Wage and Hour

Supreme Court To Clarify Key Issues Regarding The Permissibility Of Class Arbitration

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In the last several years, the enforcement of agreements to arbitrate disputes, whether between businesses or between businesses and their employees, has become a hotly contested issue in the courts. The U.S. Supreme Court issued two significant pronouncements in this area in the past few years. In 2010, in Stolt-Nielsen S.A. v. Animalfeeds International Corp., 130 S.Ct. 1758 (2010), the Court held that where an agreement to arbitrate is silent on the question of whether a plaintiff can arbitrate her claims on behalf of a proposed class of similarly situated individuals (similar to a class action lawsuit), class arbitration is not permissible. Last year, in AT&T Mobility v. Concepcion, 131 S. Ct. 1740 (2011), the Court held that (1) under the Federal Arbitration Act (“FAA”), arbitration agreements are to be enforced “according to their terms”; and (2) state law rules prohibiting the use of “class-action waiver” provisions, in which a party waives his or her right to arbitrate claims on a class basis, are preempted by the FAA. Together, these cases stand for the fundamental proposition that the parties to arbitration agreements should be bound by the clear terms of such agreements, especially with respect to class arbitration issues.  READ MORE →

Class Certification Denied: California Court of Appeal Holds That Reliance Upon Legal, Companywide Policies Is Insufficient to Support Class Certification

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Coins and Hourglass

On October 10, 2012, a California Court of Appeal held that a wage and hour class action could not be certified where the common company-wide policy at issue did not answer the “central liability” question of the case.

The case, Morgan v.  Wet Seal, Inc., was brought by former Wet Seal employees against the clothing store alleging that the company violated California law by requiring employees to 1) purchase Wet Seal clothing and merchandise as a condition of employment; and 2) travel between Wet Seal business locations without reimbursing them for mileage. The plaintiffs moved for class certification, pointing to written company policies as evidence of the common issues of fact and law that predominated over individual issues. Wet Seal opposed the plaintiff’s motion for class certification arguing, among other things, that their written policies actually undermined the plaintiff’s claims. The policies at issue specifically state that employees are not required to wear Wet Seal clothing and that employees may be eligible for reimbursement for mileage.

The Court of Appeal affirmed the trial court’s holding that the facially legal policies made it impossible to use a class-wide method of proving liability. For example, the Court explained that the plaintiffs’ dress code claims raised issues of 1) whether Wet Seal requires employees to wear the merchandise as a condition of employment; 2) whether the allegedly required attire constitutes a uniform; and 3) whether any given purchase by an employee constituted a “necessary expenditure.” Here, the Court found that the policy explicitly did not require wear and the policy’s description of the dress code as “consistent with the current fashion style that is reflected in the stores” was too broad and vague to constitute a “uniform” under the definition provided by the DLSE. Therefore, any question of liability would inevitably turn on what each Plaintiff was told, who told it to them, how they interpreted that information, whether the interpretation was reasonable and whether the employee then purchased merchandise pursuant to that conversation.

The Court of Appeal emphasized that the allegation of a companywide policy is not sufficient in and of itself to establish that common issues predominated because “there was no class wide method of proof for resolving this key liability question.” The anecdotal evidence provided in Plaintiffs’ declarations attempting to show a practice of requiring employees to purchase Wet Seal clothing as a uniform only reinforced the Court’s conclusion that liability would have to be decided on an individualized basis.

California Computer Software Employee Overtime Exemption Rate to Increase 2.6% on January 1

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The California Department of Industrial Relations (DIR) released its 2013 hourly rate and minimum salary requirement adjustment for exempt computer software employees. Beginning January 1, 2013, the minimum hourly rate of pay will increase to $39.90 to qualify for exemption, the minimum monthly salary will increase to $6,927.75, and the annual minimum salary will increase to $83,132.93. The 2.6 percent increase is based upon the California Consumer Price Index for Urban Wage Earners and Clerical Workers pursuant to California Labor Code § 515.5(a)(4).

