It is common practice throughout California to have an employee sign an arbitration agreement at the time she is hired. These agreements are generally non-negotiable, buried in a pile of new hire paperwork, and require the employee to arbitrate any claims arising out of employment. While valid arbitration agreements provide some of the safeguards that are afforded to litigants in court, it often takes away basic protections and rights including a trial by jury, and class or collective action. Arbitration is also a private process so it allows an employer to keep their wrongdoing under wraps.

The United States Supreme Court has said, repeatedly, that arbitration agreements are valid in the employment context. Recognizing the inherent imbalance in power between employers and employees, several states have tried to stop employers from forcing employees into arbitration. However, given the Supreme Court’s rulings, it is impossible to ban arbitration in employment altogether. The hope is that in California, AB 51 will even the playing field before an employee signs an arbitration agreement; requiring that an employee can only enter such an agreement voluntarily. The law also prohibits an employer from retaliating against an employee who declines to enter into an arbitration agreement, which provides additional protection.

Another significant benefit of the law is that attorneys’ fees are available to prevailing plaintiffs for violations of the law. This is an important piece of the legislation as the availability of attorneys’ fees greatly impacts the ability of plaintiffs’ firms to actually take and litigate these claims. It also provides a valuable bargaining chip in settlement negotiations.

While we expect that there will be legal challenges to AB 51, come January 1, 2020, employees have expanded and important rights with respect to whether they agree to enter into an arbitration agreement. While worker protections at the federal level are being chipped away, in California AB 51 is a significant step in the right direction to preserving employee rights in the workplace.

Jean Krasilnikoff

The distinction in being classified as an independent contractor or an employee is an important one. Numerous laws protect the rights of employees, but do not protect independent contractors. For example, California’s minimum wage, overtime, meal period, and rest break laws apply to employees, but do not apply to independent contractors. Many employers misclassify their workers as independent contractors instead of employees to avoid having to comply with the many laws and regulations that protect employees – usually to shift costs onto the worker and off of the company.

Although the employee vs. independent contractor debate has raged on for many years, it has been in the spotlight with the explosion of the so-called “gig economy.” A number of decisions have come down through the courts and through the regulatory agencies, and depending on which law applies, different tests apply for how an employee is classified. However, the California Supreme Court has now definitively adopted a new test for determining whether a worker is an employee or an independent contractor under the California Wage Orders in Dynamex Operations West, Inc. v. Superior Court (Lee).

Dynamex is a same-day delivery company that hires drivers to carry out the deliveries. In 2004, the company changed the drivers’ status from employees to independent contractors. After being reclassified, the drivers had to provide their own vehicles, pay for their expenses (tolls, fuel, maintenance, insurance), taxes, and workers’ compensation insurance. Dynamex controlled how the workers were given delivery jobs and drivers were not guaranteed any number of deliveries. The drivers filed a class action lawsuit alleging wage and hour violations, claiming that they were required to do the same duties as independent contractors as they had while they were classified as employees.

The California Supreme Court held that the appropriate test for purposes of wage orders is the “ABC” test. Under the ABC test, a worker is only properly considered an independent contractor (and thus wage orders do not apply) if the hiring company establishes:

1. That the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact;
2. That the worker performs work that is outside the usual course of the hiring entity’s business; and
3. That the worker is customarily engaged in an independently established trade, occupation or business of the same nature as the work performed for the hiring entity.

Importantly, this test “presumptively considers all workers to be employees, and permits workers to be classified as independent contractors” only if they satisfy each of the three requirements of the ABC test.

Adoption of this standard is long overdue and is welcome relief for workers throughout the state of California. For purposes of wage and hour laws, workers are presumptively considered employees under the ABC test and the employer will have to prove otherwise. This is likely to extend protections to a significant number of employees throughout the state who have been, up until now, been classified as independent contractors.

If you believe you have been misclassified, please contact our office for a consultation.

Jean Krasilnikoff

In recent years there have been several legislative changes strengthening the equal pay law in California. The California Equal Pay Act prohibits an employer for paying a male employee more than a female employee “for substantially similar work.” Cal. Labor Code § 1197.5. The California Equal Pay Act applies to all California employers, regardless of the size of the employer. The California Equal Pay Act also prohibits employers from discriminating or retaliating against an employee for invoking rights provided by the law or helping another person invoke her rights under the law.

On January 1, 2017, the Fair Pay Act was expanded to address compensation disparities between members of one race or ethnicity and those of another race or ethnicity. For example, women of color are often paid less than white women, and the changes to the law allow women of color to make a claim where this occurs. See Cal. Labor Code § 1197.5(b)

Employers often justify a disparity in salaries by claiming that they based the employees’ salaries on what the employees made at their prior jobs. Changes to the law in 2017 now explicitly prohibit an employer from justifying an unlawful difference in pay on prior salary alone. Reliance on an employee’s prior salary alone oftentimes perpetuates a life-long salary disparity. By prohibiting an employee from relying on prior salary alone, the law works to break the cycle of wage disparity.

