Employment Case is Settled – Who Pays Costs?

November 21, 2016 by

Employment CaseWho pays costs when an employment case is settled? The California Code of Civil Procedure makes it clear that in litigation, the prevailing party is generally entitled to recover its costs from the losing party. According to Section 1032, the “prevailing party” is either the party with a net monetary recovery, or the defendant in whose favor a dismissal is entered.

This rule is usually quite straightforward when a court awards a plaintiff money damages – or when a court dismisses a plaintiff’s entire claim. What about when the parties reach a settlement out of court, as is so often the case in employment cases? Has the plaintiff prevailed, or the defendant?

When the defendant pays a plaintiff to resolve a claim, one might expect the plaintiff to be regarded as the party with a net monetary recovery. But a California trial court recently had a different idea. After a Monterey hospital resolved a wrongful termination complaint by paying a former employee $23,500, the court ruled that the hospital had prevailed, and ordered the employee to pay the hospital’s costs.

The Facts of the Employment Case

Maureen deSaulles was hired by Community Hospital of the Monterey Peninsula as a patient business services registrar. She was fired the next year, and filed a wrongful termination complaint. Her complaint alleged seven different causes of action, including claims that the hospital failed to accommodate her medical condition, that the hospital retaliated against her for asserting her rights under California employment law, and that the hospital breached her contract (as well as an implied covenant of good faith and fair dealing).

At trial, the hospital filed a motion for summary judgment, and the court ruled that deSaulles could only make arguments and introduce evidence on two of her causes of action – breach of contract, and breach of an implied covenant of good faith and fair dealing. The parties then agreed to settle the employment case. The hospital would pay deSaulles $23,500, and the claims of breach of contract and breach of covenant would be dismissed with prejudice. The employment case agreement also allowed deSaulles the right to appeal the court’s rulings on the five other causes of action.

As expected, deSaulles appealed the court’s dismissal on the five causes of action. The appeals court upheld the trial court’s ruling on those causes of action, and the parties returned to the trial court, where both deSaulles and the hospital argued that they were entitled to recovery of costs. The trial court ruled that the hospital was the prevailing party, because it prevailed on five of the causes of action, and entered into a settlement on the remaining costs. The hospital was awarded $12,731.92 in costs, while deSaulles’s request for costs was denied.

The Employment Case Appeal

DeSaulles appealed the trial court’s ruling on costs, and a California appeals court overturned the decision, holding that deSaulles was the prevailing party. In DeSaulles v. Community Hospital of the Monterey Peninsula, a superior court ruled that when a plaintiff is paid money in exchange for a dismissal, the plaintiff has obtained a net monetary recovery, and is entitled to costs – even if the recovery is only partial. This default rule only applies, however, if the settlement agreement does not resolve the matter of costs, and does not have a provision stipulating alternate procedures for awarding costs. [Read more…]

Filed Under: Blog, California Employment Law Tagged With: , ,

Yahoo Accused of WARN Act Violations

March 6, 2016 by

WARN Act, Layoff ViolationsThe WARN Act, Worker Adjustment and Retraining Notification, is a California and federal law requiring employers to give employees notice before layoffs and plant closings. WARN Act laws,  can carry harsh penalties for employers who violate them, which could be very bad news for Yahoo!, Inc.

Gregory Anderson, who previously worked as an editor at Yahoo’s headquarters in Sunnyvale, California, has filed a wrongful termination suit. Anderson alleges that Yahoo violated both the federal WARN Act and the California WARN Act by reducing its workforce by around 600 employees without declaring a reduction in force or providing the employees notice under the WARN Acts.

What are the Requirements of the WARN Act?

California’s WARN Act has a broader scope than the federal WARN Act. The federal law applies only to employers with 100 or more full-time employees, while California’s law applies to employers with 75 or more or part-time employees. In both cases, the employees must have been employed for at least six of the previous 12 months.

If an employer covered by California’s WARN Act lays off 50 or more employees during a 30-day period, the employer is required to give the affected employees notice 60 days before the layoffs take place. Federal law requires this only if the number of employees affected constitutes at least 33% of the full-time employees at a single place of employment. (However, if 500 or more employees are laid off, the federal law requires notice regardless of whether the employees meet the 33% requirement.) California’s law, unlike the federal law, applies also to employees who must be relocated.