In addition to the salary requirements, computer software employees must meet the remaining criteria set forth under Labor Code § 515.5 in order to be exempted from state overtime requirements.

See’s Candy Shops, Inc. v. Superior Court: California Appellate Court Confirms Application of Federal Rounding Standards in California

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Many employers systematically round employee time punches to the nearest tenth of an hour. For example, if an employee clocks in at 9:58 a.m., the time is rounded up to 10:00 a.m.; and likewise if she clocks in at 10:02 a.m., her time is rounded down to 10:00 a.m. Under federal law, rounding policies are lawful if they are neutrally applied and do not systematically under compensate employees. While this standard was approved by the California Division of Labor Standards and Enforcement, until recently, no California court or statute specifically addressed the issue.

However, on October 29, 2012, the California Court of Appeal for the Fourth Appellate District in See’s Candy Shops, Inc. v. Superior Court confirmed that the neutral rounding standard adopted by federal law and the Department of Labor Standards and Enforcement is appropriate under California law. Thus, under See’s Candy, California employers may maintain lawful rounding policies if the rounding does not consistently result in a failure to pay employees for time worked. An example of a potentially unlawful rounding policy is one in which the employer always rounds time down.

Also of note, in approving the federal rounding standard, the See’s Candy opinion rejected the plaintiff’s reliance on California Labor Code section 204. Specifically, the court emphasized that Section 204 is solely a timing requirement as to when wages must be paid, and does not create any substantive right to wages.

You can read the decision here.

Eighth Circuit Rules Employers Can Change Workweek Regardless of Effects on Overtime Pay

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3 Minutes to 12:00

On October 10, 2012, the Eighth Circuit in Abshire v. Redland Energy Services, LLC (Case No. 11-3380) confirmed that under the FLSA, employers are allowed to alter the days contained in employees’ workweek to minimize overtime pay as long as the change is intended to be permanent. While this decision is certainly a victory for employers, employers (particularly in California) should nevertheless ensure compliance with state law before making any changes.

Abshire involved claims against employer Redland Energy Services, LLC, a company that drills and services natural gas wells in Arkansas. Most of Redland’s workers worked a regular Monday-to-Friday schedule, and any weekly overtime was calculated on a regular Sunday-to-Saturday week. Redland’s drill operators, however, worked 12-hour shifts on seven consecutive days, from Tuesdays through Mondays, and then received seven days off. Originally, Redland calculated weekly overtime for its drill operators on a Tuesday-to-Monday week. In May 2009, however, Redlands switched to a Sunday-to-Saturday week, thereby making the workweek consistent for all employees. Redland claimed that this switch was made not only to decrease payroll expense by reducing the number of hours that drill operators must be paid at the FLSA-mandated overtime rate, but also to reduce administrative costs because the change would allow the company to calculate the overtime for all of its employees on the same weekly basis. The drill operators alleged that the supposed reduction of administrative costs was merely a pretext, and the effort to reduce the amount of overtime paid was impermissible under the FLSA. READ MORE →

U.S. Supreme Court To Decide Whether Class Action Plaintiffs Can Use Stipulations To Avoid Jurisdiction Under The Class Action Fairness Act

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The United States Supreme Court recently granted certiorari to review whether class action plaintiffs can avoid federal court jurisdiction under the Class Action Fairness Act (“CAFA”) by stipulating that their damages do not exceed the federal jurisdictional prerequisite.  This issue is particularly significant to employers because they frequently rely on the CAFA to remove cases to federal court when hit with wage-and-hour and other employment class action lawsuits.  The CAFA generally permits class action defendants to remove cases with minimal diversity to federal court where the amount in controversy exceeds $5 million. READ MORE →

Post-Brinker Class Certification Decisions – Where are they now?