One week ago Governor Brown signed a bill, which will prohibit an employer from relying on an applicant’s prior salaries to determine whether to offer the applicant a job, and how much to pay the applicant. In addition, the bill will require employers to disclose the position’s pay scale if a job applicant requests that information. You can view a copy of the bill here: https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201720180AB168 This is a step in the right direction for equal pay in California!

If you believe that you have been subject to wage discrimination, contact Siegel LeWitter Malkani today.

Jean Krasilnikoff

But what about rest breaks? In California, employees who work a typical eight-hour shift are entitled to two paid ten minute breaks. The California Supreme Court just clarified that the rest breaks must be duty free and employers cannot require their employees to remain “on-call” during their rest breaks.

In Augustus v. ABM Security Services, Inc. (2016), 2 Cal.5th 257, the plaintiffs were security guards who worked for a security company. The employer required its employees to keep their pagers and radio phones on at all times, including during rest breaks. The employees were also required to remain vigilant and respond to calls when needs arose. The Court held that the employees were entitled to duty-free rest breaks – that employers “must relieve employees of all duties and relinquish control over how employees spend their time.” The Court also held that employers could not require their employees to remain “on-call” during their rest breaks because if an employee is on call, they do not have the freedom to use their rest break for their own purposes.

This is a victory for employees. If you need to use your rest break to make a personal phone call, take a walk, or simply get some fresh air, this new ruling ensures that your ten minute breaks should be uninterrupted and duty-free.

Jean Krasilnikoff

Here the employer imposed an arbitration agreement upon Mr. Moreno. When Mr. Moreno filed a simple Labor Commission claim to collect his vacation pay, the employer refused to attend the Labor Commission (Berman) hearing, and instead moved to arbitrate the claim. I suspect the move was a ploy to make it so expensive and time consuming for poor Mr. Moreno to collect what wasn’t a large amount of money to begin with, that he’d just give up. Lucky for Mr. Moreno, the Labor Commissioner realized the negative implications for all employees just trying to get paid for the work they do, if they can’t go to the Labor Commission.

In 2011 the California Supreme Court held that Mr. Moreno was entitled to his Labor Commission hearing, and that if the employer was dissatisfied with the results of the Berman hearing, it could then move to arbitrate. This was a fairly benign and logical holding.

But I guess this wasn’t enough for the anti-employee U.S. Supreme Court. It vacated the California Supreme Court opinion, and sent the case back to the California courts for reconsideration. Sonic-Calabasas A, Inc. v. Moreno 132 S.Ct 496 (2011). (I blogged about this previously, see entry of November 20, 2011.)

So, now we are back in the California Supreme Court’s “court.” Given that the U.S. Supreme Court held that arbitrations are practically invincible, the California Supreme Court felt forced to recant its prior opinion. Thus, it held that a Labor Commission hearing on the way to an arbitration imposed significant delays and could not be tolerated under the U.S. Supreme Court’s holding on AT&T Mobility LLC v. Concepcion 131 S.Ct. 1740 (2011).

However, the California Supremes held out some hope. They held that the State of California still has the right to evaluate whether the arbitration agreement is unconscionable because it is, for example, unreasonably one-sided in favor the employer. Because the evidence related to that question had not been developed, the California Supremes sent the case back to the trial court to consider.

We can expect a hearing below looking at a variety of factors, including how unfair this is to Mr. Moreno. If Mr. Moreno has to go to arbitration, he’ll need to hire a lawyer to obtain his vacation pay. This is absurd. He’ll be paying more in attorney’s fees than he will receive in his vacation pay! Likewise, if he has to pay the arbitrator to obtain what would have otherwise been a free hearing before the Labor Commission, this will wipe out his vacation pay, and is unconscionable and unreasonable.

And speaking of speed and efficiency – the ostensible values of the U.S. Supreme Court in basically making arbitration practically invincible – how many court hearings and years must pass before Mr. Moreno simply gets a determination of whether he is owed his vacation pay?

Jody LeWitter 11/20/13

The Court of Appeals reversed the award, holding that the statistical sampling violated the bank’s due process rights.

Now the California Supreme Court has granted review of the case, presenting some hope to the class of bank employees that the Court will take a fresh look at the evidence presented at trial. In addition, all class action employees and lawyers will keep their eyes peeled for a potentially important ruling on the use of statistical evidence in a class action wage and hour case. Stay tuned!

Jody I. LeWitter May 25, 2012

In Brinker, the Court points out that, if an employee works five or more hours in a shift, the employer must do one of three things: (1) afford the employee an off duty meal period; (2) reach a voluntary agreement with an employee on a meal period waiver if one hour or less will end the shift; or (3) obtain written agreement to an on-duty meal period if circumstances permit. If it does none of the three, it is liable for premium pay.

