint to add a non-California defendant, defendants filed two separate notices of removal as to each case pursuant to the Class Action Fairness Act of 2005 (CAFA).  Like the state court, the federal district court consolidated the two cases for all purposes and for trial.

The district court, in evaluating whether it had CAFA jurisdiction over the removed action, analyzed the consolidated case as though it remained two separate class actions.  The court remanded Bridewell-Sledge, the first-filed class action, pursuant to CAFA’s “local controversy exception,” which requires that the district court remand a class action when various conditions are met, including that no similar class action has been filed against any of the defendants in the preceding three years.  The district court, however, determined that the exception did not apply to Crowder, the second-filed class action, and it retained jurisdiction over that case.  Thus, even though the state court consolidated the actions for all purposes before removal, one action proceeded in state court and the other action proceeded in federal court.

The Ninth Circuit Court of Appeals affirmed in part and reversed in part, holding that it was improper for the district court to view the cases as two separate class actions after the state court had consolidated the actions for all purposes.  The court of appeal concluded that when the consolidated class actions were considered as a single proceeding, CAFA’s local controversy exception applied to the entire consolidated class action, and therefore both actions should be remanded to state court.