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In today’s workplace, arbitration agreements between employers and employees are increasingly common. However, in the recent past, California courts have taken a somewhat controversial stance on these agreements by carving out exceptions to invalidate certain arbitration clauses. While California courts cannot use state statutory law to invalidate these agreements, since state laws disfavoring arbitration are preempted by the Federal Arbitration Act, such provisions are still subject to invalidation on the same grounds applicable to contractual provisions generally (i.e. unconscionability, fraud, duress, etc.).

Focusing specifically on unconscionability, a California Appellate court recently ruled that arbitration agreements Inter-Coast International Training, Inc. DBA InterCoast Colleges had its workers sign after it was sued for wage-and-hour class action violations, are unenforceable. In the case, Plaintiffs Anthony Nguyen and Cheryl Alexander brought a wage-and-hour class action lawsuit against InterCoast Colleges. Shortly after the case was filed in 2011, the company revised its employee handbook to include a mandatory arbitration agreement covering all employment disputes. InterCoast required employees, including many potential class members, to sign the new handbook. InterCoast then filed a motion to try and compel arbitration. The trial court denied the motion and found the arbitration agreements to be unconscionable. The court reasoned that the arbitration provisions were not sufficiently highlighted or separated from the rest of the agreement and were difficult to read, which supported the Plaintiffs’ claim of surprise. Furthermore, it also found that the agreements were unconscionable due to the company’s failure to inform employees of the pending lawsuit and how signing the arbitration agreement would affect their ability to participate in the litigation. The appellate court agreed with the lower court’s decision, adding that the agreement failed to clarify that the “provision was both forward- and backward-looking” and that it “was equally silent about class actions.” As a result, InterCoast’s arbitration agreement was deemed unenforceable.

This recent ruling highlights the importance of transparency in employee arbitration agreements. Courts will often key in on oppressive terms or unfair circumstances. While an agreement can be invalidated on fraud or duress grounds, it is much more likely to be found unconscionable. There are two aspects to unconscionability: procedural and substantive. A successful unconscionability argument requires both. First, procedural unconscionability focuses on the circumstances regarding the formation or negotiation of the agreement. For example, the appellate court found that the meetings InterCoast had where employees signed the agreement constituted surprise and were oppressive because the employees had no real bargaining power. Second, substantive unconscionability focuses on the fairness of the actual terms of the agreement. Again, the court found that InterCoast’s arbitration provision was substantively unconscionable because it failed to inform employees that they could be waiving their rights to participate in the current class action lawsuit against the company.

As such, employers need to take care in how they draft arbitration agreements and in how they have employees sign them. To increase the chances the agreement will be enforceable, an employer should, ideally, have them in place before an employee sues. Additionally, the company should inform employees of how the agreement will affect their rights, as well as how signing it will affect their ability to participate in any pending litigation, and give them an opportunity to opt-out without repercussion. Furthermore, the language of the arbitration agreement should be clear and unambiguous, especially in regards to the time and scope of the agreement. Finally, if the arbitration provision is included in a larger agreement, the company should take adequate steps to highlight this section and separate it from other parts of the overarching agreement. These steps can help prevent your company’s arbitration agreement from being found unenforceable due to both substantive and procedural unconscionability.

In a decision in March, the California Supreme Court held that when calculating the overtime rate in pay periods where an employee earns a flat sum bonus, employers must divide the total compensation earned in a pay period by the non-overtime hours worked by an employee, ignoring any overtime hours worked.

The Court’s recent decision in Alvarado v. Dart Container Corp., 2018 Cal. LEXIS 1123 (Cal. Mar. 5, 2018) changed how overtime is calculated. In Alvarado, Dart Container paid an attendance bonus of $15.00 per weekend day to employees who worked on a Saturday or Sunday and completed the full shift. This flat sum bonus was paid regardless of whether the employee exceeded the normal work shift hours. The Alvarado Court had to decide how to calculate the employee’s overtime rate in light of the flat sum bonus.

