After-acquired evidence

Does evidence of an employee’s wrongdoing discovered by the employer after a case is filed require dismissal of the case before trial?

On February 18, 2015, the First District Court of Appeal considered whether dismissal of an employee’s discrimination case during a pre-trial proceeding is proper when based on “after-acquired evidence” (e.g., the employer learns of an employee’s ineligibility for hire after making the hiring decision). In Horne v. District Council 16 International Union of Painters & Allied Trades (Cal. App. 1st Dist. Feb. 18, 2015) 2015 Cal. App. LEXIS 148, the court concluded that an employer’s discovery of an employee’s wrongdoing after making an employment decision is not relevant for purposes of deciding whether there are disputed facts that require submission of the case to a trier of fact (“summary judgment”).

In this case, Raymond Horne sued District Council 16 contending that he was not hired for a union organizer position in 2009 and 2010 because of his race. After the case was filed, the union learned for the first time that Mr. Horne had been convicted of a narcotics sale in 1997. The union filed a motion for summary judgment, in which the court may use a three-stage analysis. The first stage requires the employee to provide evidence supporting a “prima facie” case of discrimination, including evidence that he was qualified for the position he sought. The union contended Mr. Horne could not establish a prima facie case because the conviction rendered him ineligible for the position: the Labor-Management Reporting and Disclosure Act of 1959 bars individuals convicted of violating narcotics laws from serving as organizers (29 U.S.C. section 504(a)). The trial court agreed with the union and granted summary judgment.

On appeal, Mr. Horne asserted that the trial court improperly considered the after-acquired evidence of the narcotics conviction. The court of appeal noted that the 2014 decision in Salas v. Sierra Chemical Co. (2014) 59 Cal.4th 407 “put to rest” the question of the appropriateness of using after-acquired evidence to negate a prima facie case. The court in Salas decided that after-acquired evidence is not a complete defense to claims under the California employment discrimination law, but does affect the available remedies. The union contended that the Salas decision did not apply because that court did not consider after-acquired evidence in the context of the summary judgment three-stage analysis. The court in Horne disagreed because Salas precludes the use of after-acquired evidence to completely bar an employee’s claim, and provides that such evidence is only relevant in the damages phase of the case. Because the three-stage analysis at summary judgment concerns liability only, after-acquired evidence is irrelevant for summary judgment purposes.

The court of appeal concluded that the trial court impermissibly relied on the after-acquired evidence of Mr. Horne’s felony conviction to support its grant of summary judgment. Accordingly, the court in Horne reversed the grant of summary judgment. This decision makes clear that after-acquired evidence cannot be used to dismiss an employee’s case.

Posted by deanroyerlaw in Employment

Second meal period

May employees waive a second meal period for shifts longer than 12 hours?

The Fourth District Court of Appeal recently addressed the issue of whether employees who work shifts longer than 12 hours may waive a second meal period. On February 10, 2015, in Gerard v. Orange Coast Memorial Medical Center (Cal. App. 4th Dist. Feb. 10, 2015) 2015 Cal. App. LEXIS 132, the court determined that an Industrial Welfare Commission Wage Order authorizing such waivers is invalid.

In Gerard, health care workers sued their hospital employer. One of the issues concerned the hospital’s policy allowing employees to voluntarily waive a second meal period for shifts longer than 10 hours, including those exceeding 12 hours. The employees alleged they signed second meal period waivers and occasionally worked longer than 12 hours without a second meal period. The trial court dismissed the meal period claim on grounds the employees were provided meal periods as required by law.

On appeal, the employees asserted that the second meal period waiver violated Labor Code provisions governing meal periods (sections 512(a) and 516) and that an IWC Wage Order is invalid to the extent it authorizes employees to waive second meal periods for shifts longer than 12 hours. The appeals court in Gerard agreed.

The court of appeal first looked to Labor Code section 512(a). That law requires employers to provide two meal periods for employees who work shifts longer than 10 hours, except when the shifts are no more than 12 hours and the employer and employees mutually consent to waive the second meal period. Next, the court discussed Labor Code section 516, which allows the IWC to adopt orders concerning meal periods except as provided in section 512. Finally, the court considered the Wage Order at issue (No. 5, section 11(D)). That order allows health care workers who work longer than eight hours per day to voluntarily waive a second meal period.

