California Labor and Employment Defense Blog

Financial Service Workers May Be Glorified "Production Workers" Who Are Entitled to Overtime -- Davis v. J.P. Morgan Chase & Co.

bvanvleck@vtzlaw.com (Brian Van Vleck) — Tue, 24 Nov 2009 19:01:37 -0800

Loan officers, analysts, and brokers of various financial products are generally considered to be well compensated and prestigious positions. As a result, these positions are often reflexively classified as exempt from overtime. The Second Circuit's recent decision in Davis v. J.P. Morgan Chase & Co. should cause employers to question this assumption.

The Davis decision holds that a given position cannot be considered exempt unless it falls on the correct side of the so-called "production/administrative dichotomy." According to this "dichotomy" test, the administrative exemption cannot apply if a worker's services are not being performed for the purpose of internally running the company, but are instead being sold to customers to generate revenue.

The court noted that classifying a position as "production" depends solely on the relationship between the work performed by the employee and the nature of the Company's business. According to the Court, the key distinction is between, on the one hand, those employees "directly producing the good or service that is the primary output of a business" and, on the other hand, those "employees performing general administrative work applicable to the running of any business."

Significantly, the Court also specifically found the following factors were irrelevant to this distinction: (i) whether the company is selling "an intangible service rather than a material good;" (ii) "the level of responsibility, importance, or skill needed to perform a particular job;" (iii) "the monetary value" of the transactions handled by the employee; and (iv) whether the employee's is highly paid.

Applying this "dichotomy" may lead to counter-intuitive results where the employer is in the business of selling financial products and services to the public. For example, an employee who creates these financial products or provides these services to the firm's clients may be found to be a non-exempt "production" worker just as surely as if he were welding car parts on a GM assembly line.

The Davis Court thus determined that a group of loan underwriters for Chase who investigated customer finances and approved loans could not be classified as exempt administrative employees. To the contrary, in the context of Chase's loan business, they had to be classified as mere "production" workers.

Although decided under the FLSA, Davis is also relevant to California overtime law, which expressly incorporates most federal definitions of exempt duties.

Vesting of Incentive Compensation -- Schachter v. Citigroup, Inc.

bvanvleck@vtzlaw.com (Brian Van Vleck) — Fri, 06 Nov 2009 07:04:10 -0800

The California Labor Code is very strict in protecting an employee's right to be paid for all compensation that he earns. As we have repeatedly blogged in the past, it is often a thorny issue to determine exactly when these protections attach -- in other words, when has a mere hope or expectation of a reward matured into a fully vested proprty right that must be paid by the employer without further delay or reduction?

The California Supreme Court recently shed a bit more light on this issue in Schachter v. Citigroup, Inc. In that case, a stockbroker had elected to take some of his compensation in the form of "restricted stock," which would only vest if he were still employed by the Company on a specified date. The broker quit before the vesting date and never received the stock. Schachter argued that this arrangement violated the Labor Code because it required him to "forfeit" compensation that he had already earned. (He also argued that it was irrelevant that he had agreed to the deal in the first place because the Labor Code also prohibits any agreement to waive its protections).

The Supreme Court rejected the theory that this restricted stock deal was an illegal forfeiture. In doing so, the Court basically construed the deal as a "stay bonus" or "longevity bonus." Under this construction, the employee never earned the compensation in the first place because he voluntarily quit.

Only when an employee satisfies the condition(s) precedent to receiving incentive compensation, which often includes remaining employed for a particular period of time, can that employee be said to have earned the incentive compensation (thereby necessitating payment upon resignation or termination).

The Court seemingly went out of its way, however, to caution employers against overreaching. For example, the Court specifically noted that bonuses, commissions, and other incentive compensation may have to be paid out where the worker does not quit but is fired.

If the employee is discharged before completion of all of the terms of the bonus agreement, and there is not valid cause, based on conduct of the employee, for the discharge, the employee may be entitled to recover at least a pro-rata share of the promised bonus. In the analogous context of commissions on sales, it has long been the rule that termination (whether voluntary or involuntary) does not necessarily impede an employee's right to receive a commission where no other action is required on the part of the employee to complete the sale leading to the commission payment. This concept has been colorfully described as “He who shakes the tree is the one to gather the fruit.”

