Seyfarth Synopsis: Employment-related cases pending before the California Supreme Court concern various questions that sometimes seem technical, but the answers they elicit will have big consequences. Questions raised by the current crop of cases include standing to sue, the availability of certain claims and remedies, federal preemption of California laws, what counts as compensable time, and—that perennial favorite—how to interpret the infernal PAGA statute.

We expect the California Supreme Court in 2019 to issue decisions addressing many important issues in private employment. Some topics easily warrant their own article or blog post, and will receive that treatment as the Supreme Court’s decisions emerge. But it’s not too soon to highlight some coming attractions.

Anti-SLAPP and Alleged Employer Motive

  • Is an employer’s anti-SLAPP motion to strike an employee’s suit affected by the employer’s alleged discriminatory motive? In Wilson v. Cable News Network, Inc., the Supreme Court has agreed to decide “whether an employee’s claims for discrimination, retaliation, wrongful termination, and defamation arise from protected activity for purposes of a special motion to strike,” and “what is the relevance of an allegation that the employer acted with a discriminatory or retaliatory motive?”

Application of CA Wage-Hour Law to Out-of-State Employers

  • Does California employment law apply to non-California residents who work in California on a transitory basis? In Ward v. United Airlines and Oman v. Delta Air Lines, the Supreme Court has accepted the Ninth Circuit’s request to address five questions:
    • (1) “Does California Labor Code section 226 apply to wage statements provided by an out-of-state employer to an employee who resides in California, receives pay in California, and pays California income tax on her wages, but who does not work principally in California or any other state?”
    • (2) Does the exemption in Wage Order 9 for collective bargaining agreements (CBA) under the Railway Labor Act bar a wage statement claim brought under California Labor Code section 226 by an employee who is covered by such a CBA?
    • (3) “Do California Labor Code sections 204 and 226 apply to wage payments and wage statements provided by an out-of-state employer to an employee who, in the relevant pay period, works in California only episodically and for less than a day at a time?”
    • (4) “Does California minimum wage law apply to all work performed in California for an out-of-state employer by an employee who works in California only episodically and for less than a day at a time?”
    • (5) “Does the Armenta/Gonzalez bar on averaging wages apply to a pay formula that generally awards credit for all hours on duty, but which, in certain situations resulting in higher pay, does not award credit for all hours on duty?

Arbitration

  • When is an arbitration remedy broad enough to preclude an employee’s resort to a Berman hearing? Under existing law, employers cannot necessarily compel employees to arbitrate wage claims unless and until employees have had the chance to bring those claims before the Labor Commissioner in a “Berman hearing.” In OTO, L.L.C. v. Kho, the Supreme Court has agreed to decide these issues:
    • “(1) Was the arbitration remedy at issue in this case sufficiently affordable and accessible within the meaning of Sonic-Calabasas A, Inc. v. Moreno (2013) … to require the company’s employees to forego the right to an administrative Berman hearing on wage claims?
    • (2) Did the employer waive its right to bypass the Berman hearing by waiting until the morning of that hearing, serving a demand for arbitration, and refusing to participate in the hearing?”

Compensability

  • Does an employee engage in compensable work while waiting for the employer to inspect a bag the employee chose to bring to work? In Frlekin v. Apple, Inc., the Supreme Court has accepted the Ninth Circuit’s request to decide this issue: “Is time spent on the employer’s premises waiting for, and undergoing, required exit searches of packages or bags voluntarily brought to work purely for personal convenience by employees compensable as ‘hours worked’ within the meaning of California Industrial Welfare Commission Wage Order No. 7?”
  • Is walking to and from a time clock compensable hours worked? In Stoetzl v. State of California, the Supreme Court has agreed to decide this issue: “Does the definition of ‘hours worked’ found in the Industrial Wage Commission’s Wage Order 4, as opposed to the definition of that term found in the federal Labor Standards Act, constitute the controlling legal standard for determining the compensability of time that correctional employees spend after signing in for duty and before signing out but before they arrive at and after they leave their actual work posts within a correctional facility?”

Liability for Wage Payment

Preemption—By the FAA and the LMRA

  • Is a PAGA suit for unpaid wages immune from arbitration? In its 2014 Iskanian case, the California Supreme Court acknowledged that the Federal Arbitration Act (FAA) preempts state laws against class-action waivers in arbitration agreements, but also held that representative PAGA actions are not subject to mandatory arbitration. Now, in Lawson v. Z.B., N.A., the Supreme Court has decide to whether a representative action under PAGA, seeking recovery of individualized lost wages as civil penalties under Labor Code section 558, falls within the preemptive scope of the FAA.
  • Does federal labor law preempt a claim for termination wages? In Melendez v. San Francisco Baseball Associates, the Supreme Court has agreed to decide this issue: “Is plaintiffs’ statutory wage claim under Labor Code section 201 subject to mandatory arbitration pursuant to section 301 of the Labor Management Relations Act because it requires the interpretation of a collective bargaining agreement?”

Remedies

  • Can an employee seeking unpaid wages use the tort of conversion? In Voris v. Lampert, the Supreme Court has agreed to decide this issue: “Is conversion of earned but unpaid wages a valid cause of action?”

