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

Reporting illegal conduct

Does reporting illegal conduct by a co-worker constitute a wrongful termination claim?

On December 1, 2014, the Sixth District Court of Appeal offered some clarity on the issue of which forms of whistle-blowing activity give rise to a wrongful termination claim. In Ferrick v. Santa Clara University (Cal. App. 6th Dist. Dec. 1, 2014) 2014 Cal. App. LEXIS 1091, the court of appeal determined whether the plaintiff’s complaint stated a cause of action for wrongful termination in violation of public policy. These claims require a showing that the employer terminated (or took some other adverse action) against the plaintiff in violation of a policy that is (1) supported by constitutional or statutory provisions, (2) provides benefit to the public, (3) exists at the time of the termination, and (4) is fundamental and substantial. (Stevenson v. Superior Court (1997) 16 Cal.4th 880, 889-890.)

First, the court in Ferrick analyzed the plaintiff’s wrongful termination claim under the Labor Code’s general whistle-blower statute (section 1102.5). It determined whether any of the plaintiff’s reports concerned what she reasonably could believe were violations of any law or regulation. The court concluded that the allegations concerning the plaintiff’s report about commercial bribery (a public university employee accepting kick-backs) were sufficient, but that the remaining allegations about embezzlement, evasion of taxes, and driving without a valid license were not. These conclusions were based on the particular allegations in the case, and turned on whether the plaintiff could show that the activity she reported constitutes a violation of a specific law or regulation; or, in the case of the driving without a valid license, whether the plaintiff could show that the applicable regulation concerns a significant and fundamental public policy. The court also rejected the plaintiff’s theories that her reports constitute claims under workplace safety statutes (Labor Code section 6310 and 6400 et seq.) and the False Claims Act (Government Code section 12650 et seq).

Second, with respect to the kick-back allegation, the court decided whether the Penal Code prohibition on commercial bribery constitutes a significant and fundamental public policy. It noted a split of authority on the question of whether an employee’s report of a co-worker’s alleged unlawful activity is protected by a fundamental public policy. In American Computer Corp. v. Superior Court (1989) 213 Cal.App.3d 664, the Fourth District Court of Appeal concluded that an employee’s report of an investigation of a co-worker’s suspected embezzlement from a former employer served only the interests of the employer, and, therefore, did not support a wrongful termination claim. Two years later, in Collier v. Superior Court (1991) 228 Cal.App.3d 1117, the Second District Court of Appeal decided that the plaintiff’s report of suspected criminal conduct (bribery and kick-backs) by co-workers concerned a fundamental public policy in a workplace free of illegal activity. It reasoned that the report served not only the employer’s interest, but the public interest in deterring crime and the interests of people who stood to suffer harm from the activity.

The court in Ferrick concluded that the decision in Collier was better reasoned. It found that the Collier decision was consistent with the court’s recognition in Green v. Ralee Engineering Co. (1998) 19 Cal.4th 66, that section 1102.5 expresses a broad public policy interest in encouraging workplace whistle-blowers to report unlawful acts without fearing retaliation. The court in Ferrick also pointed to the Legislature’s recent amendment of section 1102.5 to protect disclosures to employers (in addition to reports to government or law enforcement agencies).

The decision in Ferrick provides greater weight to the view that an employee’s report of illegal conduct by a co-worker concerns a fundamental public policy, and, therefore, supports a wrongful termination claim. But until the Supreme Court of California decides the issue, it remains an open question.

Posted by deanroyerlaw in Employment