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California Appeals Order Barring Enforcement of New Anti-Arbitration Law

By Brendan J. Begley on Posted in Employment Contracts and Agreements, Labor Law, Wage & Hour

The State of California filed an appeal last week to challenge a federal court’s order barring California from enforcing a new state law that would curtail workplace arbitration agreements.  Unless the State takes some additional action, the lower court’s ban on enforcement of the new law, AB 51, will remain in effect during the appeal.

The new law would prohibit employers from requiring employees to agree to arbitrate claims alleging violations of the California’s Fair Employment and Housing Act and Labor Code.  Many employers are especially concerned that AB 51 could impose imprisonment and fines on those who try to condition employment on workers signing arbitration agreements.  However, proponents of the new law contend that it is needed to prevent employers from depriving mistreated workers of having their day in court (or in administrative agencies created to remedy workplace violations).

In rulings on January 31 and February 7, 2020, U.S. District Judge Kimberly Mueller (of the Eastern District of California, in Sacramento) issued a preliminary injunction barring the State from enforcing AB 51.  That preliminary injunction is not permanent, but would remain in place until the district court decides whether to issue a permanent injunction.  On February 19, 2020, the State filed its notice asking the U.S. Court of Appeals for the Ninth Circuit (“Ninth Circuit”) to reverse the preliminary injunction.

Now that its appeal is on file, the State may ask either Judge Mueller or the Ninth Circuit to suspend enforcement of the preliminary injunction until the outcome of the appeal.  If the State were to proffer such a request, and if the courts were to grant it, such a ruling would allow the State to enforce the ban on arbitration agreements while the appeal is pending.

Regardless of whether the State seeks or obtains such a stay, employers who wish to secure arbitration agreements from employees should consult with competent legal counsel.  The district court case is Chamber of Commerce of the USA et al. v. Becerra et al., U.S. Dist. Ct. E.D. Cal. Case No. 2:19-cv-02456-KJM-DB.  The Ninth Circuit case is Chamber of Commerce of the USA et al. v. Becerra et al., Case No. 20-15291.

Federal Court Explains Order Barring California From Enforcing New Anti-Employment-Arbitration Law

By Brendan J. Begley on Posted in Employment Contracts and Agreements, Labor Law, New Legislation and Regulations, Wage & Hour

A federal court in Sacramento explained last week its rationale for temporarily barring the State of California from enforcing a new law, AB 51, that would curtail employment arbitration agreements.  The rationale set forth in that written order of February 7, 2020, strongly suggests (but does not guarantee) that the court is inclined to permanently enjoin the State from enforcing that new law.

By adding section 432.6 to the California Labor Code, AB 51 would have banned employers from requiring employees to agree to arbitrate claims alleging violations of the California’s Fair Employment and Housing Act and Labor Code.  On December 30, 2019, U.S. District Judge Kimberly Mueller granted a temporary restraining order barring the State from enforcing that new law until a hearing could be held in early January 2020.

Then, in a ruling on January 31, 2020, the court converted its temporary restraining order into a preliminary injunction.  The preliminary injunction enjoins the State from enforcing AB 51 as it relates to arbitration agreements that are governed by the Federal Arbitration Act (“FAA”).  That preliminary injunction is not permanent, but will remain in place until the court decides whether to issue a permanent injunction.

Judge Mueller’s ruling last month did not “explain the reasoning” for issuing the preliminary injunction; however, she promised to do so “in a detailed, written order” that would be dispatched shortly thereafter.  On February 7, 2020, Judge Mueller issued that detailed written order in Chamber of Commerce of the United States, et al. v. Becerra, et al., U.S. Dist. Ct. E.D. Cal. Case No. 2:19-cv-2456.

The State had challenged the legality of issuing such an injunction, arguing that the plaintiffs did not have legal standing to bring the action and that the federal court lacked jurisdiction to hear the case.  Judge Mueller’s detailed written order rejects those arguments.

That detailed order also sets forth the court’s analysis on the following four factors:  (1) the likelihood of the plaintiffs succeeding on the merits of their claim that AB 51 runs afoul of the FAA, (2) the probability that plaintiffs would suffer irreparable harm absent a preliminary injunction, (3) the balance of the equities, and (4) whether ordering such an injunction is in the public interest.

The court was persuaded that the plaintiffs were likely to succeed on the merits for a number of reasons.  First, Judge Mueller agreed that AB 51 violates the FAA by treating arbitration agreements differently than other contracts.  Second, the court found that, by imposing penalties against employers who require their employees to enter arbitration agreements, AB 51 interferes with the FAA’s goal of promoting arbitration.

