Decisions That Shape the Workplace

Posted March 2, 2012

Part two of a two-part series regarding significant recent legal developments in California employment law.

As discussed in last week’s article, the past year produced a number of cases that altered the landscape of employment law in California. Those cases and the ones discussed below give counsel good reason to re-‐examine their employment policies and practices.

6. Administrative exemption is not limited to employees who advise management at the policymaking level. Harris v. Superior Court, 12 C.D.O.S. 129.

Facts: The class action plaintiffs in Harris were insurance claims adjusters, who maintained they were improperly classified as exempt employees and were therefore entitled to unpaid overtime. The trial court granted the plaintiffs’ motion for summary adjudication on the defendants’ affirmative defense that plaintiffs were entitled to no overtime because they were properly classified as exempt administrative employees. The court of appeal upheld the trial court’s decision, relying heavily on the “administrative/production worker” dichotomy and finding the workers were nonexempt “production” workers.

The California Supreme Court reversed. In doing so, the court found the administrative/production dichotomy should not be used as a dispositive test for determining whether work is exempt administrative work. The court found that instead, the analysis should focus on whether the work is administrative in character. According to the court, “administrative” work is that which is “directly related to management policies or general business operation.” To qualify, such work must (1) involve servicing the business (such as advising management, planning, negotiating, and representing the company) and (2) be of “substantial importance” to management policy or general business operations.

What it means for in-house counsel: The administrative exemption remains one of the thorniest and most often-‐misunderstood exemptions. Harris should give employers some comfort that the administrative exemption is not limited to top-‐ level executives who have policymaking authority. The decision, however, leaves many questions about the exemption unanswered. For example, the court specifically declined to address what type of work would qualify as “of substantial importance” to management policy or general business operations. Given the recent proliferation of cases on exempt status issues, in-‐house counsel should ensure that their exempt status classifications can be substantiated under the most current case law.

7. Class action waiver in employment arbitration agreement is unlawful under the National Labor Relations Act. D.R. Horton, 357 NLRB 184 (Jan. 3, 2012).

Facts: D.R. Horton required all employees to execute an arbitration agreement as a condition of employment. The arbitration agreement required arbitration of all employment-‐related disputes. The agreement precluded any class or collective claims in arbitration. As a result, the effect of the agreement was to prohibit employees from bringing class or collective claims in any forum. Employees challenged the class action waiver on the grounds that it violated their right to engage in “concerted activities” for their “mutual aid and protection,” which was protected under §7 of the National Labor Relations Act. The board agreed. In reaching its conclusion, the board rejected arguments that its holding was contrary to the Supreme Court’s recent ruling in AT&T Mobility v. Concepcion, 131 S. Ct. 1740 (2011).

In Concepcion, the Court upheld the enforceability of class action waivers in consumer arbitration agreements and found that the Federal Arbitration Act pre-‐ empted California law, which deemed such waivers unenforceable in certain circumstances. The board noted that Concepcion did not address the enforceability of class action waivers in employment arbitration agreements, and that the FAA could not take away rights afforded employees under the NLRA.

What it means for in-house counsel: D.R. Horton has been appealed to the Fifth Circuit U.S. Court of Appeals, and whether it will be upheld remains to be seen. The enforceability of mandatory pre-‐dispute arbitration agreements in California remains a complicated area of the law that is constantly evolving. Concepcion caused some employers to modify their arbitration agreements to include class action waivers, believing such practice would foreclose class action employment litigation. Employers who did so may wish to consider whether the language of their agreements can survive the board’s decision in D.R. Horton. Because the law in this area changes so quickly, it is good business practice for companies to regularly review their pre-‐employment arbitration agreements to ensure their enforceability in light of recent legal developments.

8. Employee not guaranteed a right to reinstatement under CFRA when leave extends beyond 12 weeks. Rogers v. County of Los Angeles, 11 C.D.O.S. 10423.

Facts: Rogers took a stress leave from her job as the head of human resources for Los Angeles County. The county designated the time off as family medical leave under CFRA and FMLA. While Rogers was out on leave, a new executive director took over and decided to eliminate Rogers’ position. The director found Rogers another lower-‐level human resources position in a different department. The county informed Rogers of the changes when she returned to work 19 weeks after her leave had begun. Dissatisfied with the changes, Rogers sued the county for interference with her rights under CFRA. The trial court granted the county summary judgment, and the court of appeal affirmed, holding CFRA only guaranteed employees a right to reinstatement to the same or similar position upon expiration of the 12-‐week protected leave. Because Rogers’ leave extended beyond the 12-‐week period, she had no right to reinstatement to the same or similar position, and the county could not be liable for interfering with her CFRA rights when it transferred her to a less appealing position.