Both laws hold employers liable for back pay and benefits for each day that they failed to provide an employee with proper notice. California’s law also allows for a civil penalty of $500 for each day.

Anderson’s WARN Act Lawsuit

Anderson alleges that Yahoo used a Quarterly Performance Review (QRP) Process to sidestep the requirements of the WARN Acts. According to his complaint, Yahoo manipulated the results of the employees’ reviews and used their low scores as a pretext for terminating them, rather than laying off the employees and providing them with proper notice. Anderson is seeking back pay and benefits for the 60 days that he was not given notice, and $500 for each of the 60 days. He is also seeking attorney’s fees and damages related to other causes of action.

Another allegation in Anderson’s complaint is that Yahoo discriminated against him on the basis of his gender. According to Anderson, the company has a pattern of promoting women while “terminating, demoting or laying off men because of their gender.” Anderson also alleges that he was fired in violation of public policy, because he was terminated after complaining to Yahoo management about the legality of the QPR system. [Read more…]

Filed Under: California Employment Law Tagged With: , , , , , , ,

New California Law is Good News for Worker Cooperatives

February 28, 2016 by

Worker CooperativesIf you have ever looked into worker cooperatives, a bill recently passed into law in California may be of special interest to you. Assembly Bill 816 has amended the law formerly known as the Consumer Cooperative Corporation Law and renamed it the Cooperative Corporation Law. The new Consumer Cooperative Corporation law establishes how corporations can be designated as cooperatives and lays out regulations for the operation of cooperatives.

Under the law, a corporation may be designated as a cooperative corporation in its articles of incorporation, and cooperative corporations may be designated as worker cooperatives. In addition, there is an option to designate worker cooperatives as capital account cooperatives or as collective board worker cooperatives.

Worker Cooperatives

The term “worker cooperative,” in the context of this law, refers to a corporation that includes “a class of worker-members who are natural persons whose patronage consists of labor contributed to or other work performed for the corporation.” A majority of the corporation’s workers must be worker-members or candidates.

The term “capital account cooperative,” in the context of the law, refers to a worker cooperative which allows a percentage of its earnings and losses to an unallocated capital account. Earnings in the account may be used for corporate purposes.

The term “collective board worker cooperative,” in the context of the law, refers to a worker cooperative in which all of the members are worker-members, and all of the worker-members are members of the board.

The provisions of the law include the following:

  • Cooperative corporations are permitted to issue memberships with differing rights and privileges, so long as they are issued in accordance with the corporation’s articles and/or bylaws.
  • Expulsions, suspensions, and terminations of members can only take place after 15 days prior notice is given, and they must be done in good faith, in a fair and reasonable manner. In addition, if members who are expelled, suspended or terminated want to submit a challenge, they must do so within a year of the decision.
  • Worker cooperatives are permitted to create indivisible reserve accounts, and payments from these accounts do not have to be made to members.
  • Corporations can be designated as worker cooperatives in their articles of incorporation, by including the sentence, “This corporation is a worker cooperative corporation organized under the Cooperative Corporation Law.”

The law is intended to promote workers cooperatives, and create more visibility for them. The law states that the purposes of a workers cooperative are to create sustainable jobs, and to improve quality of life for worker-members. Assemblymember Rob Bonta of Oakland, who introduced the bill, stated in a press release that worker-owned small businesses are “an effective way to rebuild the local economy and address economic inequality.” [Read more…]

Filed Under: Blog, California Employment Law Tagged With:

How Easily Can a Forum Selection Clause Be Overturned?

January 28, 2016 by

forum selection clauseRequesting that new employees sign an employment agreement with a forum selection clause (which determines which state will have jurisdiction over legal disputes) is a common practice for businesses that operate in multiple states. Even if these clauses are mandatory, however, they can still be overturned by the courts. The case of Verdugo v. Alliantgroup stands out as one of California’s most important wage and hour rulings of 2015, as it gave guidance on an important issue – which side has the burden of proof when the validity of a mandatory forum selection clause is questioned.