Given such circumstances, Judge Mueller was convinced that employers would be harmed if she declined to issue a preliminary injunction.  In that vein, she explained that employers who comply with AB 51 would sacrifice their federal right to require arbitration agreements under the FAA; meanwhile, employers who fail to comply with AB 51 may be subject to civil and criminal penalties.

The court ultimately concluded that the balance of the equities and the public interest supported issuing a preliminary injunction.  Judge Mueller elaborated that ensuring the supremacy of federal laws is of “paramount” importance.

While the court’s ruling is a good sign that it will at some point permanently bar the State from enforcing AB 51, it remains to be seen if the State can avoid that outcome.  And while this preliminary injunction is likely appealable, there is no indication yet as to whether the State will pursue such an appeal or merely continuing litigating in the trial court against the imposition of a permanent injunction.  As these developments unfold, employers who wish to secure arbitration agreements from employees should consult with competent legal counsel.

 

Federal Court Extends Order Barring California From Enforcing New Anti-Employment-Arbitration Law

By Brendan J. Begley on Posted in Employment Contracts and Agreements, Labor Law, Wage & Hour

A federal judge in Sacramento has continued an order that temporarily bars the State of California from enforcing a new state law that would curtail employment arbitration agreements.  The new law, AB 51, which added section 432.6 to the California Labor Code, would have banned employers from requiring employees to agree to arbitrate claims alleging violations of certain state workplace laws; specifically, the Fair Employment and Housing Act and the Labor Code.

At a hearing on January 31, 2020, U.S. District Judge Kimberly Mueller converted her prior temporary restraining order into a preliminary injunction barring the state from enforcing the new law.  In the minute order memorializing that ruling, Judge Mueller stated that she would “explain [her] reasoning in a detailed, written order” that will be dispatched “[i]n the coming days.”  The case is Chamber of Commerce of the USA et al. v. Becerra et al., U.S. Dist. Ct. E.D. Cal. Case No. 2:19-cv-02456-KJM-DB.

In federal court, there are basically three types of injunctions that compel parties to do or stop doing a particular act; namely, 1) temporary restraining orders, 2) preliminary injunctions, and 3) permanent injunctions.  Courts generally issue temporary restraining orders and preliminary injunctions to preserve the status quo while deciding whether to issue a permanent injunction.  A court can issue a temporary restraining order without notice to the other party, while a preliminary injunction requires both notice to the other party and usually a hearing where each side presents their arguments.

Although not a guarantee that a permanent injunction will ensue, the issuance of a preliminary injunction is frequently a good sign that the court is strongly leaning in that direction.  Indeed, to obtain a preliminary injunction, the party asking for it must persuade the court that there is a likelihood of ultimately prevailing on the merits.

One aspect of the new law that has employers especially concerned is that it could impose imprisonment and fines on employers who try to condition employment on workers signing arbitration agreements.  According to employers, resolving workplace disputes through arbitration is better for everyone concerned because it is faster and more economical than litigating in court or in an administrative agency.  Employers say it is wrong to impose criminal penalties on them for trying to bolster such common-sense procedures, and that doing so runs afoul of the Federal Arbitration Act.

On the other hand, proponents of the new law contend that it is needed to prevent employers from depriving mistreated workers of having their day in court (or in administrative agencies created to remedy workplace violations).  They insist that, without the new law, employers can continue to coerce workers to sign away their legal rights, and that employees who sign away such rights are then “trapped in the employer’s handpicked arbitration system.”

Judge Mueller’s preliminary injunction is likely appealable, but there is no indication yet as to whether the State of California will pursue such an appeal or wait until the conclusion of the litigation.

Upcoming Seminar: Life After Dynamex and AB 5 – Independent Contractors v. Employees

By Ramona Carrillo on Posted in Employment Contracts and Agreements, Labor Law, New Legislation and Regulations, Wage & Hour

Summary of Program

The risks involved in misclassifying a worker as an independent contractor rather than an employee have always been serious. A number of federal and state agencies regulate the proper classification of workers and have the authority to impose significant monetary and non-monetary sanctions against employers who get the classification wrong. AB 5 has changed the landscape yet again, and employers are now faced with converting contractors to employees unless they fit within one of the exemptions written into the new law.

Program Highlights

This seminar will cover the legal landscape of independent contractor status. Topics will include:

  • The Impact of the California Supreme Court case Dynamex Operations West, Inc. v. Sup. Ct.;
  • AB 5 and its exemptions;
  • A summary of the various tests applied by federal and state agencies to determine independent contractor status;
  • A summary of the enforcement authority of various federal and state agencies and the sanctions they may impose;
  • The due diligence employers must engage in before classifying a worker as an independent contractor; and
  • California’s law imposing monetary and non-monetary sanctions against employers (and other individuals) who willfully misclassify workers as independent contractors.

