Class Action

BREAKING DEVELOPMENT: Supreme Court to Rule on Enforceability of Class Action Waivers in Arbitration Agreements

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In August of 2016, we reported that the Ninth Circuit created a deeper circuit-split on whether class action waivers in arbitration agreements violate the National Labor Relations Act (“NLRA”) with its decision in Morris v. Ernst & Young LLP.

As expected, the Supreme Court granted review today of three of the conflicting Court of Appeals decisions. It granted review of the Fifth Circuit’s decision in Murphy Oil USA, Inc. v. NLRB, 808 F.3d 1013 (5th Cir. 2015). The Fifth Circuit rejected the National Labor Relations Board’s (“NLRB”) position that class action waivers unlawfully interfere with employees’ NLRA rights to engage in concerted activity, agreeing with the Second and Eighth Circuits. The Ninth and Seventh Circuits, on the other hand, adopted the NLRB’s position that class action waivers violate the NLRA.

The Supreme Court also granted review in Morris v. Ernst & Young, 834 F.3d 975 (9th Cir. 2016) and Epic Systems Corp. v. Lewis, 823 F.3d 1147 (7th Cir. 2016). The Seventh Circuit held that an arbitration agreement precluding collective arbitration or collective action violates section 7 of the NLRA and is unenforceable under the FAA. The Ninth Circuit agreed and concluded that compulsory class action waivers violate sections 7 and 8 of the NLRA by limiting workers’ rights to act collectively, noting in footnote 4 that agreements containing an “opt-out” clause for pursuing class claims do not violate the NLRA.

All three cases have been consolidated and will be argued together.

 

Pulling the Seat From Under PAGA Plaintiffs

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From the time of its enactment, the California Private Attorneys General Act of 2004 (“PAGA”) has been a thorn in the side of employers.  For example, the California Supreme Court insists PAGA actions are not class actions, but that hasn’t stopped aggrieved employees from seeking class-wide discovery.  And because PAGA permits employees to seek penalties for unconventional causes of action previously off-limits to private plaintiffs (such as the California Wage Order’s suitable seating requirement), employers must grapple with new uncertainties. 

But one aspect of PAGA that provides some relief to employers is the requirement that plaintiffs exhaust administrative remedies before filing a lawsuit.  To satisfy this this requirement, a plaintiff is required to send a notice to her employer and the Labor Workforce Development Agency (“LWDA”) setting forth the “specific provisions” of the Labor Code allegedly violated and explaining the “facts and theories to support the alleged violation” and then wait 65 days before filing suit.  This notice requirement has two purposes: (1) to give the LWDA sufficient information to determine whether the alleged violation justifies an investigation and/ or citation and (2) to put the employer on notice so that it may voluntarily cure the alleged violation. Oftentimes, however, plaintiffs’ notice letters are deficient because they fail to include sufficient facts and theories to inform the employer or the LWDA of the nature of the claims.  In such cases, plaintiffs have failed to exhaust administrative remedies. 

Judge Gonzalo Curiel’s recent decision in Gunn v. Family Dollar Stores, Inc., Case No.: 3:14-cv-1916-GPC-BGS (S.D. Cal. Dec. 2, 2016), reminds us of the standard that notice letters must meet.  Plaintiff Gunn’s notice letter advised the LWDA of his intent to file a PAGA action for violations of Wage Order 7-2001, Section 14, and “[s]pecifically . . . allege[d] that Family Dollar failed to provide suitable seats to Plaintiff and other current and former employees when the nature of their work reasonably permits the use of seats, in violation of California Labor Code section 1198 and Wage Order 7-2001, section 14.”  Judge Curiel held that such an allegation was insufficient to meet PAGA’s standards.  As he noted, plaintiffs must detail the “facts and theories” supporting their alleged violations. But here, the plaintiff’s allegations simply parroted the language of the underlying regulation, amounting to nothing more than a “string of legal conclusions” devoid of any of the facts or theories required by the Labor Code.  The court rejected the plaintiff’s contention that facts could be implied by his allegations (i.e., that the class of employees at issue would not include office employees because they have seats). 

The most notable aspect of Judge Curiel’s opinion, however, was his denial of the plaintiff’s request for leave to amend.  Although the court recognized leave to amend tends to be granted freely, he disagreed that applied to defective PAGA notices.  The court stated that “courts have granted PAGA claimants leave to amend only when the plaintiff’s complaint failed to adequately plead exhaustion, not when Plaintiff provided defective notice to the LWDA” (emphasis added).  Indeed, granting the plaintiff leave here would tacitly endorse a strategy that precludes the LWDA from receiving the information necessary “to intelligently assess the seriousness of the alleged violation,” thereby frustrating the purpose of PAGA’s statutory notice requirement.

While the unpublished opinion in Gunn will not likely mark a sea change in how courts treat PAGA actions, it is nevertheless a victory for California employers.  Those facing suitable seats claims, which are based on a notoriously ambiguous statute, may have the most to gain. 

 

Post-Tyson Foods: No, The Sky Is Not Falling

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This past March, we blogged about the U.S. Supreme Court’s decision in Bouaphakeo v. Tyson Foods, Inc., 136 S. Ct. 1036 (2016), a case in which the plaintiffs alleged that Tyson Foods improperly denied compensation for time spent putting on and taking off required protective gear at a pork processing facility.  At trial, the plaintiffs presented experts who, based on sample data, determined the average number of minutes employees likely spent donning and doffing and the aggregate damages that would be owed to the class as a result.