In addition, the Court makes it clear that employers may not skirt their obligations, emphasizing that “an employer may not undermine a formal policy of providing meal breaks by pressuring employees to perform their duties in ways that omit breaks.” The only steps an employer need not take are to “police” breaks and affirmatively ensure that no work is done.

With respect to class certification, the Court has put an abrupt halt to the disturbing trend of trial courts reaching the merits of a case at the class certification stage, before the parties have even had the opportunity to fully flesh out the evidence in a case. It clarified that a court may only look at the legal merits of a case in limited circumstances, and it reaffirmed the appropriateness of class actions in this legal area.

Lastly, the Court clarified the timing requirements for provision of meal periods, namely, that the first meal period be provided after no more than five hours of work and, for those employees who work a shift of ten hours or more, a second meal period be provided after no more than ten hours of work.

In sum, the Court clarified employees’ right to a meal period, protected class actions as a way of vindicating this right, and ensured that employers do not delay meal periods until too late in a shift.

Darin Ranahan May 9, 2012

I’m not sure what Oracle was thinking when it invited employees from other states to enjoy the sunshine in California, but then left them out in the cold when it came to the basic rights of our overtime law while working on our turf. If the courts permitted that type of conduct, wouldn’t we just be encouraging employers to import cheap labor from Montana and Utah to do our work here in California? Talk about creating sweatshops right here in the golden state.

Let’s look at Oracle’s bold practices and inability to learn a lesson. Year after year, Oracle hired “instructors” to train customers on its products. Some of these instructors lived and worked in California; some lived and worked in other states; and some lived in other states but worked part of the time in California. Oracle classified these employees as “teachers,” to make sure that these folks were exempt from overtime laws. Voila -employees worked overtime for no extra pay.

However, the employees had a better idea. They filed a class action and demanded overtime. Consequently, Oracle saw a bit of the light, and started paying its California instructors overtime under California law. Then, Oracle saw a bit more of the light, and started paying its instructors of other states overtime under federal law (the Fair Labor Standards Act, or “FLSA”)for their time spent working in states other than California. Oracle held fast on its position for paying employees from other states overtime for their time spent working in California: no overtime for this! Non-California residents thus sued for the time they spent working in California, claiming they were entitled to the protection of California law while working in California, even if they were non-residents.

What did Oracle gain for holding out on this last issue? Hopefully a good lesson that it should have settled all its claims earlier on, rather than engaging in a torturous route through the entire court system including the California Supreme Court and the federal district and appeals court.

Both the California Supreme Court, in Sullivan v. Oracle, 51 Cal.4th 1191 (2011), and the Ninth Circuit, in Sullivan v. Oracle, 662 F.3d 1265 (9th Cir. 2011), ruled for the employees. They held that California law protects employees working in California regardless of the employees’ residences in other states, and that this included the protection of California’s Unfair Business Practices Act, Ca. B & P. Section 17200 et seq.

This case demonstrates that litigating a simple issue to death is not always the wisest idea!

Jody LeWitter

April 4, 2012

Jody LeWitter November 20, 2011

The Fair Labor Standards Act prohibits employers from discharging “any employee because such employee has filed any complaint” asserting a violation of the Act. 29 U.S.C. Section 215(a)(3). This case turned solely upon the Supreme Court’s holding that the phrase “filed any complaint” includes the making of an oral complaint, here to Saint-Gobain’s officials.

The Court held that the “purpose and context” of the anti-retaliation provision led it to this interpretation. It noted that very real problems could occur if the provision did not protect those who complained orally: it could prevent government agencies from using hotlines; it could discourage the use of informal workplace grievance procedures; and it could make it difficult for workers who are less educated to complain. This led the Court to adopt a broad interpretation of the statute.

It is a cause for celebration every time this Supreme Court, with its largely pro-business slant, votes for the rights and concerns of employees. This case does provide more protection for employees around the country who complain about wage and hour violations, although the Ninth Circuit had, already, interpreted FLSA this way, to include oral complaints and thus California employees were already protected when making oral complaints. Lambert v Ackerley, 180 F.3d 997 (9th Cir. 1999).

The Court did note that Saint-Gobain argued to the Supreme Court that FLSA’s anti-retaliation provision only applied to complaints to the government, not to private employers. Holding that Saint-Gobain abandoned this argument, the Court may have unnecessarily muddied the waters around this issue, as complaints to the employer, private or otherwise, are just the types of complaints that have historically been protected. Over ten years ago, the Ninth Circuit, noting well established law, clearly ruled that complaints to the employer are protected. Lambert v Ackerley, 180 F.3d 997 (9th Cir. 1999). Indeed, if the “purpose and context” of FLSA’s anti-retaliation provision covers oral complains, it should covers complaints to non-governmental organizations and complaints by an employee to his or her own employer. After all, it would be illogical for this Supreme Court to urge employees to go straight to the government to complain about FLSA violations and leave the employer/private business out of the loop.

Jody LeWitterApril 7, 2011