Labor and Employment Update For 2008 and Preview For 2009

Labor and Employment Update For 2008 and Preview For 2009 Presented by: John P. Zaimes, Esq. Reed Smith LLP 355 South Grand Avenue, Suite 2900 Los Angeles, CA 90071 (213) 457.8029 jzaimes@reedsmith.com John H. Lien, Esq. Reed Smith LLP 355 South Grand Avenue, Suite 2900 Los Angeles, CA 90071 (213) 457.8029 jlien@reedsmith.com

OVERVIEW 2008 Case Review New Developments for 2009

I. 2008 Case Review Noncompetes/General Releases Wage and Hour CFRA Arbitration Agreements Individual Liability for Retaliation Hostile Work Environment

Noncompetes & General Releases:Edwards v. Arthur Anderson Edwards, a CPA for accounting firm Arthur Andersen, signed an agreement that provided: “If you leave the Firm, for eighteen months after release or resignation, you agree not to perform professional services of the type you provided for any client on which you worked during the eighteen months prior to release or resignation. This does not prohibit you from accepting employment with a client.For twelve months after you leave the Firm, you agree not to solicit (to perform professional services…) any client … to which you were assigned during the eighteen months preceding release or resignation.” Edwards v. Arthur Andersen LLP, 44 Cal. 4th 937, 942 (2008).

Also, Arthur Andersen planned to cease operations (due to the Enron scandal). HSBC offered Edwards a job. HSBC required Edwards to sign a release to discharge Andersen from “any and all actions, causes of action, claims, demands, debt,” including nonwaivable rights under Labor Code section 2802’s indemnity protections. Noncompetes & General Releases:Edwards v. Arthur Anderson Edwards v. Arthur Andersen LLP, 44 Cal. 4th 937, 941-942 (2008).

Edwards refused to sign the release, fearful of being implicated in the federal investigation of Andersen and of being named as a defendant by Andersen’s clients. Andersen terminated Edward’s employment; HSBC withdrew its job offer. Noncompetes & General Releases:Edwards v. Arthur Anderson Edwards v. Arthur Andersen LLP, 44 Cal. 4th 937, 941-942 (2008).

Two Questions Presented: To what extent does Business and Professions Code section 16600 permit “narrow restraint” employee noncompetition agreements? Is a contract provision requiring an employee to release “any and all” claims unlawful because it encompasses nonwaivable statutory protections, such as the employee indemnity protection of Labor Code section 2802? Noncompetes & General Releases:Edwards v. Arthur Anderson Edwards v. Arthur Andersen LLP, 44 Cal. 4th 937, 941-942 (2008).

Holding No. 1: Under B&P section 16600, the Supreme Court found Arthur Andersen’s agreement to have “restricted Edwards from performing work for Andersen's Los Angeles clients and therefore restricted his ability to practice his accounting profession.” Thus, the noncompetition agreement was invalid. California Supreme Court thus repudiated the Ninth Circuit’s “narrow restraint” doctrine. Noncompetes & General Releases:Edwards v. Arthur Anderson Edwards v. Arthur Andersen LLP, 44 Cal. 4th 937, 941-942, 946, 948 (2008).

Noncompetes & General Releases:Edwards v. Arthur Anderson Holding No. 2: • “A contract provision whereby an employee releases ‘any and all’ claims does not encompass nonwaivable statutory protections, such as the employee indemnity protections of Labor Code section 2802” since the agreement is deemed to expressly incorporate the law that the employee cannot waive that which is not waivable. • (Similar to Workers’ Comp. waivers/releases.) Edwards v. Arthur Andersen LLP, 44 Cal. 4th 937, 941-942, 946, 948 (2008).

Meal & Rest Periods: Employers Only Need To “Provide” • Federal Court Decisions • Labor Code section 512 requires employers to provide a meal period, not ensure that they be taken. • This Interpretation of the statute forecloses class-wide adjudication of missed meal period claims, resulting in denial of plaintiff’s class certification motions.