The Forum Selection Clause Case

When Rachel Verdugo was hired in 2007 to work in Irvine, California for a tax consulting services company named Alliantgroup, she signed an employment agreement with a choice-of-law clause. This clause stated that the employment agreement would be governed in all respects by the laws of Texas – which is where Alliantgroup is headquartered. The agreement also stated that subject matter jurisdiction and personal jurisdiction would be limited to Texas, and that Harris County, Texas, would be the only accepted venue for legal disputes.

Verdugo nonetheless filed a class action complaint in California against Alliantgroup in 2013. She alleged that she and similarly situated employees of Alliantgroup had been subjected to a variety of wage and hour violations, including failure to pay overtime wages and vacation pay, failure to provide required meal breaks, and unfair and unlawful business practices.

When Alliantgroup moved to dismiss the complaint based on the employment agreement’s forum selection clause, the trial court granted the motion. However, a California Court of Appeal reversed the decision, and held that the forum selection clause was unenforceable.

Where the Burden Lies

Verdugo argued that litigating the case in Texas would violate her rights as a California worker – rights that cannot be waived. The Court held that because the plaintiff was making this argument, the burden was therefore on the defendant to prove that her rights would not be diminished if the case was litigated in Texas. The Court went on to determine that Alliantgroup failed to meet this burden.

The ruling points out that six of Verdugo’s claims were based on her statutory rights under the California Labor Code. The Court held that because California’s legislature has stated that these statutory rights cannot be set aside, a requirement that Verdugo’s case be litigated according to Texas law would be amount to a waiver of her unwaiveable rights. The Court cited case law in determining that in these types of situations, the burden is placed on the defendant.

Having held that Alliantgroup had the burden to prove that Verdugo’s rights would not be diminished, the Court determined that Alliantgroup had not met that burden. Alliantgroup argued that it was probable that a Texas court would apply California law, but the Court held that this “speculation” was not enough to satisfy the burden of proof. [Read more…]

Filed Under: Blog, California Employment Law, California Labor Law Tagged With: , ,

$1.8 M Settlement for Allegations of “Steering”

January 20, 2016 by

steering, lawsuitA “steering” allegations settlement has been reached between G&K Services, a company that manufactures branded uniforms and facility products, and the U.S. Department of Labor regarding allegations of gender discrimination. The settlement involves G&K paying over $1.8 million to affected employees at nine locations – including a facility in Sacramento.

A compliance review by the Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) found that female employees of G&K were allegedly steered into duties that paid less than the duties that were predominantly assigned to male employees. The term “steering” refers to the practice of directing employees toward less desirable jobs based on their membership in a protected class. (When employers are accused of paying workers lower salaries based on factors such as race or gender, they may be found to have engaged in discriminatory practices even if the workers had substantially different job duties – if the employees with lower paying positions were steered toward them based on protected characteristics.)

According to an OFCCP press release, G&K’s hiring practices involved discrimination based on race as well as gender, with the result that 456 African-American job applicants and 111 Caucasian applicants were denied equal opportunity. The OFCCP also determined that G&K’s practice of steering male applicants toward certain positions resulted in a lower hiring rate for male applicants – with 2,327 male applicants affected.

The Steering Allegations Agreement

G&K denied any wrongdoing, but as part of a conciliation agreement will pay $1,813,555 to employees from the affected classes. G&K also agreed to allow 58 female employees the opportunity to assume positions with higher salaries, and to offer 78 positions to rejected applicants.

G&K also agreed to perform “a detailed assessment of its hiring, placement and compensation practices,” and to look into whether documents such as job postings are discriminatory. The settlement also requires G&K to conduct adverse impact and compensation analyses at the nine facilities in which the OFCCP determined that discriminatory practices were taking place – and to share the results of these analyses with the agency.

This is not the first time in recent years that G&K has been found by the OFCCP to have taken part in steering. In 2013, G&K reached a settlement after being accused of steering female employees into lower paying positions at a facility in Santa Fe Springs, California. In that case, the OFCCP determined that female employees were assigned to “light duty” jobs with lower salaries, while only considering male employees for heavy duty work. The OFCCP also determined that male employees were denied opportunities as a result of only being considered for heavy duty positions. [Read more…]

Filed Under: Blog, California Employment Law, Employment Discrimination Tagged With: , , ,

Am I An Independent Contractor Or Employee?