The court in Gerard determined that Labor Code section 512(a) and the Wage Order conflict: the Labor Code permits second meal period waivers for shifts of 12 hours or less, but the Wage Order allows such waivers for shifts longer than 12 hours. It also found that the legislative history of sections 512 and 516 of the Labor Code demonstrates an intent to prohibit the IWC from making wage orders in conflict with the requirements set forth in section 512. Ultimately, the court concluded that the IWC exceeded its authority and declared that the Wage Order at issue is invalid to the extent it authorizes waivers of second meal periods for shifts longer than 12 hours.

Posted by deanroyerlaw in Employment

Rest periods and on-call status

Is it a lawful rest period if the employee is on-call?

On January 29, 2015, the Second District Court of Appeal published a decision concerning the issue of whether employers may require employees to be on-call during rest breaks. In Augustus v. ABM Sec. Servs. (Cal. App. 2nd Dist. Dec. 31, 2014) 2014 Cal. App. LEXIS 1209, the court concluded that employees are not deprived of rest breaks so long as they are not required to work.

This case involves a class of security workers to whom ABM afforded rest breaks, but who were also on-call during those breaks. The plaintiffs contended that because ABM did relieve them of all duties during the rest breaks—given their on-call status—they were effectively denied those breaks. The court in Augustus disagreed.

The court first looked to the Industrial Welfare Commission Wage Order covering the employees (number four). The Wage Order states that every employer must provide employees with one or more rest periods, based on the total hours worked daily, except those employees who work less than three-and-one-half hours in a day. Because the Wage Order does not describe the nature of the rest period, the court in Augustus turned to Labor Code section 226.7. That statute provides that an employer shall not require an employee to work during a meal or rest period.

The court found significant the phrase “to work.” It also noted that although the ABM workers were on-call, they were also permitted to engage in non-work activities such as smoking, reading, and taking care of personal business. The court found that although the on-call status required the workers to respond in the event of calls, the workers were not required to engage in a variety of work duties such as greeting visitors, raising or lowering the flags, monitoring traffic or parking, and observing or restricting movement of persons and property while taking a break.

The court in Augustus supported its conclusion by contrasting the section of the Wage Order concerning rest periods with the section regarding meal periods. The order requires the employer to relieve the employee of all duties during meal periods, but contains no such language about rest periods. The court also noted that the order requires that only on-duty meal periods be paid, whereas all rest periods are paid.

The plaintiffs asserted that the conclusion in Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal. 4th 1004, that an employer must relieve an employee of all duties during meal breaks also applies to rest breaks. The court in Augustus declined to adopt this reasoning on the basis that rest and meal breaks are qualitatively different.

The court in Augustus ultimately concluded that an employer cannot require an employee to work during a rest break, but need not relieve the employee of all duties such as to remain on-call. The court supported the distinction between work and on-call duty with several opinion letters issued by the Department of Labor Standards Enforcement. It remains to be seen whether other District Courts of Appeal, and the California Supreme Court, reach the same conclusion.

Posted by deanroyerlaw in Employment

San Francisco retail chain store law

San Francisco passes new law affecting retail chain stores.

On November 25, 2014, the San Francisco Board of Supervisors passed two pieces of legislation affecting retail chain stores. Both laws will take effect on July 3, 2015. They will impact businesses with 20 or more retail sales establishments worldwide and 20 or more employees in San Francisco. Contractors who provide janitorial or security services at these stores are included; non-profit and governmental employers are not.

Predictable Scheduling and Fair Treatment for Formula Retail Employees

Under this law, covered employers must provide new employees with a good faith estimate of the minimum number of scheduled shifts per month, not including on-call shifts, and the days and hours of the shifts. Employers must also give at least two weeks’ notice of work schedules, including on-call shifts. The notice must be posted in a conspicuous, readily accessible place in the workplace, or by electronic means.

