Fool’s Gold: Second Circuit Vacates Order Affirming Arbitrator’s Certification of Class of Jewelry Store Workers Including Absent Class Members

On July 24, 2017, the Second Circuit Court of Appeals rejected a federal district court’s approval for a class of roughly 69,000 women claiming that Sterling Jewelers, Inc. (“Sterling”) discriminated against them based on sex. The decision overturned a district court ruling that affirmed an arbitrator’s decision to let the women proceed to trial as a class in an arbitration.

Plaintiffs initially filed a class action lawsuit in March 2008, alleging that Sterling’s practices and policies led to women being deliberately passed over for promotions and paid them less than their male cohorts. The case was sent to arbitration several months later under Sterling’s arbitration clause.

In 2009, an arbitrator ruled that Sterling’s dispute resolution program did not specifically bar class actions and allowed claimants to seek class status. From there, the case took a number of twists and turns, which we reported on more fully at the time here.

In June 2013, the employees moved for class certification. In February 2015, the arbitrator ruled that that the employees could proceed as a class in the arbitration.  In November 2015, the district court affirmed the arbitrator’s decision concluding that the arbitrator did not exceed her authority by certifying a class that included absent class members i.e., employees other than the named plaintiffs and those who have opted into the class.  Sterling appealed. READ MORE

Allegations of Misclassification Are Insufficient to Demonstrate Commonality and Typicality According to California Court of Appeal Decision

The California Court of Appeal for the Fourth District held that misclassification alone does not establish liability for overtime violations, and, thus, the fact that members of a putative class were classified as exempt was not sufficient to demonstrate the required commonality and typicality for a misclassification class action to proceed. The court in Kizer v. Tristar Risk Management held that in addition to alleging misclassification, the plaintiffs needed to prove that the misclassification caused harm. The standard announced by the Kizer Court augments the burden on plaintiffs in misclassification wage and hour class actions to establish commonality and typicality. On July 26, the decision was certified for publication. READ MORE

Germany: Employee Monitoring by Keylogger Permitted Only in Exceptional Cases

According to a recent decision of the German Federal Labor Court (Bundesarbeitsgericht – BAG), the use of a keylogger software, which records all keyboard entries on a workplace computer for covert monitoring and control of the employee, is prohibited if there is no suspicion of a criminal offense or severe breach of duty.

Legal Background

Although severely exceeding the limits of permissible private use of the workplace computer and Internet may in principle constitute such a grave infringement of the obligations under the employment relationship that a dismissal with immediate effect may be justified, it must be kept in mind that the employer bears the burden of proof for the employee’s misconduct in case of a claim for unfair dismissal.

If evidence is achieved in breach of the Federal Data Protection Act (Bundesdatenschutzgesetz – BDSG), this generally indicates that its utilization in legal proceedings may infringe the employee’s right on informational self-determination and, therefore, is not admissible evidence. READ MORE

Court Rules Dodd-Frank Whistleblower Retaliation Claims Are Arbitrable

We have previously written about how Dodd-Frank retaliation cases are a mixed bag for employers and about the Supreme Court’s expansion of Sarbanes-Oxley (“SOX”) Whistleblower protections.  A new decision from the Wisconsin District Court is another mixed win for employers who want to enforce arbitration agreements in Dodd-Frank and SOX retaliation cases.  In a case of first impression in the Seventh Circuit, Wussow v. Bruker Corporation., No. 16-cv-444-wmc, 2017 WL 2805016 (W.D. Wis. June 25, 2017), the district court held that while arbitration of SOX whistleblower retaliation claims cannot be compelled, a similar cause of action for whistleblower retaliation under Dodd-Frank can be. READ MORE

Be Prepared Update on EU Employment Data Privacy Laws

Global companies face stricter rules on employee data privacy, in particular when using social media and internal monitoring tools. It also now becomes clearer that many EU Member States will use the opening clause of Art. 88 General Data Protection Regulation (“GDPR”) to re-implement their “old” data privacy laws.

  1. Use of Social Media And Employee Analysis Tools Under GDPR

Recently, the Article 29 Working Party (“WP29”), the expert group of European data protection authorities, published its opinion on the upcoming changes relating to data privacy at the work place. It explains what employers should do for ensuring compliance with the GDPR and provides guidelines for the use of information found on social media platforms – such as Facebook or LinkedIn and for electronic monitoring of employees. READ MORE

California Supreme Court Expands PAGA Plaintiffs’ Access to Statewide Discovery of Employee Contact Information

On July 13, 2017, the California Supreme Court greatly expanded the scope of discovery available under California’s Labor Code Private Attorneys General Act of 2004 (“PAGA”). In Williams v. Superior Court (Marshalls of CA, LLC), ___Cal. 5th ___ (Jul. 13, 2017), the court held that the breadth of discovery in a PAGA action should be no less than what is normally permitted in a class action. Additionally, the Court held that as an essential first step to prosecuting any representative action, a PAGA plaintiff is presumptively entitled in the early stages of litigation to obtain from the employer-defendant the contact information of those the plaintiff purports to represent in early stages of litigation. READ MORE

Supreme Court to Hear Oral Argument in October on Enforceability of Employment Class Action Waivers in Arbitration Agreements

In January, we reported that the Supreme Court granted review of three conflicting Court of Appeal decisions to settle the question of whether an agreement requiring that employees resolve employment-related disputes through individual arbitration violates the National Labor Relations Act (“NLRA”).