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Coins and Hourglass

Brinker continues to impact meal and rest period and off-the-clock cases as lower courts continue to grapple with the contours of its application.  Several cases at the appellate level were remanded after the California Supreme Court’s Brinker decision, and those cases are now working their way through the lower courts.  On our July 6, 2012 blog post, we identified three post-Brinker decisions denying class certification in meal period cases.  Below is a brief summary of post-Brinker decisions issued since our last update. READ MORE →

Amendment to New York’s Labor Law Expands the Universe of Permissible Wage Deductions

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Pen and Calculator

The New York State Legislature recently passed a bill amending New York Labor Law Section 193 and establishing new categories of permissible wage deductions that employers may take with the consent of employees. In addition to allowing employers (with employee consent) to recoup advances on wages or accidental overpayments, the new amendments also permit employee-approved deductions for things such as discounted mass transit tickets; gym membership dues; cafeteria or pharmacy purchases made at the employer’s place of business; and education and child care expenses. Both employers and employees are expected to benefit from the flexibility permitted by the bill, although implementing regulations from the New York Department of Labor have yet to be enacted.

With respect to deductions related to recovering accidental overpayments of wages or wage advancements, the bill instructs the New York Department of Labor to issue regulations governing the periodic amount of recovery or repayment; the timing, frequency, duration and method of recovery or repayment; a requirement that notice to be provided to employees before commencing the recovery or repayment; and a requirement that employers implement procedures for disputing the amount of overpayment or repayment or seeking to delay commencement of repayment or recovery. Employers are advised to wait until these regulations are enacted before acting on the bill, and should also take care to ensure compliance with the bill’s new record keeping requirements.

The amendment is expected to be signed into law by Governor Andrew Cuomo and will become effective 60 days after enactment. The bill contains a sunset provision, which provides that the law shall expire and be deemed repealed three years after the effective date. The text of the bill is available here.

Menes v. Roche

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Gavel and Hundred-Dollar Bill

In a victory for pharmaceutical companies, the Ninth Circuit Court of Appeals recently held that plaintiff-appellant pharmaceutical sales representatives (“reps”) were exempt from California law’s overtime requirements. See Menes v. Roche Laboratories, Inc., No.  08-55286 (9th Cir. July 23, 2012) (unpublished) (consolidated with D’Este v. Bayer Corp. and Barnick v. Wyeth).

The Ninth Circuit decision is on the heels of the U.S. Supreme Court’s similar holding that reps are exempt from federal law overtime requirements. Back in June 2012, the U.S. Supreme Court in Christopher v. SmithKline Beecham Corp., No. 11-204 (U.S. June 18, 2012) held that reps were exempt from overtime under the Fair Labor Standards Act’s outside sales exemption. The Supreme Court found reps were exempt as outside salespersons despite laws that prohibit reps from selling pharmaceuticals directly to patients or physicians based on a “common sense” approach to the exemption. It was also a significant victory for employers because the Department of Labor attempted to use amicus briefs to argue that courts must defer to its interpretation of the law—the Supreme Court rejected this practice. See Orrick’s Blog Post about Christopher here.

Unlike Christopher and unlike the district court below, the Ninth Circuit in Menes did not reach the issue of whether reps were exempt under California’s outside sales exemption. Rather the Ninth Circuit held that reps were exempt under California’s administrative exemption, a different exemption, which generally provides that individuals who spend more than 50 percent of their time performing non-manual work directly related to the management policies or general business operations of his employer or customers are exempt.

Orrick represents Roche Laboratories, Inc. Read Law360’s coverage of this case here.

Harris v. Superior Court, No. B195121 (Cal. App. July 23, 2012)

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Is it “here we go again” for Harris? In the latest round of the donnybrook that is the administrative exemption in California, a California Court of Appeal in Harris v. Super. Ct., No. B195121 (Cal. App. July 23, 2012), held that the plaintiffs, insurance claims adjusters, were—as a matter of law—not exempt from California’s overtime laws under California’s administrative exemption. After a trial court certified a partial class of California claims adjusters, but denied plaintiffs’ motion for summary judgment, the parties appealed the decision all the way to the California Supreme Court. READ MORE →