The Bottom Line: Employers may lawfully condition bonus payments on an employee's voluntary decision to quit. But employers generally cannot condition payment on matters solely within their own unilateral control, such as a decision to fire an employee before he can perform all of the contractual conditions.

Ninth Circuit Authorizes a Practical "Alternative Workweek" Solution -- Parth v. Pomona Valley Hospital

bvanvleck@vtzlaw.com (Brian Van Vleck) — Mon, 26 Oct 2009 10:05:03 -0800

In Parth v. Pomona Valley Hospital Medical Center, the Ninth Circuit authorized employers and employees to exercise some flexibility in attempting to work around the overtime requirements of the FLSA.

In Parth, a group of nurses was originally assigned to work almost exclusively in 8-hour shifts. The majority of the nurses, however, "preferred working 12-hour shifts in order to have more days away from the hospital." As a result, the Company implemented a new pay plan.

The pay plan provided nurses the option of working a 12-hour shift schedule in exchange for receiving a lower base hourly salary (that at all times exceeded the minimum wage set forth by the FLSA) and time-and-a-half pay for hours worked in excess of eight per day. The result: nurses, who volunteered for the 12-hour shift schedule, would make approximately the same amount of money as they made on the 8-hour shift schedule (while working the same number of hours and performing the same duties).

Several years later Parth filed a class action claiming that the whole plan was just an artificial scheme to avoid paying overtime, and that the lower base rate for 12 hour shifts therefore violated the FLSA. The Court disagreed. It held instead that the use of a lower base rate of pay for longer shifts is permissible so long as the rate is not so low as to be wholly "unrealistic and artificial."

A number of other factors, while not strictly relevant to its interpretation of the FLSA, also influenced the Court. For example, the employees had apparently expressed their preference for the longer shifts, the 12 hour shifts were voluntary, and the whole arrangement was eventually codified in a CBA that was ratified by the bargaining unit. Under these circumstances it was pretty difficult to paint a picture of employees being unfairly exploited.

Since its passage in the 1930's the FLSA has been one of the preeminent examples of government paternalism designed to protect employees by taking away their right to bargain with their employers over certain working conditions. The Parth decision is an especially refreshing development because it restores a small degree of discretion to employers and employees to work together to craft "win-win" alternatives to the standard 9 to 5 workweek.

Employees Are Not Required to Exhaust Internal Expense Reimbursement Procedures Before Suing -- Stuart v. RadioShack

bvanvleck@vtzlaw.com (Brian Van Vleck) — Sat, 10 Oct 2009 10:06:46 -0800

California employees have a right to be reimbursed for their work related expenses, such as business travel, equipment, materials, training, and even legal expenses. On the other hand, companies typically have their own deadlines, rules, special forms, and other procedural requirements which must be followed in order to request and receive reimbursement.

So what happens when an employee sues for reimbursement and the Company argues that his claim should fail because he did not make a proper request under its internal rules?

In Stuart v. RadioShack, the Northern District addressed this very question and held, in effect, that the requirements of the statute must override any internal reimbursement rules set by the employer.

Indeed, California Labor Code section 2802 provides that "An employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties." And Section 2804 further provides that "Any contract or agreement, express or implied, made by any employee to waive the benefits of this article or any part thereof, is null and void."

Thus, companies must reimburse employee expenses and the parties can't do anything to forfeit or limit these rights even if they wanted to. According to the District Court, the employer's duty to reimburse expenses should be triggered by the same standard that applies in cases of "off-the-clock" work:

The Court concludes that a fair interpretation of [Labor Code] §§ 2802 and 2804 which produces “practical and workable results,” consistent with the public policy underlying those sections, focuses not on whether an employee makes a request for reimbursement but rather on whether the employer either knows or has reason to know that the employee has incurred a reimbursable expense. If it does, it must exercise due diligence to ensure that each employee is reimbursed.

The Bottom Line: Employer's should continue to set internal deadlines and procedures for expense reimbursement. However, they should also recognize that the failure to follow these procedures will ultimately not be a defense to legal liability if they know or have reason to believe the expense was actually incurred.