Dart argued that its formula for calculating overtime complied with federal law. Dart argued it complied by (1) multiplying the number of overtime hours by the employee’s straight time (called the “base” rate); (2) adding the total hourly pay for non-overtime work, any non-hourly compensation, and the base hourly pay for overtime work from step one; (3) multiplying the total from Step 2 with the overtime hours during the relevant pay period (called the “premium”); and (4) adding the base rate from step one with the premium from step three to get the total overtime compensation for the pay period. In addition, Dart argued that the DLSE regulation Plaintiff relied on was a void “underground regulation” and, because there was no existing valid state regulation, the formula used by the federal Department of Labor applies. That formula includes all hours in the divisor.

However, the Plaintiff argued that this formula violated the law because, according to the DLSE Manual, the flat sum bonus should be calculated using only the number of non-overtime hours worked.

The California Supreme Court agreed with the Plaintiff and relied on an outdated DLSE Enforcement Manual that said: “If the bonus is a flat sum, such as $300 for continuing to the end of the season, or $5.00 for each day worked, the regular bonus rate is determined by dividing the bonus by the maximum legal regular hours worked during the period to which the bonus applies.” While the Court agreed with Dart that the DLSE rule was an invalid underground regulation, it held that the regulation could be a persuasive application of state law.

Furthermore, the Court found that because Dart paid the flat sum bonus regardless of whether an employee worked any overtime hours on that weekend day, it should be applied to non-overtime hours in the pay period. Effectively, the Court adopted the DLSE regulation. The Court held that its decision should apply retroactively but expressly limited the holding to flat sum bonuses.

Although Alvarado modified how employers calculate certain overtime pay, the resulting difference in pay between the two formulas is often minimal unless an employee receives a large number of flat sum bonuses. Below is an example illustrating the difference between the two formulas.

Example:

Employee A works an 8-hour shift each day from Monday to Saturday, totaling 48 hours–40 regular hours and 8 overtime hours.  Employee A is paid $20 per hour and earns a $40 attendance bonus for the Saturday shift.  For purposes of determining Employee A’s regular rate of pay, the $40 bonus is divided by the total non-overtime hours worked (40 hours) for an additional per-hour value of $1.00, giving the employee a regular rate of $21.00.

Employee B, on the other hand, works only a 10-hour shift Monday and Saturday, totaling 20 hours–16 regular hours and 4 overtime hours.  Employee B is paid $20 per hour and earns a $40 attendance bonus for the Saturday shift.  For purposes of determining Employee B’s regular rate of pay, the $40 bonus is divided by the total non-overtime hours worked (16 hours) for a per-hour value of $2.50, giving the employee a regular rate of $22.50.

If the bonus were divisible by all hours worked (as permitted by the FLSA), the per-hour value of the bonus would be $0.83 for Employee A (not $1.00) and $2.00 for Employee B (not $2.50).  And, if the bonus were divisible by all potential non-overtime hours (i.e., 40 hours), the per-hour value for both Employee A and Employee B would be $0.38.  The method selected by the court, therefore, provides for a greater per-hour value (regular rate) than the FLSA method whenever overtime has been worked.

With a new year comes new laws taking effect. While Proposition 64, which legalizes the adult use of marijuana in California, is not technically a new law since it went into effect in November of 2016, recreational sales finally started this month. However, this doesn’t mean that it’s all harmony and good vibes, especially in the workplace.

In fact, despite Proposition 64 (formally entitled, “Control, Regulate and Tax Adult Use of Marijuana Act”), not much has changed regarding marijuana in the workplace—Employers can still drug test their employees for marijuana, employees can still be fired, and job applicants can be rejected for using the drug. Though proponents may decry this as unfair, the California Supreme Court dealt with medical marijuana in the workplace nearly ten years ago in Ross v. RagingWire Telecommunications, Inc., 42 Cal. 4th 920, (2008). The plaintiff, in that case, was fired for using medical marijuana, which the employer discovered through a drug test and after the plaintiff gave the company a copy of his physician’s recommendation. The plaintiff said he needed medical marijuana for his chronic back pain. He sued his former employer and claimed that he was fired because of his disability. Yet, the State Supreme Court saw things differently and ruled that employers can legally fire, or not hire, someone due to marijuana use. The Court also found that employers do not have to accommodate an employee’s medical marijuana use even if they have a valid recommendation from a doctor. While this may seem surprising, Proposition 64 explicitly states that it does not change an employer’s right to a drug test or terminate employees.