Meal & Rest Periods: Employers Only Need To “Provide” • White v. Starbucks Corp., 497 F.Supp.2d 1080 (N.D.Cal. 2007) (defense motion for summary judgment); • Perez v. Safety-Kleen Systems, Inc., 253 F.R.D. 508 (N.D.Cal. 2008) (same); • Brown v. Federal Express Corp., 249 F.R.D. 580 (2008) (class certification denied); • Kenny v. Supercuts, Inc., 2008 U.S.Dist. LEXIS 43073 (N.D.Cal. 2008) (same); • Salazar v. Avis Budget Group, Inc., 251 F.R.D. 529 (S.D.Cal. 2008) (same); • Kohler v. Hyatt Corp., 2008 U.S.Dist. LEXIS 63392 (C.D.Cal. 2008) (same).

Meal & Rest Periods: Employers Only Need To “Provide” • Brinker Restaurant Corporation operates 137 restaurants in California. • Putative class action where employees alleged denial of rest breaks, denial of meal periods (and taking lunch within first hour of shift), and working off the clock during meal periods. • DCA: Motion for class certification should have been denied (reversed trial court). Brinker Rest. Corp., v. Sup. Ct., 165 Cal.App.4th 25, 30 (2008) (review granted and pending before the Cal. Sup. Ct. as case no. S166350)

Labor Code §512(a) An employer may not employ an employee for a work period of more than five hours per day without providing the employee with a meal period of not less than 30 minutes,

Labor Code §512(a) except that if the total work period per day of the employee is no more than six hours, the meal period may be waived by mutual consent of both the employer and employee.

Meal & Rest Periods: Employers Only Need To “Provide” The Fourth District Court of Appeal concluded: 1. while employers cannot impede, discourage or dissuade employees from taking meal periods, they need only provide them and not ensure they are taken; 2. employers are not required to provide a meal period for every five consecutive hours worked; Brinker Rest. Corp., v. Sup. Ct., 165 Cal.App.4th 25, 30 (2008) (review granted and pending before the Cal. Sup. Ct. as case no. S166350)

Meal & Rest Periods: Employers Only Need To “Provide” 3. while employers cannot coerce, require or compel employees to work off the clock, they can only be held liable for employees working off the clock if they knew or should have known they were doing so; 4. “Because rest and meal breaks need only be ‘made available’ and not ‘ensured,’ individual issues predominate and, based upon the evidence presented to the trial court, they are not amenable to class treatment;” Brinker Rest. Corp., v. Sup. Ct., 165 Cal.App.4th 25, 30 (2008) (review granted and pending before the Cal. Sup. Ct. as case no. S166350)

Meal & Rest Periods: Employers Only Need To “Provide” 5. “Off-the-clock claims are also not amenable to class treatment as individual issues predominate on the issue of whether Brinker forced employees to work off the clock, whether Brinker changed time records, and whether Brinker knew or should have known employees were working off the clock.” 6. DEPUBLISHED (CSC Review) Brinker Rest. Corp., v. Sup. Ct., 165 Cal.App.4th 25, 30 (2008) (review granted and pending before the Cal. Sup. Ct. as case no. S166350)

Meal & Rest Periods: Employers Only Need To “Provide” • Second District Court of Appeal found that the employer “provided” meal breaks based on: • a written policy providing for meal periods; • awareness by plaintiff and other managers of the policy; • reprimands for not taking meal breaks; • a meeting advising plaintiff and others that taking lunch and rest breaks was required; and • 21 declarations from managers who said they were allowed to take meal periods at their own discretion. Brinkley v. Public Storage, Inc., 167 Cal.App.4th 1278, 1280 (Oct. 28, 2008) (Petition for Review filed Dec. 4, 2008).

Meal & Rest Periods: Employers Only Need To “Provide” • “The interest protected by the meal period provisions of [Labor Code] sections 226.7 and 512 is the right of employees to be free of the employer’s control during the meal period. The meal period laws do not obligate employees to take meal periods or employers to ensure that meal periods are taken.” • Meal periods need not be provided within the first five hours of the shift. Brinkley v. Public Storage, Inc., 167 Cal.App.4th 1278, 1280 (Oct. 28, 2008) (Petition for Review filed Dec. 4, 2008).