December 24, 2015 by

independent contractorA common complaint among workers in today’s economy is the eagerness of many employers to label them as an independent contractor. The Department of Labor has now issued a memorandum criticizing the overuse of the term “independent contractor” and clarifying what constitutes an employee under the Fair Labor Standards Act (FLSA).

Economic Realities of Independent Contractor vs. Employee

Courts apply an “economic realities” test to determine if a worker is an employee or an independent contractor. In most circumstances, the test asks the following questions:

  • To what extent is the worker’s output integral to the employer’s business?
  • Does the worker have an opportunity to make or lose money based on his or her managerial skill?
  • What are the relative investments of the employer and the worker? (If the worker has made an investment, this would indicate that he or she is an independent contractor.)
  • Does the work require special skills or initiative? (The Department of Labor cites electricians, carpenters, and construction workers as examples of the types of workers that typically operate as independent contractors.)
  • How permanent is the relationship between the employer and the worker? (If the work is permanent, that would suggest that the worker is an employee.)
  • How much control does the employer exercise (or retain)?

The Department of Labor’s memo emphasizes that the test should be viewed from the lens of the FLSA’s “suffer or permit” standard. This refers to a clause in the FLSA which states, “’Employ’ includes to suffer or permit to work.”

According to the memo, the “suffer or permit” standard means that a worker is an employee if he or she is dependent on the employer. The standard exists in order to broaden the FLSA’s applicability, by expanding the definition of an employer/employee relationship. The memo states that the economic realities test is not determinative, and that the most important factor in determining whether a worker is an employee is whether he or she is economically dependent on the employer.

Other clarifications offered in the memo include:

Even if an employer and worker have an agreement stating that the worker is an independent contractor, this agreement will have no bearing on whether the worker is actually considered an independent contractor or an employee.

Whether a worker receives a 1099-MISC from the IRS (which is intended for independent contractors) is not considered evidence that the worker is actually an independent contractor.

The economic realities test is qualitative, rather than quantitative, meaning that not all of the factors need to be present in order for the worker to be considered an employee. [Read more…]

Filed Under: California Employment Law Tagged With: , , ,

E Verify System Law Changes For California in 2016

December 21, 2015 by

e-verify systemIf you operate a California business, there is a good chance that you are familiar with the government’s E Verify system, which allows employers to determine whether their employees are legally permitted to work in the U.S. If your business has any federal contracts, you are probably very familiar with your legal obligations to use E-Verify.

What you may not be aware of, however, is that you soon will face penalties if you use E-Verify when you do not have a legal obligation to do so. New legislation, which will go into effect on January 1, 2016, makes it illegal for employers in California to use E-Verify voluntarily.

The Forthcoming Changes to E Verify System Law

Assembly Bill 622, which was signed into law in October by Governor Jerry Brown, amends the California Labor Code. It prohibits any employer from using E-Verify to check the legal eligibility of an employee or job applicant unless the employer is required to use the system because of a federal law, or a condition of receiving federal funds or the employer is authorized to use the system by a federal agency memorandum of understanding.

When using the E-Verify system, there is not always a definite answer given. The legislation contains regulations on what employers must do if federal records do not match the information that they entered into the system. An employer who receives a tentative non-confirmation (or TNC) from either the Department of Homeland Security or the Social Security Administration must comply with employee notification procedures and provide the employee in question with information about his or her case. The information must be provided “as soon as practicable.”

Violations can carry fines as high as $10,000. Each unauthorized use of the E-Verify system counts as a separate violation. The legislation leaves open the possibility of other penalties, as well.

Assembly member Roger Hernandez, who wrote the bill, has stated that his intention was to protect immigrant workers. According to Hernandez, immigrant workers are especially likely to receive tentative non-confirmations, even when they are legally eligible for employment.