If you or your company is currently using independent contractors, this is a seminar you should not miss.

Date:    Thursday, February 13, 2020

Time:    9:00 a.m. – 9:30 a.m.  – Registration & Breakfast / 9:30 a.m. – 11:30 a.m. – Seminar

Location:  Weintraub Tobin, 400 Capitol Mall, 11th Floor, Sacramento, CA

Webinar: This seminar is also available via webinar. Please indicate in your RSVP if you will be attending via webinar.

Parking Validation provided. Please park in the Wells Fargo parking garage, entrances on 4th and 5th Street. Please bring your ticket with you to the 11th floor for validation.

There is no charge for this seminar.

Approved for two (2) hours MCLE.  This program will be submitted to the HR Certification Institute for review.  Certificates will be provided upon verification of attendance for the entirety of the webcast. 

To register for this seminar, please RSVP to Ramona Carrillo by Friday, February 7, 2020.

New Year, New Minimum Wage

By Katie Collins on Posted in Labor Law, New Legislation and Regulations, Uncategorized, Wage & Hour

Effective January 1, 2020, California’s minimum wage rate increased to $13.00 per hour (from $12.00) for employers with 26 or more employees and $12.00 per hour (from $11.00) for employers with 25 or fewer employees. The minimum wage will continue to increase yearly until it reaches $15.00 per hour on January 1, 2022 for employers with 26 or more employees and January 1, 2023 for employers with 25 or fewer employees.

In California, many cities and counties are increasing their minimum wages faster than the state. Click here for a chart of increases set to take place in 2020.

Court Blocks Ban on Mandatory Arbitration Agreements in Employment

By Lukas Clary on Posted in Employment Contracts and Agreements, Labor Law, New Legislation and Regulations, Wage & Hour

Mandatory arbitration agreements in California employment have been granted a stay of execution. For now. Earlier today, a federal judge in California issued a temporary restraining order enjoining enforcement of AB 51, the new California law that would have banned employers in the state from requiring employees to sign mandatory arbitration agreements as a condition of employment.  AB 51 was set to take effect on January 1, 2020.

Earlier this month, a group of pro-commerce organizations and trade associations, including the United States Chamber of Commerce and the California Retailers Association, jointly filed a lawsuit seeking to block AB 51 from taking effect. The organizations argued that AB 51 was preempted by federal law that precludes states from limiting or interfering with the use of arbitration agreements to resolve disputes.

Judge Kimberly Mueller of the Eastern District of California accepted that argument, at least for now. The temporary restraining order prevents enforcement of AB 51 until at least January 10, 2020. The Court has set a hearing that day to decide whether to grant a preliminary injunction that would block enforcement of AB 51 until the lawsuit is resolved.

So what does this ruling mean for California employers? For now, not much other than hope. AB 51 will still take effect on January 10 unless Judge Mueller grants the longer injunction. Granting the temporary restraining order, however, does suggest that she believes the preemption argument may have merit. That said, employers would be best suited taking a wait-and-see approach between now and the next ruling from the court. In the meantime, employers may consider permissive, rather than mandatory, arbitration agreements that make clear entering into it is not a condition of employment. Also, because AB 51 does not apply retroactively, employers will still be able to enforce mandatory arbitration agreements that were entered into before January 1, 2020.

Religious Employer Prevails Over Allegations That it Waived Religious Entity Exemption From FEHA

By Shauna N. Correia on Posted in Discrimination, Labor Law, Retaliation and Wrongful Termination

In 2018, this author blogged about how religious entities can navigate the potential traps when they seek to comply with the federal laws against anti-harassment, discrimination and retaliation laws by adopting handbook policies and training their employees, while protecting their status as exempt from the California analog to Title VII, the Fair Employment and Housing Act (FEHA).  While that case was up on appeal, the parties settled, leaving the state of the law unsettled.

Happily for religious entities, the Court of Appeal for the Sixth Appellate District of California, has paved a clearer path forward for religious employers in another case pending at the same time.

To read the full article, please click here.

Even Unintentional Disability Discrimination is Actionable in California

By Brendan J. Begley on Posted in Disability Discrimination, Discrimination, FMLA and Other Leaves of Absence, Labor Law

In a decision that may lead employers to feel a little less gratified on Thanksgiving Day, a California appellate court determined last week that “even a legitimate company policy, if mistakenly applied,” can lead to liability for disability discrimination in the Golden State.  Specifically, the Court of Appeal ruled that “a lack of [discriminatory] animus does not preclude liability for a disability discrimination claim.”  A copy of that decision in is available at this link.