If employers choose to ban marijuana in the workplace, they should have a clear policy that they uniformly enforce. This is especially true for jobs that involve driving or construction, where no-tolerance policies are the norm.

Employers who wish to administer drug tests face technological challenges: current drug tests can only check if marijuana is in the system and cannot determine if the user is under the influence of marijuana. Because marijuana can be detected in the body long after consumption and long after the effects have subsided, an employer does not have a precise way to determine if an employee is actually under the influence while at work. Marijuana advocates argue that it is unfair to fire or discipline employees who test positive for marijuana since current testing cannot determine if a worker was actually impaired on the job versus simply having evidence of marijuana in the system from past use.

Although current testing technology has not yet provided a precise way to distinguish between on-the-job and off-duty marijuana usage, employers are generally free to determine how they will handle marijuana in the workplace, including setting a zero-tolerance policy, administering drug tests and terminating those who fail. Employers would be wise, however, to make the policy clear to employees in advance. Knowing this, employees should be cautious and try to get a clear answer to their employer’s policy regarding marijuana usage. For now, Californians will have to proceed carefully while navigating this evolving area of the law.

 

 

 

ILG Legal takes pride in representing both corporate employers and individual workers. As of 2016, our attorneys had already helped thousands of workers recover money they were owed via class action claims, particularly those focusing on unpaid wages. In 2017, the firm celebrated representing its 100th individual client, a California-based small business who had received a demand letter threatening a new employment lawsuit. We are grateful that after more than 100 clients we have an unbeatable track record: perfect reviews on all three platforms. Our Yelp, Facebook, and Avvo scores are all 5 out of 5! We also won Avvo’s Client Choice Award twice since we opened in March 2015. We believe servicing over 100 clients with perfect reviews is our greatest accomplishment to date.
“The Client’s goal is the only goal in the dispute” has been the first principle of our Mission Statement since we signed our first client in 2015. ILG Legal set out to create a more client-centered approach to legal practice. We think the stellar reviews after more than 100 clients prove that our Mission Statement is more than just words on digital paper; instead, it is a creed we live by, and our clients sense it.

Referrals

 

Many businesses live by the saying, “A referral is the best compliment someone can give us.” If that’s true we have a lot of “thank you” cards to write. We’re happy to report we’ve had many referrals from the typical sources—clients, family members, and friends. We had two highly unusual referrals of which we are especially proud.

A mediator with one of the two largest mediation companies had worked with ILG Legal once, mediating a complex case that didn’t settle at mediation but settled soon afterward. A few months later, the mediator heard of a strong employment case and sent the individual directly to ILG Legal. That was quite a compliment.

The single greatest referral, though, initially looked like an ethical violation. A few weeks after we settled a claim against a large corporation, we received a voicemail from the corporation’s General Counsel. The voicemail referenced a worker with a new claim who would likely be a great client for us. At first, listen, it sounded as if the General Counsel was calling to introduce us to someone who would sue his corporation! That would be highly unusual, if not unethical. We spoke a few days later, and it turned out the potential client was the General Counsel’s close friend who needed an employment attorney regarding a wrongful termination claim against an unrelated company. The General Counsel, who was our opponent on a single case, considered us professional and effective enough that when his close friend needed an employment attorney, he thought of us. If we had to give an award for the best referral ever, this would be hard to top.

Awards

Although less important than our perfect client reviews and diverse referrals, we were very excited to receive several noteworthy awards this year. ILG Legal was named one of the “10 Best” California Employment Law Firms in Client Satisfaction by the American Institute of Legal Counsel, and Owner Stephen Noel Ilg was named one of the Top 40 Employment Lawyers Under 40 by the American Society of Legal Advocates.

 

Thank you to all of the clients, family members, friends, mediators, and even opposing attorneys that have trusted us to help resolve their legal problems.

LGBTQ employees in the United States have become more and more visible in American society in the past few decades, but the legal issues surrounding their standing in the workplace is far from clear. While LGBTQ folks in states like California enjoy certain guarantees of recourse thanks to FEHA (Fair Employment and Housing Act) of 1992, there is still no analogous federal law in place.