Rest Breaks & Meal Periods

  • Rest breaks for ambulance attendants on 24-hours shifts. In Stewart v. San Luis Ambulance, Inc., the Supreme Court accepted the Ninth Circuit’s request to decide these issues: (1) “Under the California Labor Code and applicable regulations, is an employer of ambulance attendants working twenty-four hour shifts required to relieve attendants of all duties during rest breaks, including the duty to be available to respond to an emergency call if one arises during a rest period?: (2) “Under the California Labor Code and applicable regulations, may an employer of ambulance attendants working twenty-four hour shifts require attendants to be available to respond to emergency calls during their meal periods without a written agreement that contains an on-duty meal period revocation clause? If such a clause is required, will a general at-will employment clause satisfy this requirement?” (3) “Do violations of meal period regulations, which require payment of a ‘premium wage’ for each improper meal period, give rise to claims under sections 203 and 226 of the California Labor Code where the employer does not include the premium wage in the employee’s pay or pay statements during the course of the violations?”

Standing for PAGA Claims

  • Can a PAGA plaintiff settle his individual wage and hour claims and still pursue his PAGA action as an “aggrieved employee”? In Kim v. Reins International California, Inc., the Supreme Court has agreed to decide whether an employee bringing an action under PAGA loses standing to pursue representative claims as an “aggrieved employee” by dismissing his or her individual claims against the employer.

Workplace solution. Some of the issues raised by the above cases may seem relatively minor, technical, or limited to particular industries. Yet many a significant class action has turned upon issues no more monumental. We will keep our eyes and ears on the Court’s progress and keep readers updated with the latest developments.

Seyfarth Synopsis: The ordinary headaches of responding to unemployment claims with the EDD do not have to bog down employers in 2018. Here, we provide recommendations for managers to consider before the ball drops in Times Square this New Year.

’Tis the season to be jolly, sing holiday songs with family by the fire, and aspire to reach new heights in the coming year. Employers, consider making it one of your New Year’s resolutions to reevaluate your approach to unemployment benefits claims. Certainly, more time and fewer headaches are things we can hope for in 2018.

Many of us are well-acquainted with the frustrations of defending unemployment claims made by employees recently fired for misconduct. Suppose an employee with a history of warnings for rude comments makes one final zinger on a conference call, forcing your hand to fire him. The resulting distraction and lost morale are bad enough, but next he hales your business into a claims process with the California Employment Development Department (EDD) for unemployment benefits. You spend the next few months answering questions from EDD agents and submitting detailed proof of the employee’s bad behavior. A manager and other witnesses take the day off to testify at the hearing. After all this, the employee is awarded benefits anyway and, worse, he now sues you for wrongful termination. This nightmare before Christmas is enough to make any employer a scrooge!

Our holiday gift to employers is a set of best practices to help you navigate the EDD’s blizzardy claims process, and to minimize any potential problems should a Grinch-y employee sue you later. We hope our recommendations result in many silent nights in the year to come.

Determine If The Employee Was Bad Enough For the EDD’s Naughty List

Employers do not need a shepherd or a shooting star to know that employment in California is at will. So long as the decision is not discriminatory or unlawful retaliation, managers may terminate employment because of misconduct, poor performance, for violations of company policy (even on first-time infractions), or, ultimately, for no reason at all.

But the EDD will deny a claim for unemployment benefits only if it finds a much narrower type of serious misconduct. The broken rule or policy at issue must be important to the business. If a misdeed did not harm the company, then the discharged employee will likely win an award of benefits. Also, a single, isolated mistake usually will not preclude such an award. Poor job performance—unless highly egregious and persisting after multiple warnings and a clear threat of termination—will probably not suffice either. What the employer needs to prove are acts of serious misconduct, such as embezzlement, workplace violence, or harassment, and EDD will demand real proof, such as documents and convincing testimony.

Remember, the EDD is in the business of awarding benefits, so expect that in most cases that is just what the EDD will do. That is, most terminations will not disqualify a former employee from an award of unemployment benefits. Employers should carefully evaluate the reason for the discharge, and the supporting evidence, before trudging down the icy path of litigating an unemployment claim. And if you do decide to challenge a claim, make sure to bring more than a Red Ryder BB gun to the hearing; the EDD will expect hard evidence and credible witnesses before it denies benefits.

Just As Santa Does With His List, Check Your Facts At Least Twice

Most disputed unemployment claims are contentious. No holiday carol extols the joy of getting fired, and that is for good reason. Opposing a former employee’s benefit claim is often like throwing gasoline on a fire, and lawsuits for wrongful termination are usually not too far away.

The EDD’s claims process is complex, so it is not uncommon for claimants to lawyer-up. None of the parties’ communications with the EDD are privileged, however; interviews, position statements, and the like are all discoverable, as are the documents submitted and the testimony given at the hearing. In a later lawsuit, a plaintiff’s lawyer can subpoena the EDD’s entire file, which frequently includes an audio recording of the hearing, and search for inconsistencies or admissions to use against an unsuspecting employer in litigation. Because companies often give EDD claims a low priority, statements made to the EDD often are not scrutinized by counsel or senior staff. Employers should carefully vet the facts of a termination before they are presented to the EDD. Otherwise, bad evidence, like the ghost of Jacob Marley, may just come back to haunt you.

Consult Your Trusted Magi On High Risk Terminations

In some cases, the likelihood of litigation over a termination is clear before or soon after the termination decision. A high-risk termination may be preceded by the threat of a lawsuit by an employee’s newly hired lawyer during the company’s investigation for misconduct. It may not be wise, depending on the circumstances and the employer’s ultimate goal, to oppose the employee’s unemployment claim. Or, conversely, it may be strategically sound to educate the employee’s attorney on the Gremlins hiding in the case from the outset.

Workplace Solutions: When litigation is on the horizon, we recommend that employers consult with their trusted counsel on these strategic decisions as early as possible. Our attorneys are ready to help guide employers through these dynamics, whether it be this holiday season or in the year to come.