The plaintiff in Glynn v. Superior Court was a pharmaceutical sales representative who requested and obtained a leave of absence from his employer due to an eye condition that left him unable to drive.  So far so good.  But things started to take a turn for the worse when the employer declined to reassign the plaintiff to a new job in the company that did not require driving (even though the plaintiff applied for several such positions). 

Things got even worse yet when a temporary corporate benefits staffer mistakenly concluded that the plaintiff had transitioned from short-term disability to long-term disability.  This mistake led the staffer to conclude, innocently but incorrectly, that the plaintiff was unable to work with or without a reasonable accommodation.  Based on that seemingly good-faith mistake, the staffer fired the plaintiff (even though the employer’s policies did not allow such a termination unless the employee actually applied for and was receiving long-term disability benefits).  The plaintiff tried to correct the misunderstandings over the course of a few months, but the employer ignored his entreaties. 

Things went from worse to worst when the plaintiff filed a lawsuit alleging, among other things, disability discrimination in violation of the California Fair Employment and Housing Act, Cal. Govt. Code §§ 12940 et seq. (“FEHA”).  After realizing that a mistake was at the root of terminating the plaintiff’s employment, the employer tried to make things better by offering to reinstate him.  However, the plaintiff rejected that offer because the employer did not identify any specific position being offered or the rate of compensation. 

With seemingly nothing left to do but defend itself in litigation, the employer persuaded the Los Angeles County Superior Court to dismiss the plaintiff’s disability-discrimination claim.  However, the plaintiff filed an emergency appeal and convinced California’s Second Appellate District to reverse that dismissal.  The Court of Appeal reasoned that the FEHA “‘does not require an employee with an actual or perceived disability to prove that the employer’s adverse employment action was motivated by animosity or ill will against the employee. Instead, California’s statutory scheme protects employees from an employer’s erroneous or mistaken beliefs about the employee’s physical condition.’” 

Ultimately, the appellate court opined that “‘the financial consequences of an employer’s mistaken belief that an employee is unable to safely perform a job’s essential functions should be borne by the employer, not the employee, even if the employer’s mistake was reasonable and made in good faith.’”  This is not to say that liability in such circumstances is a forgone conclusion; it remains to be seen whether a jury might forgive such missteps if they do not appear to be borne of any discriminatory animus.  Still, there are important lessons to be learned from this decision.  

The take away is that disability accommodation is an area of the workplace that presents many traps for the unwary.  At the same time, any decision to terminate an employee, particularly one who is arguably entitled to some type of disability accommodation, can lead to costly litigation.  Similarly, an offer to reinstate a terminated employee may provide an employer with a valuable defense that might reduce exposure, but that offer must be handled correctly to be effective.  Therefore, it is advisable to review such decisions with an experienced employment attorney before executing them.

 

New California Law Will Outlaw “No-Rehire” Provisions in Settlement Agreements

By James Kachmar on Posted in Discrimination, Employment Contracts and Agreements, Labor Law, New Legislation and Regulations, Retaliation and Wrongful Termination, Wage & Hour

I have discussed in the past how the use of “no-rehire” provisions in settlement agreements between employers and their former employees were coming under attack in court.  In 2015, the Ninth Circuit in Golden v. California Emergency Physicians Medical Group, held that a “no-rehire” provision in a settlement agreement between the plaintiff doctor and his former employer could be found to violate section 16600 of the Business and Professions Code, which codifies California’s long standing public policy favoring employee mobility.  Section 16600 prohibits, with certain limited exception, any contract or agreement that places a restraint on a person’s trade or profession.

Employers find the use of “no-rehire” provisions useful in settlement agreements as a means of a protecting themselves against “boomerang” lawsuits.  That is, these provisions provide some protection to employers who settle claims with a former employee who claims that he or she was terminated because of discrimination from having to face a subsequent discrimination lawsuit if a former employee submits a new job application and is not hired.

California’s Legislature took up this issue and passed Assembly Bill No. 749, which was signed by Governor Gavin Newsom on October 12, 2019.  AB 749 creates a new statutory provision, section 1002.5 of the California Code of Civil Procedure, which will apply to any settlement agreement entered into on or after January 1, 2020.  This new law prohibits an employer from entering into a settlement agreement with an employee to resolve an employment dispute from inserting a provision “prohibiting, preventing or otherwise restricting a settling party that is an aggrieved person from obtaining future employment with the employer against which the aggrieved person has filed a claim” or any affiliate of that employer.  Any provision that violates this section will be void.