This year, the Supreme Court may have to finally address this discrepancy. Various federal plaintiffs and appellants have asserted for years that Title VII of the Civil Rights Act of 1964 (banning sex discrimination) should also ban sexual orientation discrimination. Two cases—Hively v. Ivy Tech Community College of Indiana, No. 15-1720 (7^th Cir. 2017) and Zarda v. Altitude Express No. 15-3775 (2d Cir. 2017) have produced conflicting interpretations of Title VII in 2017, making it ripe for Supreme Court cert.[1]

Title VII asserts that discrimination based on “race, color, religion, sex, or national origin […]” 42 U.S.C. § 2000e-2(a) is prohibited. The plaintiffs in Hively and Zarda premised their federal cases on the prohibition of “sex” discrimination.

In the Seventh Circuit, Hively, a community college teacher, had applied for multiple jobs and had been denied a promotion, and was ultimately fired for, according to her, discriminatory and prejudicial attitudes about her sexual orientation. An out lesbian, she felt her identity was the primary motivation for her termination.

The judges of the Seventh Circuit skirted the question of whether to add sexual orientation as a distinct category protected by Title VII. They instead asked whether, if Hively were a man, would she be treated differently for being in a relationship with a woman? The court asserted the following:

“Hively alleges that if she had been a man married to a woman (or living with a woman, or dating a woman) and everything else had stayed the same, Ivy Tech would not have refused to promote her and would not have fired her. […] This describes paradigmatic sex discrimination.”

In no uncertain terms, the Second Circuit ruled the exact opposite in Zarda. Here, the court ruled that the plaintiff’s identity as a homosexual man did not constitute a sufficient basis for protection under Title VII’s sex discrimination protections. For this court, pink painted nails were insufficient “[…] to establish the requisite proximity between his termination and his proffered instances of gender non-conformity.”[2]

 

In contrast to the Seventh Circuit’s Hively decision, the Second Circuit ruled that Zarda’s homosexual dating habits were not considered a gender non-conforming activity and were not protected under federal law.

The circuit split makes the issue ripe for Supreme Court consideration. This dispute would provide interesting insight into rookie Supreme Court Justice Neil Gorsuch’s attitudes towards civil rights and LGBTQ issues.

While LGBTQ folks in California have strong protections against discrimination based on sexual orientation, many states have none. If the Supreme Court agrees with the Seventh Circuit, sexual orientation would be a protected category throughout the country. Practitioners, scholars, and businesses will be closely tracking developments.

[1] http://www.cnn.com/2017/09/26/politics/lgbt-employment-case/index.html

[2] https://law.justia.com/cases/federal/appellate-courts/ca2/15-3775/15-3775-2017-04-18.html

In the last year, with the Trump Administration’s various immigration bans, attempts to repeal and replace Obamacare and now overhaul the tax code, the so-called “net neutrality” issue may have flown under the digital radar for many. But a key vote by the FCC—which may occur as early as mid-December—could seriously impact businesses and consumers alike with respect to any and all Internet content they consume.

The Basics of Net Neutrality in the Obama Era: In 2015, the Obama administration issued an order reclassifying Internet service providers as if they were utilities. This means that all data on the Internet must be treated the same—and Internet companies cannot charge more money to consumers based on content, website, user, application, method of communication, amount of data used, or any other component or aspect of the web. It also means that corporations like Comcast, Verizon, and Time Warner Cable cannot block or slow Internet content for any reason.

This is what experts mean when they say “net neutrality.”

Is it Legal? In June 2016, the U.S. Court of Appeals for the D.C. Circuit upheld the Obama administration’s net neutrality rules as a valid exercise of FCC’s authority under Title II of the Communications Act as well as Section 706.

The Coming FCC Vote: However, President Trump’s FCC chairman, Republican Ajit Pai, has now announced that the FCC will hold a vote next month on whether to reverse the Obama administration’s net neutrality order. The vote will likely occur on December 14, 2017.

What Will This Mean? Internet companies such as Comcast and Verizon see the end of net neutrality as a boom to business: ending the Obama-era order would lead to billions of dollars in investment and revenue in broadband and Internet services.