Meal & Rest Periods: Employers Only Need To “Provide” Some strategies to avoid class certification and violations on meal and rest break violations: • Review records and enforce policy providing for meal and rest breaks • Implement policy of reprimanding employees for not taking meal or rest breaks and document • Affirmatively ensure that employees are relieved of all duty by, e.g., providing an area in the workplace for taking meal and rest breaks (but allow them to leave the premises) • Get offending employee to acknowledge in writing that: • failed to sign out; or • missed of own volition; or • meal period was provided

Pay Stub Violations:Actual Injury Required • Putative class action based on pay stub violations for mistakenly identifying $11.20 per hour as the rate for associated mileage for property managers instead of $.19 per hour; pay, however, was accurately stated. • An employer cannot be liable for misstatements on pay stubs under Labor Code section 226, unless it: • (i) knowingly and intentionally makes such misstatements; and • (ii) an employee suffers injury as a result, which plaintiff did not prove. Brinkley v. Public Storage, Inc., 167 Cal.App.4th 1278, 1280 (Oct. 28, 2008) (Petition for Review filed Dec. 4, 2008).

California Family Rights Act: Split Decision For Employers • Hospital employee claimed work-related stress and received a medical note for a leave of absence. Employee stated that she would not return to work prior to August 27, 1999. • Employer directed her to see another doctor, who determined plaintiff could work without any restrictions. • Employer allowed plaintiff to use PTO, but directed her to return to work by August 23, 1999 or face dismissal. Lonicki v. Sutter Health Central, 43 Cal.4th 201 (2008)

California Family Rights Act: Split Decision For Employers • On August 26, 1999, plaintiff’s psychiatrist found employee was “disabled by major depression” and recommended her medical leave be extended to September. • Employer terminated employee for failing to appear at work on August 23 and 24. • N.B.: During her “leave” and at the time of her termination, plaintiff worked part-time at another hospital performing similar duties. Lonicki v. Sutter Health Central, 43 Cal.4th 201 (2008)

California Family Rights Act: Split Decision For Employers Questions Presented: • When faced with conflicting medical opinions on whether an employee is unable to perform her job, must an employer obtain a “tie-breaking” medical opinion to preserve its right to challenge the employee’s subsequent CFRA claim? • Can an employee who works a similar job for another employer on a part-time basis still claim that she was not capable of performing her job? (Employer claimed that her part-time job was conclusive evidence that she could work.) Lonicki v. Sutter Health Central, 43 Cal.4th 201 (2008)

California Family Rights Act: Split Decision For Employers • No. Under the statutory language of CFRA, an employer merely has the option to request a tie-breaking option if the first two doctors disagree. • Yes. The relevant inquiry was whether plaintiff’s alleged serious health condition rendered her unable to do her job at the defendant’s hospital. The Supreme Court found that plaintiff’s part-time job at another hospital, performing similar duties, didnot conclusively demonstrate that she could perform her job. Lonicki v. Sutter Health Central, 43 Cal.4th 201 (2008)

California Family Rights Act: Split Decision For Employers • "The Court of Appeal affirmed the trial court, reasoning that under the CFRA an employer must grant medical leave only if the employee is unable to perform the employee's essential job functions 'generally, rather than for a specific employer.' Plaintiff challenges the Court of Appeal's holding, arguing that the relevant inquiry is whether a serious health condition made her unable to do her job at defendant's hospital, not her ability to do her essential job functions 'generally,' as the Court of Appeal concluded. She is right. Neither the CFRA nor the FMLA, after which the CFRA was modeled, has language supporting the Court of Appeal's holding.” Lonicki v. Sutter Health Central, 43 Cal.4th 201 (2008)

California Family Rights Act: Split Decision For Employers • Citing a Ninth Circuit case, which interpreted the FMLA, the court explained: "A demonstration that an employee is unable to work in his or her current job due to a serious health condition is enough to show that the employee is incapacitated, even if that job is the only one that the employee is unable to perform. The [Ninth Circuit] court explained that 'the inquiry into whether an employee is able to perform the essential function of her job should focus on her ability to perform those functions in her current environment.' We agree." Lonicki v. Sutter Health Central, 43 Cal.4th 201 (2008)

Arbitration Agreements:Review Them Again • “[T]he Arbitrator, and not any federal, state, or local court or agency, shall have the exclusive authority to resolve any dispute relating to the interpretation, applicability or formation of this Agreement, including but not limited to any claim that all or part of this Agreement is void or voidable” • Each party had the right to take the deposition of one individual and any expert witness designated by another party. “Additional discovery may be had only where the Arbitrator selected pursuant to this Agreement so orders, upon a showing of substantial need.” Ontiveros v. DHL Express, 164 Cal.App.4th 494 (2008).