Dan Rather's Wrongful Termination Suit Against CBS is Dismissed Pursuant to "Pay or Play" Clause

bvanvleck@vtzlaw.com (Brian Van Vleck) — Sun, 04 Oct 2009 19:56:56 -0800

Dan Rather was famously terminated following his 2004 "60 Minutes II" report which used forged documents to accuse George W. Bush of evading military service. And a New York State Appellate Court has just dismissed the last remnants of Rather's wrongful termination lawsuit against the network.

After the 2004 scandal, CBS had continued to pay Rather's $6 million salary even while it stopped using his services for any on-air broadcasts. Once he was formally terminated in June 2006, CBS accelerated and paid the remaining five-months of compensation due under the term of the contract.

Rather claimed, however, that if he were not utilized as the CBS Evening News anchor his contract required CBS to reassign him to actual broadcast stories on 60 Minutes or 60 Minutes II. The Appellate Court disagreed. It held that the contract's "pay or play" clause clearly allowed the network to keep him off the air so long as it continued to pay the compensation due under the contract.

Rather claims that, in effect, CBS "warehoused" him, and that, when he was finally terminated and paid in June 2006, CBS did not compensate him for the 15 months "when he could have worked elsewhere." This claim attempts to gloss over the fact that Rather continued to be compensated at his normal CBS salary of approximately $6 million a year until June 2006 when the compensation was accelerated upon termination, consistent with his contract.

Contractually, CBS was under no obligation to "use [Rather's] services or to broadcast any program" so long as it continued to pay him the applicable compensation. This "pay or play" provision of the original 1979 employment agreement was specifically reaffirmed in the 2002
Amendment to the employment agreement.

The Court also dismissed Rather's final claim that CBS breached a fiduciary duty on the ground that "employment relationships do not create fiduciary relationships."

Employers Cannot Avoid Liability For Discrimination By Subcontracting Hiring Decisions -- Halpert v. Manhattan Apartments

bvanvleck@vtzlaw.com (Brian Van Vleck) — Mon, 28 Sep 2009 22:08:11 -0800

In Halpert v. Manhattan Apartments, Inc. a job applicant sued after being told he was "too old" for a position. The prospective employer initially won summary judgment on the ground that it was not liable as the hiring decision was made by an outside contractor who was not its employee.

The Second Circuit reversed on the ground that the independent contractor status of the decision maker was irrelevant -- so long as he was acting as an authorized agent on behalf of the Company it is directly liable for his discriminatory decisions:

That prohibition [against age discrimination] applies regardless of whether an employer uses its employees to interview applicants for open positions, or whether it uses intermediaries, such as independent contractors, to fill that role. . . . [I]t makes no difference whether the person whose acts are complained of is an employee, an independent contractor, or for that matter a customer. If a company gives an individual authority to interview job applicants and make hiring decisions on the company's behalf, then the company may be held liable if that individual improperly discriminates against applicants on the basis of age.

This result is logically sound since a corporation acts only through its agents and must therefore bear legal responsibility for the illegal personnel decisions of those agents. The decision is a stark reminder, however, that employers cannot absolve themselves of liability merely by delegating personnel decisions to outsiders such as temp agencies, business consultants, or even unions.

Court holds independent contractor status of cab drivers not suitable for class action.

azaller@vtzlaw.com (Anthony Zaller) — Mon, 28 Sep 2009 10:00:04 -0800

USA Cab owns a fleet of about 45 taxis that it leases to drivers, and it operates a taxi dispatch service. At issue in the case was whether USA Cab’s classification of the drivers as independent contractors was proper. The Plaintiffs’ brought a putative class action alleging that due to the misclassification, USA Cab failed to provide workers’ compensation insurance, failed to pay minimum wages, improperly required drivers to pay security deposits and other fees, and denied them meal and rest breaks.

Under the terms of the agreement with the drivers, USA Cab provided the lessee-drivers with a taxi "painted with [its] insignia and equipped with meter, radio, and any other equipment as required by state law and local ordinances relating to taxicabs.” The company also paid for all licenses, taxes and fees assessed on the taxi, and to furnish liability insurance, oil, tires, and maintenance, except that required by the lessee's misuse or abuse of the taxi. The company also allowed the lessee to select from specified daily, weekly or monthly lease rates depending on his or her driving record.

USA Cab argued the purported class would be unmanageable, and common questions do not predominate over individual issues, given differences among the driver-lessees' situations.