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Arbitration in Employment Sea Change?: Ninth Circuit Holds Mandatory Class Action Waivers Unlawful

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Can employers still require employees to sign arbitration agreements with class action waivers as a condition of employment?  Last week, the Ninth Circuit became the second appellate court to adopt the National Labor Relations Board’s (“NLRB”) position that class action waivers violate the National Labor Relations Act (“NLRA”) in Morris v. Ernst & Young LLP.

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California Supreme Court Holds “No Universal Rule” Exists When Deciding Who Should Determine Availability of Classwide Arbitration

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On July 28, 2016, the California Supreme Court added to the ever-changing body of case law regarding classwide arbitration when it held that “no universal rule” exists regarding who (the court or the arbitrator) should decide whether classwide arbitration is permissible under an arbitration agreement, and that this issue must be decided on a case-by-case basis. 

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California Enacts New PAGA Amendments as Part of Governor’s Budget Bill

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The Private Attorneys General Act of 2004 (“PAGA”) authorizes aggrieved employees to file lawsuits to recover civil penalties on behalf of themselves, other employees and the state of California for Labor Code violations. In January, Governor Brown submitted a budget proposal that sought greater oversight of PAGA claims and amendments to the PAGA statute. On June 15, 2016, the California Legislature approved Governor Brown’s budget proposal which included significant amendments to PAGA (Labor Sections 2698-2699.5). SB 836 went into effect on June 27, 2016 and provides:

  • The Labor and Workforce Development Agency (“LWDA”), the agency which coordinates workforce programs by overseeing seven major departments that serve California businesses and workers now has 60 days to review a notice under Labor Code § 2699.3(a). Prior to the amendments, the LWDA had 30 days to review. Additionally, the time for the LWDA to investigate a claim is extended to 180 days (it was 120 days);
  • A Plaintiff cannot file a civil action until 65 days after sending notice to the LWDA (previously 33 days);
  • The LWDA must be provided with a copy of any proposed settlement of a PAGA action at the time it is submitted to the court;
  • A copy of the court’s judgment and any other order that awards or denies PAGA penalties must be provided to LWDA;
  • All items that are required to be provided to the LWDA must be submitted online, including PAGA claim notices and employer cure notices or other responses;
  • A $75 filing fee is required for a new PAGA claim notice and also for any initial employer response to a new PAGA claim notice. The filing fee may be waived if the party on whose behalf the notice or response is filed is entitled to in forma pauperis status; and
  • When a plaintiff files a new PAGA lawsuit in court, a filed-stamped copy of the complaint must be provided to LWDA. This requirement only applies to cases in which the initial PAGA claim notice was filed on or after July 1, 2016.

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Pork Processing Plant Employees Can Keep the Bacon: Supreme Court Affirms Jury Award and Permits Proof of Wage and Hour Class Claims By Representative Evidence

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While the Supreme Court in Tyson Foods, Inc. v. Bouaphakeo dashed employers’ hopes that the Court would broadly preclude statistical evidence and severely limit wage and hour class actions in a fashion similar to its restriction of discrimination class actions in Wal-mart v. Dukes, the Court was also clear that this type of evidence will not be appropriate or probative in all wage and hour claims.  In ruling for the class action claimants, the Court affirmed a $2.9 million jury award for overtime claims related to donning and doffing at an Iowa pork processing plant.  In so ruling, the Supreme Court refused to adopt the position advanced by Tyson Foods and several of its amici that class actions cannot be resolved by reliance upon representative evidence or statistical samples.  It also refused to embrace Tyson Food’s reading of Wal-mart v. Dukes as standing for the proposition that representative sample is an impermissible means of establishing class-wide liability.  But the Court also made clear whether statistical evidence could be used for liability depends on the claims asserted and the particular evidence.  While the decision is not unsurprising after oral arguments, it seems likely that employers will see an uptick in plaintiffs aggressively relying on “representative” statistical evidence in wage and hour collective and class cases.  There are, however, several “lessons learned” based upon the majority’s decision.

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Justice Scalia’s Employment Law Legacy

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On February 13, 2016, Justice Antonin Scalia, the anchor of the Court’s conservative wing for nearly three decades, passed away.  He leaves behind a distinguished legal career that involved experience in wide range of roles.  After graduating from Harvard Law School, Justice Scalia entered private practice and then became a law professor at the University of Virginia.  He served in the Nixon and Ford administrations, eventually becoming Assistant Attorney General.  Scalia then began his judicial ascension when President Ronald Reagan nominated him to the United States Court of Appeals for the District of Columbia Circuit.  Soon thereafter, Reagan nominated Scalia to the Supreme Court to replace Justice William Rehnquist, whom Reagan had named to the Chief Justice position.  Scalia was unanimously confirmed.

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What Can Brown Do For PAGA? Budget Proposal Seeks Greater Oversight of PAGA Claims

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California Governor Jerry Brown’s administration recently submitted a budget proposal to the California Legislature that would increase State oversight of Private Attorneys General Act (PAGA) claims and amend the PAGA statute accordingly.  The proposal has significant implications for the administration of PAGA claims going forward.

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Not All Class Actions Are Created Equal Under CAFA, Says the Ninth Circuit

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The Ninth Circuit recently delivered a setback to defendants seeking to remove cases to federal court under the Class Action Fairness Act (“CAFA”) when it interpreted the statute narrowly to exclude consideration of non-class claims in determining the jurisdictional amount in controversy in Yocupicio v. PAE Grp., LLC, No. 15-55878, 2015 WL 4568722 (9th Cir. 2015).

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