Arbitration Agreements:Review Them Again “[P]rovision in the arbitration agreement giving the arbitrator exclusive authority to decide enforceability issues is unconscionable and, therefore, unenforceable.” “Because an employee may not be required to pay fees unique to arbitration, the provision in the agreement requiring such payment is unlawful and hence substantively unconscionable.” Ontiveros v. DHL Express, 164 Cal.App.4th 494 (2008).

Arbitration Agreements:Review Them Again • “[T]he permitted discovery is so low [deposition of only one individual permitted] while the burden for showing a need for more discovery [substantial burden standard] is so high that plaintiff’s ability to prove her claims would be unlawfully thwarted by the discovery provision in the agreement.” Ontiveros v. DHL Express, 164 Cal.App.4th 494 (2008).

No Retaliation Claim Against Individual Managers Or Supervisors • Retaliation claims are only proper as against an employer, not against individual employees. • Decision may make removal to federal court easier for out-of-state companies. Jones v. The Lodge at Torrey Pines Partnership, 42 Cal.4th 1158, 1160 (2008); Dominguez v. Washington Mutual Bank, 2008 Cal.App. LEXIS 2286, *26 (Nov. 21, 2008).

No Retaliation Claim Against Individual Managers Or Supervisors • “We conclude that the same rule applies to actions for retaliation that applies to actions for discrimination: The employer, but not nonemployer individuals, may be held liable.” • FEHA statute makes it an unlawful employment practice for “any employer, labor organization, employment agency, or person” to retaliate. “The statutory language is not plain.” Jones v. The Lodge at Torrey Pines Partnership, 42 Cal.4th 1158 (2008).

No Retaliation Claim Against Individual Managers Or Supervisors • The “reasons for not imposing individual liability for discrimination – supervisors can avoid harassment but cannot avoid personnel decisions, it is incongruous to exempt small employers but to hold individual nonemployers liable, … the chilling of effective management, corporate employment decisions are often collective, and it is bad policy to subject supervisors to the threat of a lawsuit every time they make a personnel decision – apply equally to retaliation.” Jones v. The Lodge at Torrey Pines Partnership, 42 Cal.4th 1158 (2008).

Hostile Work Environment Even If Comments Not Directed At Employee • Only female sales representative in the transportation department claimed that general, sexually offensive comments made by co-workers and branch manager and sexually charged radio program played on a daily basis subjected her to a hostile work environment. • Court of Appeal found that “the daily exposure to language and radio programming that are particularly offensive to women” is “sufficient to satisfy the ‘based on’ and ‘severe or pervasive’ elements of a hostile work environment claim. Reeves v. C.H. Robinson Worldwide Inc., 525 F.3d 1139 (11th Cir. 2008)

OVERVIEW • 2008 Case Review • New Developments for 2009

OVERVIEW New Developments for 2009 Discriminatory “Stray Remarks” No Texting FMLA Regulations ADA Amendments Mileage Reimbursement Employee Free Choice Act Requirement To E-Verify

Looking Ahead To 2009Stray Remarks As Discriminatory Animus? • Should California law recognize the “stray remarks” doctrine in ruling on a motion for summary judgment? • i.e. disregard isolated discriminatory remarks or comments unrelated to the decision-making process as insufficient to establish discrimination? Reid v. Google, Inc., 155 Cal.App.4th 1342 (2007) (review pending by the Cal. Sup. Ct.; case no. S158965).

Looking Ahead To 2009Stray Remarks As Discriminatory Animus? • Google hired Dr. Reid, age 52, as director of operations and director of engineering. • Reid’s manager, age 38, called his opinions and ideas “obsolete” and “too old to matter and said he was “slow,” “fuzzy,” “sluggish,” and “lethargic.” • Colleagues called him “old man,” “old guy,” or “old fuddy-duddy.” Reid v. Google, Inc., 155 Cal.App.4th 1342 (2007) (review pending by the Cal. Sup. Ct.; case no. S158965).