The court noted, that while the merits of the case are not determined at the class certification stage, the facts and defenses pertinent to the merits of the case are taken into consideration to determine whether class certification is appropriate. With regards to the test of which workers can be classified as independent contractors, the court noted:

While the right to control work details is the most important factor, there are also " 'secondary' indicia of the nature of a service arrangement." [citation] The secondary factors are principally derived from the Restatement Second of Agency, and include "(a) whether the one performing services is engaged in a distinct occupation or business; (b) the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision; (c) the skill required in the particular occupation; (d) whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work; (e) the length of time for which the services are to be performed; (f) the method of payment, whether by the time or by the job; (g) whether or not the work is a part of the regular business of the principal; and (h) whether or not the parties believe they are creating the relationship of employer-employee." [citation] "Generally, the individual factors cannot be applied mechanically as separate tests; they are intertwined and their weight depends often on particular combinations." [citation]

The court provides an excellent overview of California law regarding which workers can be classified as independent contractors. The opinion is well worth the read for anyone dealing with this issue in California.

In this case, USA Cab submitted a number of declarations from primarily current drivers to oppose Plaintiffs’ motion for class certification. The court noted that the declarations tended to show that the case was not proper for class certification because the they tended to show that individualized issues predominated the case:

The declarations tended to show a lack of class-wide damage. For instance, most declarants said they incurred no work-related injuries, customarily took meal and rest breaks, and earned wages equaling or exceeding minimum wage.
The declarations established that the drivers were not required to use USA Cab's dispatch service. Some drivers used it for between 20 and 60 percent of their business, many used it infrequently, and some chose not to use it at all.
The declarations also showed that drivers paid for their own tools, such as map books, flashlights, tool kits, jumper cables, cell phones, computers, GPS navigational systems, and credit card machines.
Some of the drivers also established that they conducted their own marketing and advertising to gain new customers.
The drivers also declared that “with varying frequency they chose to set their own rates, such as flat rates for trips, or rates below the standard metered rate.”

Based on these facts, the trial court ruled, and the appellate court agreed, that this case was not suitable for class treatment. The opinion, Ali v. USA Cab Ltd., can be downloaded here (Word).

Is The NFL's Anti-Tampering Rule Legal Under California Law?

bvanvleck@vtzlaw.com (Brian Van Vleck) — Sun, 27 Sep 2009 21:26:45 -0800

The San Francisco 49ers have recently filed a complaint with the NFL against the New York Jets for supposedly "tampering" with their unsigned draft pick, Michael Crabtree. The Jets deny the accusation, of course, but what is "tampering" anyway? Well, the best definition I have been able to find, is given by NFL spokesman Greg Aiello in the Minneapolis Star Tribune:

The term tampering as used within the National Football League, refers to any interference by a member club with the employer-employee relationship of another club or any attempt by a club to impermissibly induce a person to seek employment with that club or with the NFL.

That's not terribly enlightening. But if this is a "free country" as the saying goes, where does the NFL get off telling a prospective employee and a prospective employer that they are not allowed to talk to one another? To my mind, this seems positively anti-free market, anti-free speech, and downright un-American.

Indeed, California Business and Professions Code section 16600 explicitly states that "every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void." Thus, at least to the extent California law governs the matter, it would seem that any agreement between NFL clubs not to speak with one another's unsigned draft picks about prospective employment is entirely illegal and unenforceable.

HR professionals note to employment lawyers: stop working off of fear

azaller@vtzlaw.com (Anthony Zaller) — Fri, 25 Sep 2009 11:23:33 -0800

The HR blog Fistfull of Talent raises a concern I think a lot of HR professionals feel. See article “Hey Employment Law ‘Experts’, You’re Killing My Profession.” Kris Dunn expresses the all too common sentiment that employment lawyers are not advising their clients – but are rather scaring them into inaction. Kris uses the example of advice some lawyers are providing about whether or not companies should use social networking sites and Google to conduct background checks on job applicants. Taking the conservative approach, many lawyers, as Kris notes, advise against using these new technologies out of concern that it could create potential discrimination claims. (On a side note – I warned awhile ago that companies should be using the Internet to conduct background checks.)

Kris’ analysis is right on for a number of reasons. First, lawyers are trained to point out the risks of any situation to properly advise their clients. Second, lawyers are notoriously behind the technology curve. Most do not know what “new” technologies are being used or how to use them, and this creates concern as anyone is scared about what they do not know about.