But advocates of net neutrality see the end of the Obama order as a “barter[ing] off to the highest bidders of a billionaire class that dominates the political debate on so many other media platforms.”

Where you fall on the issue likely depends on how you view the Internet. Is Internet access a public good, like the Postal Service, which delivers affordable mail services to everyone, rich or poor? Or is the Internet a commodity like any other, subject to supply and demand and other free economy ideals? Do corporations have the right to control how fast or slow any given website loads? Or should all data be equal?

These issues will likely be decided by all three branches of government in the coming years, starting with the important FCC vote set to occur in December.

And if you wish to have your voice heard, the FCC is currently seeking comments on the issue of net neutrality and what the FCC describes as an “open Internet.”

You can simply to go this web link and send an email to the FCC via the email address provided in the link.

While you may have recently seen the phrase “me too” on social media following the Harvey Weinstein allegations, “me too” evidence is actually frequently used in employment litigation. In employment cases, it is often very difficult for a plaintiff to provide direct evidence of an employer’s discriminatory intent. In most cases, plaintiffs can only present circumstantial evidence to show that the employer’s actions were discriminatory. In response, the employer will argue that they had a legitimate, nondiscriminatory reason for firing the employee. Plaintiffs regularly rely on “me too” evidence to refute the employer’s claim that his/her actions were not motivated by discriminatory intent.

“Me too” evidence is usually testimony from other employees meant to demonstrate a discriminatory atmosphere. For example, in Pantoja v. Anton, an employee sued her former employer for race and sex discrimination after he called her derogatory names, inappropriately touched intimate parts of her body and made sexual advances towards her.[1] The appellate court ruled that the trial court should have allowed evidence of the defendant’s “harassing or discriminatory conduct that was witnessed by other employees but not experienced by” the plaintiff.[2] The court reasoned that such evidence showed that the defendant “harbored a gender bias and therefore tended to disprove the ostensible reason for her dismissal.”[3] Without the testimony from other employees, the plaintiff would be unable to successfully prove her employer’s discrimination. Cases like this show how powerful “me too” evidence can be in employment cases.

However, employers can also use this same type of evidence to disprove claims that employees bring against them. Sometimes called “not me too” evidence, this type of evidence is often testimony by other employees that they were not discriminated against and that the employer did not have a discriminatory intent. In fact, courts have regularly held that evidence of an employer’s favorable treatment of other employees is highly relevant in such cases. [4] Ansell v. Green Acres Contracting Co. was one of the first cases to find that an “employer’s favorable treatment of other members of a protected class can create an inference that the employer lacks discriminatory intent.”[5] As a result, defendants today often use “not me too” evidence to rebut discrimination claims by employees.

As you can see, “me too” evidence can be very powerful and influential in employment cases, for both plaintiffs and defendants. In fact, both “me too” and “not me too” evidence are often present in employment cases. In the absence of the all too rare “smoking gun,” the outcome of many employment law cases will depend on the strength of “me too” evidence.

 

_________________________________________________________________________________

 

[1] Pantoja v. Anton, 198 Cal. App. 4th 87, 119, (2011)

[2] Id. at 97

[3] Id. at 114

[4] Ansell v. Green Acres Contracting Co., 347 F.3d 515, 524 (3d Cir. 2003)

[5] Id. at 524

Congratulations to Senior Associate Tracy Scanlan who will begin maternity leave on October 28, 2017!

The team at ILG Legal wishes Tracy and her family smooth sailing, good health, and a joyous welcoming to the newest member of their family. We will miss her and look forward to her return in Spring 2018.

Congrats, Tracy!

Negotiating a starting salary is one of the most nerve-wracking aspects of looking for a job. It can be especially vexing for women working in majority-male professions such as science and technology.

Recent changes to California’s Fair Pay Act, which came into effect January 1^st, 2017, bar employers from paying a higher salary to members of one sex over another. This change is a step in the right direction for closing the gender-wage gap, surely—especially since it’s coming coupled with Assembly Bill 168.

This bill, soon-to-be California Labor Code § 432.3, supplements the Fair Pay Act amendments by preventing employers from requesting a candidate’s salary history before hiring them.