The legislation comes four years after the Employment Acceleration Act was passed in California, which prevented municipalities from requiring employers to use employment verification systems such as E-Verify. Prior to the Employment Acceleration Act, many California municipalities had laws with such requirements, including San Bernardino County, and the cities of Riverside and Santa Maria. [Read more…]

Filed Under: California Employment Law Tagged With: , , , , ,

CA Appeals Court Arbitration Waiver Ruling

November 25, 2015 by

arbitration waiverMario Garrido signed and arbitration waiver when he was hired as a truck driver for American Air Liquide, Inc. in Santa Fe Springs, California. The arbitration waiver required him to resolve any disputes with his employer via arbitration and included a provision prohibiting class arbitration.

After Garrido lost his job, however, he filed a class action complaint against Air Liquide, alleging that he and his co-workers were subjected to a variety of unfair labor practices. Air Liquide responded by filing a motion to compel arbitration, but the trial court denied the motion, holding that Garrido had a right to file a class action claim. Air Liquide appealed.

On October 26, 2015, a California Court of Appeal upheld the decision, siding with Garrido. The ruling, Garrido v. Air Liquide Industrial U.S. LP, established several important precedents for cases involving arbitration waivers in the following areas:

To Whom Does the Federal Arbitration Act Apply?

The arbitration agreement that Garrido signed when he began working for Air Liquide stated that it was governed by the Federal Arbitration Act (FAA). Garrido argued that this provision was invalid because the FAA itself states that it does not apply to transportation workers. Air Liquide argued that Garrido should not be considered a transportation worker because Air Liquide is not in the transportation industry.

The Court of Appeal agreed with Garrido and held that as a truck driver, he was excluded from the FAA. The ruling states that a truck driver is a transportation worker, regardless of who owns the goods that the driver transports.

Can the CAA Apply Automatically?

The California Arbitration Act (CAA) was not mentioned in the arbitration waiver. Garrido argued that, in light of this, it could not apply to his case, but the court disagreed. The ruling holds that the CAA can be enforced even when it has not been explicitly mentioned in an arbitration agreement.

Garrido argued that because Air Liquide’s motion to compel arbitration dealt with the FAA, and not the CAA, Air Liquide lost its right to compel arbitration under state law. The court disagreed with this, as well, pointing out that Air Liquide had never argued that the CAA would not apply.

Can the State Refuse to Enforce a Class Arbitration Waiver in a Non-FAA Case?

Garrido argued that, even though the arbitration agreement contained a class waiver, his class action suit should nonetheless be allowed to proceed. While the California Supreme Court recently held the FAA prevents the state from striking down class waivers for public policy reasons, that decision did not address whether it would be appropriate in a CAA case.

The Court of Appeal used the four-factor test applied in Gentry v. Superior Court, which is based on:

  • The size of potential individual recovery,
  • The potential for retaliation against class members,
  • Whether absent members of the class may be unaware of their rights, and
  • Obstacles to the use of individual arbitration.

After applying the test, the Court of Appeal agreed with the trial court that a class proceeding would be more effective than individual arbitration. [Read more…]

Filed Under: Binding Arbitration, Blog, California Employment Law Tagged With: , , , , , , , , ,

California Unlawful Discrimination Precedent Set By “Desperate Housewives” Case Ruling

November 20, 2015 by

unlawful discriminationCalifornia unlawful discrimination precedent established. In 2004, actress Nicollette Sheridan signed a contract with Touchstone Television Productions to play the role of Edie Britt on the television series Desperate Housewives. In 2008, she complained to Touchstone that the show’s creator, Marc Cherry, physically assaulted her during a rehearsal. When she learned that her contract was not being renewed for another season, she filed a complaint against Touchstone.

Sheridan’s original claim stated that she had been fired because she complained about the alleged assault, and argued that her firing was a wrongful termination in violation of public policy. Her claim went to court, where a mistrial was declared after the jury was unable to make a unanimous decision.

Sheridan then amended her claim, arguing that her firing amounted to retaliation under Section 6310 of the California Labor Code. In 2013, her case was dismissed, on the grounds that she was required to exhaust her administrative remedies under Sections 98.7 of the California Labor Code before she could sue under 6310. However, on October 20, 2015, a California Court of Appeal overturned that ruling.