Looking Ahead To 2009Stray Remarks As Discriminatory Animus? • Google then removed Reid as director of operations and two employees, 15-20 years younger, took over his duties; Reid’s new position was subsequently terminated. • At his termination meeting, Reid claims Google told him he was not a “cultural fit.” Reid v. Google, Inc., 155 Cal.App.4th 1342 (2007) (review pending by the Cal. Sup. Ct.; case no. S158965).

Looking Ahead To 2009Stray Remarks As Discriminatory Animus? • Trial court had granted Google’s motion for summary judgment on age discrimination claims. • Court of Appeal reversed, disagreeing “with suggestions that “a ‘single, isolated discriminatory comment’ … or comments that are ‘unrelated to the decisional process’ are ‘stray’ and therefore, insufficient to avoid summary judgment.” Reid v. Google, Inc., 155 Cal.App.4th 1342 (2007) (review pending by the Cal. Sup. Ct.; case no. S158965).

Looking Ahead To 2009Stray Remarks As Discriminatory Animus? • "Google argues at length that the comments Reid offers were stray remarks that do not raise a triable issue of fact as to pretext. The so-called stray remarks rule allows courts to deem racist or sexist remarks insufficient to support denial of summary judgment if the remarks are considered stray. We cannot view such a rule as anything other than the assumption by the court of a fact-finding role." Reid v. Google, Inc., 155 Cal.App.4th 1342 (2007) (review pending by the Cal. Sup. Ct.; case no. S158965).

Looking Ahead To 2009Stray Remarks As Discriminatory Animus? • "We do not agree with suggestions that a 'single, isolated discriminatory comment' or comments that are 'unrelated to the decisional process' are 'stray' and therefore, insufficient to avoid summary judgment. There are certainly cases that in the context of the evidence as a whole, the remarks at issue provide such weak evidence that a verdict resting on them cannot be sustained. But such judgments must be made on a case-by-case basis in light of the entire record, and on summary judgment the sole question is whether they support an inference that the employer's action was motivated by discriminatory animus. Their 'weight' as evidence cannot enter into the question." Reid v. Google, Inc., 155 Cal.App.4th 1342 (2007) (review pending by the Cal. Sup. Ct.; case no. S158965).

Looking Ahead To 2009Stray Remarks As Discriminatory Animus? • Beware of e-mail communication: Leading up to his termination, one of Reid’s manager determined that “Reid should receive a bonus of $11,300, in addition to some other suggested terms of a severance agreement, to avoid a ‘judge concluding we acted harshly…’” • DEPUBLISHED (Review granted by CSC) Reid v. Google, Inc., 155 Cal.App.4th 1342 (2007) (review pending by the Cal. Sup. Ct.; case no. S158965).

Looking Ahead To 2009No Calling Or Texting While In The Car Could this be your employee? • Metrolink engineer was text-messaging shortly before authorities said his commuter train ran stop signals and slammed into a freight train in Chatsworth, killing 26, including himself. • Brokerage firm settled a personal injury action for $500,000 when one of its stockbrokers hit and killed a 24 year old motorcyclist (a father of two) while driving and allegedly making “cold calls” from his cellular phone.

Looking Ahead To 2009No Calling Or Texting While In The Car • Employee talking on cell phone, making business appointments at 77 mph (cruise control). Didn’t see traffic stopped ahead. Rammed into car and sent it flying over center divider on its side, after which it slid down the highway. The driver’s arm was caught between the car door and the pavement. Several operations ensued to try to save the arm, but eventually it had to be amputated just below the shoulder. The victim, a widowed father of four, sued the employee’s employer, claiming that use of cell phone while driving was unreasonably hazardous.Settlement: $5.2 Million.

Looking Ahead To 2009No Calling Or Texting While In The Car • Effective January 1, 2009. • No writing, sending, or reading text-based communication while driving. • Violation punishable by a base fine of $20 for a first offense; $50 for each subsequent offense. Cal. Vehicle Code § 23123.5

Looking Ahead to 2009New FMLA Regulations (Jan. 19, 2008) Three Key Changes: 1) Exigent Military Leave • Leave may be taken “because of any qualifying exigency … arising out of the fact that the spouse, son, daughter, or parent of the employee is on active duty (or has been notified of an impending call or order to active duty) in the Armed Forces in support of a contingency operation.” • 12-week leave entitlement 29 C.F.R. § 825.126

Labor and Employment Update For 2008 and Preview For 2009