The Fair Pay amendments strengthened California’s commitment to closing the gender wage gap and was a powerful public statement; nevertheless, they left open a loophole which Assembly Member Eggman (D-Stockton) intended to close.

[i]

She introduced Assembly Bill 168 to the assembly floor in January of 2017, shortly after the new Fair Pay Act amendments took effect. As of September 25^th, 2017, Assembly Member Eggman’s bill passed the State Assembly and Senate and has been passed to Governor Brown’s desk.

The loophole left by the Fair Pay Act meant that though employers could no longer pay employees of different sexes who perform “substantially similar” jobs unequal wages or salaries without a rational basis, the amendments failed to account for the fact that women have, on average, earned less than their male counterparts. Therefore, an employer could explain away gendered pay disparities by stating that salary history was a sufficient rational basis for unequal pay between two employees performing substantially similar work.

As of 2015, California’s wage gap between men and women was a median of $7,227/year.[ii] Many factors influence this disparity; preventing salary disclosure will mitigate one of the factors that currently impedes women from achieving higher salaries in their preliminary negotiations for a job.

Labor Code § 432.3 would prevent this by making sure that employers will not know a potential employee’s salary history before offering them a job. Even state and local government employers would be prohibited from seeking salary history information about an applicant for employment, except as otherwise provided.

Moreover, the bill would require an employer, except state and local government employers, upon reasonable request, to provide the pay scale for a position to an applicant for employment.

The two provisions—preventing an employer from requesting salary history and requiring that employers report salary information—are hoped to eliminate salary momentum whereby an individual’s lower salary in one job carries forward to subsequent jobs that request salary history. Proponents of the legislation contend the rule would force employers to make hiring decisions based on a candidate’s credentials, experience, and personality rather than based on his or her salary history. Moreover, proponents emphasize that nothing prohibits a candidate from disclosing the information if desired.

Some critics argue the bill is overly restrictive in that it impedes an employer from requesting a key category of information—prior salaries. This lack of information will make it more difficult for employers to ensure they are providing an attractive compensation structure.

Other critics argue it does not go far enough. Employers will attempt to circumvent the legislation by offering a signing bonus to some candidates but not others, by increasing the salary post-hire, or by several other methods.

Contact us today for a consultation.

[i] http://equalmeansequal.com/the-gender-pay-gap/

[ii] http://www.latimes.com/business/la-fi-equal-pay-day-20170404-story.html

In a case in The Superior Court of California, Santa Clara Superior County, called Paolo Subida v. SC3 DVBE SECURITY SERVICES, INC. (“SC3”), Case No. 17CV305530, the judge has ordered a Class Notice to be sent to all Putative Class Members in the case.

On January 23, 2017, Plaintiff Paolo Subida filed a lawsuit against his former employer, SC3 DVBE Security Services, Inc. alleging several causes of action. Specifically, Plaintiff alleged:

1. A Failure to Compensate for All Hours Worked;
2. A Failure to Pay Minimum Wage;
3. A Failure to Provide Meal and Rest Periods;
4. A Failure to Maintain Accurate Records;
5. A Failure to Furnish Wage and House Statements;
6. Failure to Pay Final Wages on Time;
7. Unlawful Retaliation in Violation of Public Policy;
8. Discrimination and Harassment;
9. Failure to Prevent and Investigate Discrimination and Harassment;
10. Intentional Infliction of Emotional Distress;
11. Negligent Infliction of Emotional Distress;
12. Negligence; and
13. Unfair Business Practices

With respect to the wage and hour claims, Plaintiff brought the action on behalf of himself and as a class action of the following hourly class and terminated subclass:

All California non-exempt employees who worked for SC3 DVBE Security Services, Inc., in the State of California as a Patrol Officer or similar or equivalent position at any time on or after the date that is four years prior to when the Complaint was filed.

Terminated Subclass: All persons who are eligible for membership in the Class but who are no longer employed by Defendant.

Putative Class Members should contact an attorney if they have questions or concerns about the Class Action Case Subida v. SC3 DVBE SECURITY SERVICES, INC. (“SC3”), Case No. 17CV305530, in Santa Clara Superior Court.

