In a significant victory for California employers, a California Court of Appeal recently upheld a ruling that compelled arbitration of an employee's wage and hour claims and dismissed his class and representative claims. In Iskanian v. CLS Transportation Los Angeles, LLC, plaintiff Archavir Iskanian, a former CLS truck driver, sued CLS for various wage and hour violations, including failure to pay overtime and provide rest and meal breaks, alleging individual and putative class claims. CLS moved to compel arbitration of the individual claims and to dismiss the class and representative claims consistent with the agreement he signed at the inception of employment, which provided that "any and all claims" arising out of his employment would be subject to mandatory, binding arbitration and that expressly waived each party's right to bring representative and class claims. The trial court granted the motion, and Iskanian appealed. Shortly thereafter, the California Supreme Court issued its decision in Gentry v. Superior Court (September 2007 FEB), which held that certain class action waivers in arbitration agreements should not be enforced if class arbitration would more effectively vindicate employee rights. Accordingly, the appellate court directed the trial court to reconsider its ruling in light of Gentry. On remand, CLS withdrew its motion, and the lawsuit proceeded. Iskanian amended his complaint to add representative Private Attorney General Act ("PAGA") claims and certified his other claims for class treatment.
Shortly after the U.S. Supreme Court issued its decision in AT&T Mobility v. Concepcion (Fenwick's April 28, 2011 Litigation Alert) – in which the Court held that "[r]equiring the availability of classwide arbitration interferes with fundamental attributes of arbitration and thus creates a scheme inconsistent with the FAA" – CLS renewed its motion and the trial court granted it. On appeal by Iskanian, the court dealt three major blows to prior challenges to class action waivers in employment arbitration agreements.
First, the court recognized that "the Concepcion decision conclusively invalidates the Gentry test." A plaintiff who successfully meets the Gentry test would proceed to class arbitration, with the procedure imposed on a party that never agreed to it – a concept "thoroughly rejected" by Concepcion as inconsistent with the FAA. Further, as recognized by Concepcion, "'[s]tates cannot require a procedure that is inconsistent with the FAA, even if it is desirable for unrelated reasons.' The sound policy reasons identified in Gentry for invalidating certain class waivers are insufficient to trump the far-reaching effect of the FAA, as expressed in Concepcion."
Second, the court rejected Iskanian's attempt to invoke the recent decision of the National Labor Relations Board ("NLRB") in D.R. Horton (February 2012 FEB) that found class action waivers in arbitration agreements violate the National Labor Relations Act. Refusing to give any deference to the decision, the court observed that "the FAA is not a statute the NLRB is charged with interpreting." It then followed CompuCredit Corporation v. Greenwood, in which the U.S. Supreme Court held that "unless the FAA's mandate has been 'overridden by a contrary congressional command,' agreements to arbitrate must be enforced according to their terms . . . ." Because D.R. Horton failed to identify such a congressional command, it did "not withstand scrutiny in light of Concepcion and CompuCredit."
Third, the court rejected Iskanian's claim that his representative Private Attorney General Act claims were inarbitrable. Expressly departing from a prior California appellate decision (August 2011 FEB), the court held that "the public policy reasons underpinning PAGA do not allow a court to disregard a binding arbitration agreement. The FAA preempts any attempt by a court or state legislature to insulate a particular type of claim from arbitration."
This decision represents a significant pro-employer arbitration and class action ruling, at least for now. It also creates a split among California appellate courts on the enforceability of waivers of PAGA representative claims, such that future California Supreme Court review is likely. Thus, employers should carefully consider the potential benefits and pitfalls of such waivers, with the guidance of seasoned legal counsel, before implementing class or representative action waivers.