If a covered employer wants to make changes to shifts, it must give notice by in-person communication, telephone, email, text, or other electronic communication. Failure to provide the required notice carries consequences. If the employer gives notice between 24 hours and less than seven days, it must compensate the affected employee with one additional hour of pay at her regular rate. Less than 24 hours’ notice results in a penalty of two additional hours of pay if the shift is up to four hours; or four additional hours of pay if the shift is more than four hours.

The law also regulates on-call shifts. If an employer requires an employee to be available but does not call him in to work, the employer must pay him compensation for that shift: two hours of pay for shifts of less than four hours; four hours of pay for shifts of four hours or more. No compensation under this law is required if the employer calls the employee in for work, or gives at least 24 hours’ notice of a cancellation or change in the on-call shift.

There are exceptions to the compensation penalties for shift changes and on-call shifts. These include when another employee is not available due to illness, vacation, or employer-provided time-off and the employee provided less than seven days’ notice; another employee has not reported to work on time or has been fired or sent home as a disciplinary action; overtime work; and when the employee trades shifts with another employee or requests a shift change.

The law also affects part-time employees. Covered employers must provide employees who work less than 35 hours per week the same starting hourly wages, time off, and eligibility for promotion as provided to full-time employees with the same jobs. Pay differences are allowed for reasons other than part-time status, the time off may be pro-rated, and eligibility for promotion may be conditioned on availability for full-time employment or reasons other than part-time status.

Employers must provide notice in the workplace of rights under this law. They are required to retain documentation of work schedules and pay records for three years. Failure to do so gives rise to a presumption of failure to comply with this law absent clear and convincing evidence.

Retaliation by an employer for an employee’s exercise of her rights under this law is prohibited. Rights include a request to modify the initial proposed work shifts, and informing any person of rights under this law.

San Francisco’s Office of Labor Standards Enforcement has jurisdiction to enforce the law. The remedies it may order include: requiring an employer to provide lost wages to an employee whose rights were violated; a $50 administrative penalty to each employee whose rights were violated for each day of violation; and enforcement costs to be paid to the City of San Francisco. The City Attorney may bring a civil action for lost wages, a civil penalty not to exceed the amount of lost wages, reinstatement, and attorney fees and costs.

Hours and Retention Protections for Formula Retail Employees

Under this law, covered employers must offer additional work to part-time employees (working less than 35 hours per week) before hiring any new employees or using contractors or temporary services/staffing agencies. The employees have to be qualified to perform the additional work as determined by the employer, and the employees must have previously performed the same or similar work. Employees are not required to accept the offer, which must be in writing.

A second area covered by this law is the retention of employees when there is a change in ownership or control of a covered workplace. The outgoing (incumbent) employer must provide the incoming (successor) employer with a list of employees, including names, contact information, dates of hire, rates of pay, and average number of hours worked per week in the past six months. The incoming employer must employ eligible employees—those who were employed for at least 90 days prior to the change of control—on this retention list under the same terms of employment for at least 90 days. The incoming employer must make an offer of employment in writing, including when an establishment location changes within San Francisco. If the incoming employer determines it requires fewer employees, it must retain employees by seniority based on the date of hire by the outgoing employer or as required by a collective bargaining agreement. The incoming employer cannot discharge any eligible employees without cause during the 90-day period.

The outgoing employer must post a notice in the workplace about any change of control for 30 days. The notice has to include the names of the outgoing and incoming employers, postal and electronic addresses for employees to provide updated contact information, and the effective date of the change of control. The incoming employer must include a notice of rights under this law with the first paycheck it issues, and post a notice of rights in the workplace.

Under this law, covered employers must retain work schedules, pay records, and written offers for additional work hours for three years. The same retention period applies to incoming employers with respect to offers of employment to eligible employees and the retention list.

Retaliation by an employer for an employee’s exercise of her rights under this law is prohibited. Rights include informing any person of rights under this law, and a good faith (even if mistaken) allegation of a violation of the law. If an employer takes adverse action against an employee within 90 days of the employee’s exercise of her rights, there is a rebuttable presumption that the action was taken because of the exercise of rights.