Employment lawyers need to take heed of this critique. HR professionals have jobs to perform and companies to run. They need legal advice that helps them perform their jobs better – not scare them into failing to change and keeping up with the times.

Employment lawyers need to recognize that change entails risk. However, companies always have to change, and lawyers need to help companies navigate this risk, not prevent them from doing anything new.

Note to HR professionals

As you know, the HR profession is changing a lot given today’s new technologies. New issues are creating a lot of uncertainty. Issues such as how to use social networking sites to conduct background checks, monitoring employee’s internet use, and determining "hours worked" when employees always have a smart device on them.

When looking for legal advice about these issues, you need to be certain that your lawyer is familiar and up-to-date with the technology available. Does the lawyer who you are seeking legal advice from have a Twitter, Facebook, or LinkedIn account? Do they use an iPhone or Blackberry? If the answer to these questions are ‘no’ – don't be surprised if their advice is to avoid these “new” technologies.

When Are Employers Liable for Their Workers' Traffic Accidents -- Jeewarat v. Warner Bros.

bvanvleck@vtzlaw.com (Brian Van Vleck) — Sat, 19 Sep 2009 14:05:40 -0800

It is well settled that employers may be liable for the actions of their employees in the "course and scope" of their employment. It is also well settled that employers are not liable for an employee during his commuting time -- otherwise known as the "coming and going rule."

These two principles become blurred, however, when an employee is traveling to or from an off-site conference, job assignment, or some other so-called "special errand." For example, in Jeerwat v. Warner Bros., the employee was driving back from a three-day business conference to his home, and was even following his normal commute path, when he struck several pedestrians. The pedestrians sued the employer and the Court held that the lawsuit could proceed.

We hold that an employee's attendance at an out-of-town business conference may be considered a special errand under the special errand doctrine. In addition, when an employee intends to drive home from the errand, the errand is not concluded simply because the employee drives his regular commute route, but rather, the errand is concluded when the employee returns home or deviates from the errand for personal reasons.

In other words, when Companies schedule retreats, conferences, and office parties they need to be aware that they may be liable for any accidents caused by their employees in getting to and from the meeting.

Federal Judge Rejects $33 million SEC Settlement with Bank of America over Excessive Bonuses

bvanvleck@vtzlaw.com (Brian Van Vleck) — Tue, 15 Sep 2009 12:24:05 -0800

Bank on August 6, we blogged that the SEC's just-announced deal with BofA to settle claims of concealing unpaid executive bonuses was pretty lame. We pointed out two glaring problems with the settlement: i.e., that the $33 million settlement was "infinitesimal" next to the multi-billion dollar fraud being alleged and that "even more conceptually problematic" this amount was supposed to "be paid by the same shareholders who were the victims of the non-disclosure in the first place."

Federal District Judge Jed Rakoff is apparently on the same page. As reported in today's LA Times, he has rejected the proposed settlement on exactly these grounds.

In his 12-page ruling, Rakoff criticized the $33-million payment, saying that if Bank of America intentionally deceived shareholders, "$33 million is a trivial penalty for a false statement that materially infected a multibillion-dollar merger."

He also questioned why Bank of America shareholders should foot the bill for misdeeds approved by executives. Regulators say shareholders weren't aware of the bonuses before voting to approve the deal to acquire Merrill late last year, according to regulators.

"The notion that Bank of America shareholders, having been lied to blatantly in connection with the multibillion-dollar purchase of a huge, nearly bankrupt company, need to lose another $33 million of their money . . . is absurd," Rakoff wrote.

Perhaps Judge Rakoff is a reader of this blog. More likely, however, he just had the good common sense to reject a transparently absurd deal whose purpose was to achieve a politically expedient press release rather than any substantive recovery for fraud victims.

Is Cutting Employee Hours to Avoid Benefit Coverage Illegal Under ERISA?

bvanvleck@vtzlaw.com (Brian Van Vleck) — Sun, 13 Sep 2009 16:57:55 -0800

Companies that offer health insurance or other employee benefits typically set some sort of minimum threshold for triggering coverage -- for example, being employed for more than 20 or 30 hours per week. ERISA is very clear in allowing employers almost unlimited discretion to write their benefit plans in order to exclude part-time employees (or any other category of worker) in this fashion.