The new law will define “aggrieved person” to mean any person who has filed a claim against the employer either in court, before an administrative agency, in an alternative dispute resolution forum such as arbitration, or through the use of the employer’s internal complaint process.  The law does allow the employer and the settling employee to agree to “end a current employment relationship” as well as allows an employer to use a “no-rehire” provision provided that “the employer has made a good faith determination that the [former employee] engaged in sexual harassment or sexual assault.”  Finally, the new law does nothing to affect an employer’s ability to decline to rehire a person “if there is a legitimate non-discriminatory or non-retaliatory reason for terminating the employment relationship or refusing to rehire the person.”

When this new law goes into effect, employers are encouraged to seek legal advice in resolving any disputes with an employee that may involve the termination of that employee’s employment as well as the handling of future applications for rehire from terminated employees who have entered into settlement agreements after January 1, 2020.  This may include reviewing an employer’s form severance agreement to ensure compliance.  While the new law does not apply by its terms to agreements containing such provisions entered into prior to January 1, 2020, employers must tread carefully.  For further details about AB 749 and its history, please see the article, “New California Law Ban `No-Rehire’ Clauses after Worker Lawsuits,” by Wes Venteicher in The Sacramento Bee.

New Laws that Will Significantly Impact the Litigation of Employment Disputes

By Beth V. West on Posted in Disability Discrimination, Discrimination, Employee Privacy Rights, Employment Contracts and Agreements, Harassment, Labor Law, New Legislation and Regulations, Retaliation and Wrongful Termination, Wage & Hour

The October 13, 2019 deadline for Governor Newsom to take his final actions in the 2019 legislative season has come and gone and as expected, he signed into law a number of employment-related bills. Below is a summary of just a few of those bills that will have a significant impact on employment litigation in California.  To read the full article, please click here.

A.    Assembly Bill 51

AB 51 was introduced by Assemblymember Lorena Gonzales and will severely restrict the use of mandatory arbitration agreements in employment. The Bill adds section 12953 to the California Government Code (“FEHA”) and states that it is an unlawful employment practice for an employer to violate section 432.6 of the California Labor Code.

B.   Senate Bill 707

In Armendariz v. Foundation Health Psychcare Services, Inc. case (2000) 24 Cal. 4th 83, the California Supreme Court concluded, among other things, that “when an employer imposes mandatory arbitration as a condition of employment, the arbitration agreement or arbitration process cannot generally require the employee to bear any type of expense that the employee would not be required to bear if he or she were free to bring the action in court.”  In a number of cases after Armendariz, courts have held that an employer’s failure to pay the arbitration costs [and thus delaying or preventing the arbitration of the dispute] constitutes a material breach of the arbitration agreement.

In line with this case law, SB 707, introduced by Senator Wieckowski, provides that a company’s failure to pay the fees of an arbitration service provider in accordance with its obligations contained within an arbitration agreement or through application of state or federal law or the rules of the arbitration provider hinders the efficient resolution of disputes and contravenes public policy.  According to SB 707, a company’s strategic non-payment of fees and costs severely prejudices the ability of employees [or consumers] to vindicate their rights. This practice is particularly problematic and unfair when the party failing or refusing to pay those fees and costs is the party that imposed the obligation to arbitrate disputes.

Therefore, among other things, SB 707 adds section 1281.97 to the California Code of Civil Procedure and provides that in an employment or consumer arbitration that requires, either expressly or through application of state or federal law or the rules of the arbitration administrator, the drafting party to pay certain fees and costs before the arbitration can proceed, if the fees or costs to initiate an arbitration proceeding are not paid within 30 days after the due date, the drafting party is in material breach of the arbitration agreement, is in default of the arbitration, and waives its right to compel arbitration.  As a result, the employee [or consumer] may do either of the following:

  1. Withdraw the claim from arbitration and proceed in a court of appropriate jurisdiction; or
  2. Compel arbitration in which the drafting party shall pay reasonable attorney’s fees and costs related to the arbitration.

If the employee withdraws the claim from arbitration and proceeds with an action in a court of appropriate jurisdiction, the statute of limitations with regard to all claims brought or that relate back to any claim brought in arbitration shall be tolled as of the date of the first filing of a claim in any court, arbitration forum, or other dispute resolution forum.  Further, if the employee proceeds with an action in a court, the court shall impose sanctions on the drafting party in accordance with Civil Code section 1281.99, which requires the drafting party to the reasonable expenses, including attorney’s fees and costs, incurred by the employee as a result of the material breach.  The court may also impose additional sanctions against a drafting party including, but not limited to, discovery sanctions and terminating sanctions. Continue Reading