What it means for in-house counsel: While Rogers offers a bright-‐line rule regarding reinstatement under CFRA, it should not be construed as definitive guidance on how much leave employers must grant to employees on medical leaves. Medical leaves of absence can be protected under multiple statutes in California, including FEHA and the ADA. Inflexible leave policies that only allow medical leaves of a specific
duration may violate those statutes. Similarly, whether an employee should be entitled to the same or similar position upon a return from a leave of absence under those statutes will depend on the individualized circumstances presented. As always, counsel should proceed cautiously when evaluating employee requests for medical leave and reinstatement.

9. An employee is not entitled to receive two hours of “reporting time pay” for short meetings held on an employee’s day off if the meeting is scheduled in advance and lasts at least half of the time scheduled. Aleman v. AirTouch Cellular, 11 C.D.O.S. 15258.

Facts: The purported class-‐representative plaintiffs in Aleman sued AirTouch alleging the company failed to pay “reporting time pay” when employees were required to report to work on their days off to attend short, work-‐related meetings. AirTouch moved for summary judgment against one of the named plaintiffs who admitted that all of the meetings he attended were scheduled at least four days in advance and that he was paid for all of the time he spent at the meetings. The meetings were generally scheduled for an hour and a half and were never shorter than one hour long. The named plaintiff argued he was entitled to a “reporting time pay” minimum of two hours of pay instead of the pay he received for the actual time he spent at the meeting. The trial court granted AirTouch’s motion and the court of appeal affirmed.

The court noted that an employee’s entitlement to reporting time pay hinged, in part, on whether the time was scheduled in advance. For work scheduled in advance, the court held, an employee is only entitled to reporting time pay if the employer furnishes the employee with less than half of the work time originally scheduled. In such situation, so long as the employee is paid for the actual time worked, no reporting time pay is owed. When employees report to work for a meeting or shift that has not been scheduled in advance and is of an unspecified duration, however, employees are entitled to a minimum of two hours of reporting time pay, regardless of the amount of time they work.

What it means for in-house counsel: Reporting time pay is intended to provide compensation to employees who are required to report to work and are then furnished with less work than is expected. While the AirTouch decision relies heavily on the distinction between “scheduled” shifts and “unscheduled” shifts in determining when reporting time pay is owed, the court offers no guidance for employers to determine how far in advance the employee must be notified of the shift for it to be considered “scheduled.” To minimize exposure to claims for reporting time pay, employers who require employees to attend short meetings or work extra shifts outside of their normal work schedule would be wise to give employees as much notice as possible and specify in advance the expected duration of the shift or meeting.

10. Employer is liable for discrimination when nonbiased decision maker is influenced by others harboring discriminatory intent. Staub v. Proctor Hosp., 131 S.Ct. 1186 (2011)

Facts: Vincent Staub worked as a technician for Proctor Hospital. He was also a military reservist, required to attend monthly weekend drills and train full-‐time for two to three weeks per year. Staub believed both his immediate supervisor and his supervisor’s supervisor were hostile to his military obligations and wanted to see him fired. The skip-‐a-‐level supervisor issued Staub a corrective action instructing him to remain in his work area unless given permission to leave, and to report to his manager when he had no patients.

A few months later, Staub’s manager claimed he had violated the corrective action by leaving his station without informing the manager. Staub maintained he had left a voicemail for his manager informing him of his whereabouts. Staub’s manager reported the incident to the vice president of human resources, who found Staub was in violation of the corrective action and terminated his employment. Staub did not allege that the VP of HR harbored any animus towards him. Rather, Staub claimed that animus of his supervisors must be attributed to the company because their actions influenced the ultimate employment decision (known as the “cat’s paw” theory of liability). The Seventh Circuit rejected Staub’s theory of liability, but the Supreme Court overruled it.

According to the Court, when a biased supervisor’s action is a “causal factor” in the ultimate employment decision, liability will result. The Court rejected Proctor’s argument that the decision maker’s independent investigation should insulate Proctor from liability. The court noted: “the supervisor’s biased report may remain a causal factor if the independent investigation takes it into account without determining that the adverse action was, apart from the supervisor’s recommendation, entirely justified.”

What it means for in-house counsel: While Staub addressed the standard for discrimination under the USERRA, its reasoning likely will be extended to discrimination claims under Title VII and similar statutes such as the ADA and FEHA. Staub underscores how critical it is that companies conduct thorough and neutral investigations prior to taking adverse employment actions. Such investigations should dig beyond the surface of performance reviews, corrective actions, or criticisms of other managers when there is reason to believe such managers may be biased. Staub makes clear that a decision maker’s blind reliance on another supervisor’s recommendation could lead to liability under the discrimination laws.

Lisa Lawson is a co-founding partner of Pennington Lawson, a women-‐owned boutique law firm based in San Francisco. Her specialties include employment litigation, counseling and training; workplace investigations; negotiation of employment and separation agreements; and preparation of employment-‐related policies and documents. Lawson can be reached through the firm’s website: www.PenningtonLawson.com.

In Practice articles inform readers on developments in substantive law, practice issues or law firm management. Contact Vitaly Gashpar with submissions or questions at vgashpar@alm.com.