OLSE has jurisdiction to enforce the law. The remedies it may order include: requiring an employer to provide additional hours of work; reinstatement; payment of lost wages to an eligible employee whose rights were violated; an administrative penalty not to exceed the amount of lost wages; and enforcement costs to be paid to the City of San Francisco. OLSE also has the authority to assess administrative fines of $500 per eligible employee for a violation of the requirements concerning the retention list; notice of change of control; notice of rights with the first paycheck; posting of notice of rights (where each day is a separate violation after notice of continued violation would authorize a citation); making of employment records available to OLSE; and written offers of additional hours of work. The City Attorney may bring a civil action for lost wages, a civil penalty not to exceed the amount of lost wages, reinstatement, and attorney fees and costs.

Posted by deanroyerlaw in Employment

Title VII punitive damages

Does the Title VII punitive damages statute satisfy due process?

On December 10, 2014, the Ninth Circuit Court of Appeals upheld a $300,000 punitive damages award in a sexual harassment case in which the jury awarded only $1 in nominal damages. In Arizona v. ASARCO LLC (9th Cir. Ariz. Dec. 10, 2014) 2014 U.S. App. LEXIS 23255, the issue before the Ninth Circuit was whether the punitive damages award was consistent with due process.

In this case, the plaintiff pursued multiple claims arising from her employment with ASARCO LLC, which operates a mine near Tucson, Arizona. The jury found in her favor under the federal employment discrimination statute (Title VII), and awarded her $1 in nominal damages and $868,750 in punitive damages. The trial court reduced the punitive damages to $300,000, the maximum allowed under Title VII for an employer of ASARCO LLC’s size. (42 U.S.C. section 1981a(b)(3)(D).) On appeal, a three-judge panel reduced the punitive damages award further to $125,000.

The Ninth Circuit agreed to hear the case en banc. It started by acknowledging the decision in BMW of North America, Inc. v. Gore (1996) 517 U.S. 559, in which the U.S. Supreme Court established a due process standard for punitive damage awards. The standard consists of three guideposts: (1) the degree of reprehensibility of the defendant’s misconduct; (2) the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and (3) the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases. (State Farm Mutual Automobile Insurance Co. v. Campbell (2003) 538 U.S. 408, 418.)

The first step in the court’s analysis in Arizona was to review the constitutional concerns underlying the due process standard for punitive damages awards. One is fair notice to the defendant of conduct that will subject it to such awards and the severity of the penalty that may be imposed. A second is to avoid arbitrary, biased, or ill-informed deprivation of defendants’ property by juries when the statute or common law did not provide sufficient safeguards.

Next, the Ninth Circuit determined that rigorous application of the three Gore guideposts is appropriate when reviewing punitive damages awards for common law claims, but not when the awards arise from a statute. Accordingly, the court in Arizona looked to the Title VII statute. It concluded that the statute comports with due process because it sets forth the type of conduct that will justify an award of punitive damages, and establishes a cap on compensatory and punitive damages. Consequently, defendants have had the required fair notice since the establishment of the statute in 1991. The court in Arizona also determined that the chance of random, arbitrary awards is reduced considerably because of the combined cap on compensatory and punitive damages.

The Ninth Circuit also concluded that Title VII’s punitive damages statute satisfies the three Gore criteria. The intent requirement for an award of punitive damages satisfies the reprehensible conduct guidepost. The disparity between the harm suffered and the award (ratio) has little applicability because Title VII caps the liability. Furthermore, because the combined cap on compensatory and punitive damages means that greater awards for compensatory damages leave less available for punitive damages, the ratio guidepost is unnecessary. The Ninth Circuit also noted that because nominal damages are not compensatory in nature, application of the ratio guidepost in the Arizona case was not appropriate. Finally, the purpose of the third guidepost (comparison of the jury award to other comparable cases) is deference to reasoned legislative judgments. For Title VII, Congress made a reasoned judgment not simply as to analogous criminal or civil penalties, but as to punitive damages awarded in cases.

The decision in Arizona means that punitive damages awards within the Title VII cap should be upheld for employees in the Ninth Circuit. The U.S. Supreme Court may take a different view, but that will be a subject for a future post.

Posted by deanroyerlaw in Employment