On May 30, 2012, the National Labor Relations Board's Office of General Counsel issued its third guidance memorandum on social media and the workplace, this time specifically focusing on employer policy language. By way of background, an employer's social media policy may violate Section 8(a)(1) of the National Labor Relations Act ("NLRA") if it would reasonably tend to chill an employee's exercise of Section 7 rights. This concept applies to even nonunionized workforces. Employers may glean the following key points from the latest memorandum:
While potentially helpful guidance, the memorandum and opinions on which it reports are not binding NLRB precedent; rather, they comprise the Office of the General Counsel's position used for determining whether to prosecute an unfair labor charge. While these positions may reasonably be construed as unreasonable or otherwise subject to challenge, employers should nevertheless carefully consider this guidance when implementing a new or revised social media policy.
Employee Entitled to Commissions Earned on Improperly-Assigned Account
Sciborski v. Pacific Bell Directory, a recent California Court of Appeal decision, emphasizes the importance of clear language in commission plans and agreements. Pacific Bell clawed back a commission payment to plaintiff Sciborski on the grounds that she had not earned the commission – i.e., the prior payment was merely an advance – because she was improperly assigned to an account for which she was not eligible. Sciborski argued that Pacific Bell's admitted clerical error was an improper basis to claw back the commission, because the at-issue bargaining agreement did not include proper account assignment as a prerequisite for earning commissions. The court agreed with Sciborski: "Absent an express provision to this effect, Pacific Bell was not entitled to unilaterally declare that the commission was not earned and use self-help measures to deduct funds from Sciborski's wages that had already been paid to her."
Post-Concepcion, Arbitration Agreements Still Subject To Armendariz Test
A California Court of Appeal recently affirmed the applicability of the Armendariz v. Foundation Health Psychare Services, Inc. standard for assessing unconscionability challenges to arbitration agreements, notwithstanding the U.S. Supreme Court's ruling in AT&T Mobility v. Concepcion (see above link). In Samaniego v. Empire Today LLC, plaintiffs – carpet installers – sued Empire claiming it misclassified them as contractors. In denying Empire's motion to stay the action and compel arbitration, the trial court found the agreement containing the arbitration provision was "highly unconscionable from a procedural standpoint," demonstrated "strong indicia of substantive unconscionability" and was thus unenforceable under Armendariz. The trial court also denied Empire's motion for reconsideration in light of Concepcion, which issued several weeks after the trial court's decision.
The appellate court affirmed, and further recognized that Concepcion "explicitly reaffirmed that the FAA 'permits agreements to arbitration to be invalidated by generally applicable contract defenses, such as fraud, duress, or unconscionability.'" As such, the court concluded that "arbitration agreements remain subject, post-Concepcion, to the unconscionability analysis employed by the trial court in this case."
Employers Paying Salaries to Non-Exempt Employees Beware of Proposed Legislation
AB2103 would eliminate agreements with non-exempt employees to pay a fixed salary covering regular and overtime hours. Specifically, AB 2103 provides that such a fixed salary "shall be deemed to provide compensation only for the employee's regular, nonovertime hours, notwithstanding any agreement to the contrary." AB2103 express takes aim at – and overturns – the decision in Arechiga v. Dolores Press that recognized and enforced an agreement to pay a non-exempt employee a fixed salary for 66 hours of work per week. Advocates claim the bill would restore California law to its pre-Arechiga status. The Assembly passed AB2103 on May 7, and the bill is now pending for review before the Senate's Committee on Labor and Industrial Relations.
California Partnerships Subject to Anti-Retaliation Laws
In Fitzsimons v. California Emergency Physicians Medical Group, a California court of appeal revived an emergency room physician's retaliation claim against the partnership of which she is a member. The physician claimed that the partnership removed her from her regional director position and created a hostile working environment for her because she reported that officers and agents of the partnership were sexually harassing female employees. The partnership argued, and the trial court agreed, that the anti-retaliation protections applied only to employees and did not extend to members of the partnership. The appellate court disagreed, finding the statutory language and legislative purpose supported a broader reading of the statute and recognizing protection for partners who oppose sexual harassment of the partnership's employees.
This Fenwick Employment Brief is intended by Fenwick & West LLP to summarize recent developments in the law. It is not intended, and should not be regarded, as advertising, solicitation, legal advice or opinion. Readers who have particular questions about these issues should seek advice of counsel.
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