But ERISA is equally clear in precluding an employer from making employment decisions for the specific purpose of preventing an employee from obtaining or keeping coverage. In particular, ERISA Section 510 provides that

It shall be unlawful for any person to . . . discriminate against a participant or beneficiary . . . for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan . . .”

In these recessionary times, employers may keep their costs down by deliberately reducing employees from full-time to part-time status, or by refusing to give employees the additional hours necessary to trigger benefit coverage. Employers should be aware, however, that to the extent work assignment decisions are motivated by benefit costs they may be illegal under ERISA section 510.

HR professionals and companies turning to Twitter for hiring needs

azaller@vtzlaw.com (Anthony Zaller) — Wed, 09 Sep 2009 07:55:20 -0800

The Wall St. Journal recently noted how mainstream Twitter is becoming in the workplace. The article notes that many employers are proactively using the service to recruit better qualified employees faster and cheaper. Companies such as Microsoft, Raytheon and MTV now list job openings on Twitter. As the article points out:

People who respond to job tweets typically have social-media skills, and some employers say they use the service to target them. In March, MediaSource Inc., a video-production and publicity firm in Columbus, Ohio, advertised a media-relations specialist job only on Twitter, LinkedIn and two niche job boards, says Lisa Arledge Powell, MediaSource's president.
"We needed someone that understood social media, so we thought, 'Why not go to where these people go?' " she says.

As a lawyer, it is sometimes hard to embrace new technologies given the uncertain “risks” that the technologies may create. However, just like running a business entails risk, use of new technology, like Twitter, is fine as long as the employer uses some common sense. Employers and employees alike, need to always remember not to be drawn into Twitter’s informal atmosphere – everything written on Twitter is public. As the article notes, employees should not begin a job request with the term “Dude” and employers should always approach Twitter in a professional tone.

As side note, you can follow me on twitter here @anthonyzaller.

Social Norms and Market Norms -- Using Behavioral Economics in the Workplace

bvanvleck@vtzlaw.com (Brian Van Vleck) — Sun, 06 Sep 2009 10:55:06 -0800

Employers, managers, and employees can learn a lot about their workplaces from Dan's Ariely's fascinating new book Predictably Irrational: The Hidden Forces that Shape Our Decisions.

One of the insights gleaned from the empirical psychological studies that he reviews is that we all maintain two separate and distinct moral systems -- i.e., the "social norms" which apply to inter-personal relationships and the "market norms" which apply to the self-interested quid pro quo of the marketplace. As Ariely explains, much of the hard feelings between companies and their customers and employees can be traced to different expectations about which system is in play.

For example, the trend in the last few decades has been for Companies to characterize themselves as participants in a warm and fuzzy "relationship" using terms that invoke images of family, friendship, partnership, and team cohesion. To the extent employees buy into this "social relationship" model the Company stands to reap major dividends in the form of loyalty, hard work and dedication which can be purchased without monetary incentives.

But the downside is that any failure by the Company to live up to its end of this perceived social contract will not be seen as a mere business decision but as a personal betrayal and disloyal "stab in the back."

What's the upshot? If you're a company, my advice is to remember that you can't have it both ways. You can't treat your customers [or employees] like family one moment and then treat them impersonally--or, even worse, as a nuisance or a competitor--a moment later when this becomes more convenient or profitable. This is not how social relationships work. If you want a social relationship, go for it, but remember that you have to maintain it under all circumstances.

Ariely is definitely on to something. And this disconnect between "social" and "business" norms may go a long way toward explaining why employment litigation often has more in common with divorce court than with a commercial breach of contract. To paraphrase the Bard: hell hath no fury like an employee scorned.

DFEH Review Shows That Disability Discrimination is Most Common Complaint

bvanvleck@vtzlaw.com (Brian Van Vleck) — Thu, 03 Sep 2009 10:53:58 -0800

As part of a review commemorating its 50th Anniversary the California Department of Fair Employment and Housing has released an informative review of the DFEH's history and current activities.

The Power Point presentation includes some interesting facts. For example, disability discrimination is now far and away the most commonly alleged basis for administrative complaints. Out of 18,785 charges filed in 2008, a full 36.4% (6,844) alleged discrimination on the basis of mental or physical disability. By contrast, race (22.4%), age (19%), gender (12%), and sexual orientation (4.4%) weren't even close.