Last week, the Supreme Court set oral argument for October 2, 2017 to resolve the circuit split on whether mandatory class action waivers violate the NLRA. The Fifth, Second and Eight Circuits rejected the National Labor Relations Board’s (“NLRB”) position that class action waivers unlawfully interfere with employees’ NLRA rights to engage in concerted activity. See Murphy Oil USA, Inc. v. NLRB, 808 F.3d. 1013 (5th Cir. 2015); Cellular Sales of Missouri, LLC v. NLRB, 824 F.3d 772 (8th Cir. 2016); Patterson v. Raymours Furniture Co., Inc., 2016 WL 4598542 (2d Cir. Sept. 2, 2016).  The Ninth and Seventh Circuits however, held that an arbitration agreement precluding class actions violates the NLRA and is not preempted by the Federal Arbitration Act (“FAA”). See Morris v. Ernst & Young, 834 F. 3d 975 (9th Cit. 2016) Epic Systems Corp. v. Lewis, 823 F.3d 1147 (7th Cir. 2016).  The Ninth Circuit’s opinion distinguishes mandatory class action waivers from those agreements that permit employees to opt-out.

In June, Ernst & Young, Murphy Oil and Epic Systems filed their opening briefs with the Supreme Court, requesting that the Court affirm the Fifth Circuit’s decision and reject the Seventh Circuit’s decision. The companies argued that the FAA requires enforcement of class action waivers because it requires enforcement of agreements to arbitrate according to their terms and the NLRA’s provisions protecting employees’ right to act in concert do not override the FAA. The U.S. Department of Justice filed one of 17 amicus curiae briefs last month in support of the enforceability of class action waivers.  The Department of Justice’s argument that the NLRB’s position contradicts the FAA is especially significant given its previous contrary position under the Obama administration.

Show Me The Money: SEC Awards $2.5 Million To Government Agency Whistlleblower

Silver school PE sports whistle on white background Will the Whistle be Silenced? Dismantling Dodd-Frank

The SEC has awarded $2.5 million to a government agency employee who reported misconduct by a company to the SEC and caused the SEC to open an investigation. While the SEC order granting the award acknowledged that government employees may be prohibited from receiving whistleblower awards in some circumstances, such as when the employee works for a “law enforcement organization,” the SEC nevertheless determined that although “certain components of Claimant’s governmental employer have law enforcement responsibilities, [ ] those responsibilities are housed in a separate, different component of the agency at which Claimant works.” The SEC further explained that “the record is clear that this is not a situation where a claimant sought to circumvent the potential responsibilities that his or her government agency might have to investigate or otherwise take action for the misconduct.  We express no view on how an award determination might differ under that alternative circumstance.”  Ultimately, because the individual provided the Commission with “credible information . . . significant ongoing assistance, and relevant testimony that accelerated the pace of the investigation,” the SEC found the $2.5 million bounty justified.

In a press release announcing the award, the SEC noted it has now awarded approximately $156 million to 45 whistleblowers since the program’s inception.

Landing a New Gig: Lessons for the “On Demand” Economy

In the past few years, the American workforce has shifted dramatically. By some estimates, as many as 53 million Americans are now self-employed. Many of them work in the “gig” or “on demand” economy, which has emerged as the new norm for doing business. In general, the gig economy offers traditional services, such as transportation, food delivery, and housing, in a more efficient way by connecting consumers directly to service providers. But, as with many innovations, gig economy companies face challenges from multiple fronts due to mounting legal pressures. Employment laws written in the 1930s haven’t kept up with the pace of innovation, and trying to apply them to the way services are delivered today is like trying to fit a square peg into a round hole. READ MORE

SEC, CFTC and OSHA Officials Offer Candid Insights into Whistleblower Programs’ Results, Priorities, and Future Directions

On June 28, 2017, three prominent whistleblower law regulators spoke at PLI’s Corporate Whistleblowing in 2017, which was co-chaired by Orrick partners Mike Delikat and Renee Phillips. With the standard disclaimer that their comments and opinions were their own and not the official comments of their respective agencies, each spoke candidly about their agencies’ whistleblower program’s progress, challenges, and priorities.

SEC’s Office of the Whistleblower

The Chief of the SEC’s Office of the Whistleblower (“OWB”), Jane Norberg, kicked off the panel with her views on the current status and priorities of the OWB in the new administration: “From my point of view, the SEC’s whistleblower program is open for business and we are moving forward as we have in the past.”  She elaborated on the program’s results to date, noting that the Commission has received over 18,000 tips and awarded over $154 million to 44 tipsters, reflecting over $1 billion recovered through the SEC’s enforcement actions and related actions arising from whistleblower tips.  Norberg explained, “the real value of the program comes from individuals who help prevent ongoing fraud at a company while also giving victims a chance to recover some of what they lost.” READ MORE