The Appellate Court Weighs in

The Court of Appeal ruled only on the issue of whether Sheridan was permitted to file a lawsuit under Section 6310 without first exhausting her administrative remedies under Sections 98.7 and 6312. The decision held that she was not obligated to exhaust these remedies and allowed her complaint to proceed.

Section 6312 states that an employee may file a claim with the California Labor Commissioner under 98.7 if he or she alleges unlawful discrimination under 6310 or 6311. 98.7 states that an employee may file a complaint with the Labor Commissioner within six months of an alleged violation of any law under the Labor Commissioner’s jurisdiction.

The Court of Appeal’s decision holds that the use of the word “may” in Sections 98.7 and 6312 (as opposed to “shall”) indicates that filing a complaint with the Labor Commission was permitted, but not mandatory. In addition, the ruling points to the language used in subdivision (g) of Section 98.7, which states that the law has no requirement that a complainant exhaust administrative remedies.

The decision also cites the case of Lloyd v. County of Los Angeles, in which a public employee argued that he was wrongfully terminated in violation of Section 98.7. In that case, an appellate court rejected the County’s argument that the plaintiff was obligated to exhaust his administrative remedies. The Lloyd ruling stated that plaintiffs suing under the California Labor Code do not have an administrative exhaustion requirement.

What Does This Mean for Future Unlawful Discrimination – Wrongful Termination Lawsuits?

Since Sheridan filed her complaint, the California Legislature has amended the Labor Code to explicitly state that complainants do not have a requirement to exhaust their administrative remedies. The ruling described above asserts that there is no such requirement even for a complaint that was filed before these amendments went into effect in January 2014. [Read more…]

Filed Under: California Employment Law, wrongful termination Tagged With: , , , , , , , , , ,

Cardenas v. Fanaian Firing Violated Public Policy Exception

November 11, 2015 by

public policy exceptionLast August we discussed California’s public policy exception for at-will employment – which prohibits employers from firing employees for reasons that contravene public policy. Since then, a California appeals court has ruled in favor of an employee who was fired for reporting a crime to the police, holding that her termination was in opposition to public policy.

Carcenas V. Fanaian – Facts of the Labor Law Case

In 2010, Rosa Lee Cardenas was working as a dental hygienist for a dentist named Masoud Fanaain. She realized one day that her wedding ring was missing and concluded that it had been stolen from Dr. Fanaian’s office. Cardenas and her husband filed a theft report with the police, and soon after, some police officers showed up at the dental practice and questioned employees.

After the police came to the office a second time, Fanaian terminated Cardenas’s employment. He told her that the presence of the police was making the staff uncomfortable. Cardenas filed a complaint against his practice in 2011, asserting that her firing was in violation of public policy.

Cardenas’s complaint also stated that her firing violated Section 1102.5 of the California Labor Code. 1102.5 prohibits an employer from retaliating against an employee for giving information to law enforcement, if the employee has reason to believe that the information pertains to a violation of the law. (It also protects employees who testify about legal violations and employees who give information to coworkers who have the authority to investigate legal violations.)

The Court’s Employment Law Holding

At trial, the jury sided with Cardenas regarding both causes of action and awarded her $117,768 in damages. Fanaian appealed the verdict to the Court of Appeal for California’s Fifth District, arguing that the firing did not contravene public policy.

The Court of Appeal upheld the decision. According to the opinion, Cardenas was engaging in protected behavior when she reported the theft of her wedding ring to the police because theft is a violation of the California Penal Code. Because there was a causal link between Cardenas’s police report and the decision to fire her, the termination was in violation of public policy.

Fanaian’s appeal asserted that that 1102.5 applies only when an employee discloses information about wrongdoing that is specifically related to the employer’s business activities. The Court of Appeal rejected this argument, holding that the plain language of 1102.5 does not contain any requirement that the information be about business activities. According to the opinion, the statute reflects an intent by the legislature to encourage employees to report unlawful conduct in general, and not just unlawful conduct by their employers. [Read more…]

Filed Under: California Employment Law Tagged With: , , , , ,
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