Also interesting are the settlement statistics showing that the administrative charges settled prior to the issuance of an accusation by the DFEH were settled for an average of $8,120. Following an accusation the average was $39,196. (These numbers obviously exclude the stronger cases in which plaintiffs are generally represented by counsel and seek an immediate right-to-sue in civil court).

Ninth Circuit Clarifies When Travel and Commuting Time Must be Paid -- Rutti v. LoJack

bvanvleck@vtzlaw.com (Brian Van Vleck) — Sat, 22 Aug 2009 09:18:25 -0800

In Rutti v. LoJack, the Ninth Circuit examined the issue of which employee activities must be counted as "hours worked" and which may be disregarded as non-compensable. In doing so, it touched upon most of the important issues raised in so-called "off-the-clock" cases. It also applied these rules under both the FLSA and California Labor Code (where there is currently a dearth of authority on the subject).

As a result, Rutti it is an important case for both employers and plaintiffs that warrants several distinct posts. This entry focuses on the Ninth Circuit's ruling on commuting time.

In that regard, Rutti reemphasized the familiar rule that commuting time (i.e., travel time from home to the first place of employment for the day) need not be paid under the FLSA or California Labor Code.

Under federal law, the 1996 Employee Commuting Flexibility Act (“ECFA”), 29 U.S.C. Sec. 254(a)(a)(2), generally excludes "traveling to and from the actual place or performance of the principal activity or activities which such employee is employed to perform."

Under California law, Labor Code section 510(b), likewise provides that "[t]ime spent commuting to and from the first place at which an employee's presence is required by the employer shall not be considered part of the day's work."

Rutti held that this commuting rule applies even where the employee is required to use a company vehicle and is restricted from making unauthorized stops or engaging in personal business.

Rutti did allow that an employee's travel time could become compensable if he were required to perform any "additional legally cognizable work" during his commute. The Court gave no specific examples of such work. However, making work related cell phone calls or entering data in an on-board computer system would seem to be likely real-world examples of such activities that would have to be paid even if they are done during otherwise non-compensable commute time.

Ninth Circuit Approves Whistleblower Claim by In-House Counsel

bvanvleck@vtzlaw.com (Brian Van Vleck) — Sat, 15 Aug 2009 16:09:31 -0800

In Van Arsdale v. International Game Technology, the Ninth Circuit reversed the grant of summary judgment against the retaliation claims of a husband and wife who worked together as in-house counsel and who claimed to have been wrongfully terminated for raising internal concerns about potential Sarbanes-Oxley violations.

In reaching this result, the Court made clear that even a Company's own in-house counsel may bring retaliation claims when their internal counselling activities are not well-received. The district court had found the lawsuit should be barred as contrary to the attorney-client privilege and the ethical obligations requiring confidentiality. The Ninth Circuit, however, felt there was nothing fundamentally incoherent in allowing an internal whistleblower suit by legal counsel so long as the district court took steps to shield confidential information from public disclosure.

To the extent this suit might nonetheless implicate confidentially-related concerns, we agree with the Third Circuit that the appropriate remedy is for the district court to use the many “equitable measures at its disposal” to minimize the possibility of harmful disclosures, not to dismiss the suit altogether. . . . Nothing in this section indicates that in-house attorneys are not also protected from retaliation under this section, even though Congress plainly considered the role attorneys might play in reporting possible securities fraud.

The Ninth Circuit seemed unconcerned that its decision may damage the attorney-client relationship and chill internal legal analysis. Indeed, the decision may even prompt many companies to rely more heavily on the advice of outside counsel -- where the relationship is strictly legal and not compromised by the panoply of rights accorded to an internal employee.

Technology blurs work/life definition

azaller@vtzlaw.com (Anthony Zaller) — Tue, 11 Aug 2009 07:43:41 -0800

On-call time

The WSJ notes the increase of lawsuits pertaining to when employees need to be compensated for on-call time or for time checking electronic devises away from the workplace. As the article notes, there have been a fair share federal cases, but California employers have no doubt been at the tip of this arrow.

California’s DLSE takes the position that on-call or standby time at the work site needs to be paid for even if the employee does nothing but wait for something to happen. “[A]n employer, if he chooses, may hire a man to do nothing or to do nothing but wait for something to happen. Refraining from other activities often is a factor of instant readiness to serve, and idleness plays a part in all employment in a stand-by capacity”.

The DLSE opines that employees may be paid for on-time work such as when the employee is not relieved of duties during meal periods and sleep periods when the employees are subject to the employer’s control.

What constitutes “work-time” and therefore must be paid depends on the restrictions placed on the employee. A variety of factors are considered in determining whether the employer-imposed restrictions turn the on-call time into compensable “hours worked.” These factors, set out in a federal case, Berry v. County of Sonoma, include whether there are very restrictive geographic limits on the employee’s movements; whether the frequency of calls is unduly restrictive; whether a fixed time limit for response is unduly restrictive; whether the on-call employee can easily trade his or her on-call responsibilities with another employee; and whether and to what extent the employee engages in personal activities during on-call periods.

Travel time

The DLSE also considers travel time compensable work hours where the employer requires its employees to meet at a designated place and use the employer’s designated transportation to and from the worksite. The leading case on this topic in California is Morillion v. Royal Packing Co. (2000) 22 Cal.4th 575.

Bank of America pays $33 million in SEC Fines for Excess Bonuses

bvanvleck@vtzlaw.com (Brian Van Vleck) — Thu, 06 Aug 2009 13:13:31 -0800

Employee bonuses continue to be a hot political issue. The most recent exhibit was the SEC's announcement on Monday that Bank of America would pay $33 million in fines for not telling its shareholders that Merill Lynch would be allowed to pay $5.8 billion in executive bonuses prior to its merger with BofA.

While BofA's shareholders have every right to be upset about the non-disclosure, they must surely be wondering what good was accomplished by the SEC's action. The $33 million fine is infinitesimal next to the $50 billion merger deal or the $5.8 billion in undisclosed bonuses. But even more conceptually problematic is that the SEC fine will be paid by the same shareholders who were the victims of the non-disclosure in the first place. So instead of an even $5.8 billion, the BofA shareholders are now out of pocket for $5,833,000,000.

At least the settlement made headlines and allowed the administration to underline its moral outrage against excessive bonus compensation.

Ninth Circuit appeals court holds Wal-Mart cannot be held liable for foreign suppliers' labor violations

azaller@vtzlaw.com (Anthony Zaller) — Mon, 27 Jul 2009 07:54:28 -0800

Plaintiffs in this case, Jane Doe v. Wal-Mart, were employees of suppliers to Wal-Mart who work in foreign countries. Their lawsuit alleged that Wal-Mart should be liable for the suppliers’ labor code violations. The employees worked for companies who manufactured goods for Wal-Mart in countries such as China, Nicaragua, and Bangladesh.

Plaintiffs alleged a unique theory for establishing liability on Wal-Mart’s behalf. They argued that Wal-Mart’s code of conduct for its suppliers (called the “Standards for Suppliers”) established a duty for Wal-Mart to ensure that the suppliers were complying with the foreign countries’ labor laws. Plaintiffs also relied on the Standards’ provision that gave Wal-Mart a right to inspect the suppliers’ to ensure they were complying with the applicable laws.

Wal-Mart filed a motion to dismiss the case on the grounds that under the law Wal-Mart could not be found liable for these third-party suppliers’ foreign labor code violations. The Court agreed with Wal-Mart in holding that the Standard for Suppliers policies did not create an obligation for Wal-Mart to monitor the suppliers’ compliance with the law – it only gave Wal-Mart a right to inspect the suppliers and then cancel orders if violations existed.

The Court also held that the facts plead by Plaintiffs did not make Wal-Mart a joint employer with its suppliers. The Court explained that to be a joint employer, an employer must have “the right to control and direct the activities of the person rendering service, or the manner and method in which the work is performed.” The Court also explained that there needs to be a day-to-day level of control, which simply did not exist in this case.

While Wal-Mart prevailed in this case, it should be a clear warning to employers to be careful in how it enters into relationships with vendors and suppliers. Employers need to be careful about how much control it has over vendors’ employees. If the relationship if not documented properly, or there is day-to-day control over the outside companies’ employees, there may be a possibility that the contracting employer could be liable for the vendors’ labor code violations.

Oral argument of the case can be listened to here.