A job with an unlimited vacation policy seems awesome right? Companies that offer unlimited vacation policies are often viewed as employee friendly and revolutionary and many companies are jumping on the bandwagon. Your company tells you that they’re getting with the program and offering unlimited vacation! But before you start buying those plane tickets to Hawaii, consider this: is the unlimited vacation policy actually cheating you out of your wages?

Traditional vacation policies work on an accrual system where you accumulate a certain number of hours during each pay period. In California, vacation days that are accrued constitute wages and are part of an employee’s compensation package. “It is established that vacation pay is not a gratuity or a gift, but is, in effect, additional wages for services performed.” Suastez v. Plastic Dress-Up Co., 31 Cal.3d 774, 779 (1982). Accordingly, once you accrue a vacation day, it cannot be taken away. “Use it or lose it” vacation policies or policies where employers “buy back” your vacation days at a lower rate than your earned wages have been deemed illegal. See Boothby v. Atlas Mechanical, Inc., 6 Cal. App. 4th 1595, 1602 (1992); Wang v. Chinese Daily News, Inc., 435 F.Supp.2d 1042, 1049 (2006).

Once your vacation days vest, if you leave your job because you quit or are terminated, California law requires that your employer pay you for the unused vacation days as wages. Cal. Lab. Code § 227.3. This not only makes a lot of sense legally but also practically because who couldn’t use some extra cash when leaving a job?

If your job offers unlimited vacation and you don’t take any because you’re too busy or your manager won’t approve it, then you’re in no better position when you leave than your cube-mate that spent the better part of 2017 in the Bahamas. Unlimited vacation policies might seem great for the employee, but in actuality, companies save potentially millions of dollars when they establish one because they do not need to pay out when employees leave. And even articles that tout unlimited vacation policies acknowledge that employees may take less vacation: “Freedom gives people such a strong sense of ownership and accountability that, like business owners, many end up taking no vacation at all.”

If your company shifts from a traditional accrued vacation policy to an unlimited policy, what happens to your accrued vacation? The courts haven’t faced this issue yet but this author would argue that if your company requires you to use your “accrued” vacation dates before your “unlimited” vacation days, their policy violates Labor Code section 227.3. In addition, if unlimited vacation policies in action actually depend on the whims of managers and bosses who may or may not administer time-off fairly, then maybe the unlimited vacation policy is just ruse to get out of paying employees their due wages.

Although there haven’t been any court decisions regarding unlimited vacation policies, as more and more companies move towards that model, this topic is ripe for discussion. If you think your company’s vacation policy might be denying you your accrued wages, you should contact a lawyer to discuss your rights.

The Law is Like a Box of Chocolates: Federal Judge Allows False Advertising Suit Against Hershey’s to Move Past the Pleading Stage Because ‘Reasonable Consumer’ Determination More Appropriate for Summary Judgment

If a box of chocolates is sold with the box half empty, has the chocolate company violated false advertising laws?

It all comes down to whether a “reasonable consumer” would be fooled when looking at the box.

A federal judge in ­­­Missouri has allowed a lawsuit on this exact issue to move past the pleading stage, ruling that the “reasonable consumer” determination is better suited for summary judgment, when more facts of the case have been developed. The case involved Hershey Co. candy such as Reese’s Pieces and Whoppers.

The plaintiff in the Hershey’s suit, Robert Bratton, says that 29 percent of the Reese’s Pieces Box and 41 percent of a Whoppers box is empty. Consequently, the plaintiff argues, consumers are being deceived and Reese’s has violated false advertising laws.

The judge agreed. “Hershey’s candy boxes are opaque and non-pliable, and a reasonable consumer could conclude that the size of a box suggests the amount of candy in it,” the judge ruled.

Thus, the lawsuit is alive—for now.

A federal lawsuit can be dismissed on a Motion to Dismiss (called a Demurrer in California state court), which argues that even if all the facts in the complaint, or pleadings, are accepted as true, the Plaintiff still loses as a matter of law. On the other hand, the judge can allow the suit to go forward so that more of the facts can be established. Once the facts have been developed through depositions and other forms of discovery, the defendant can then make a Motion for Summary Judgment to get the case thrown out if the defendant is confident the facts are in their favor.

In the Hershey’s case, the judge ruled that the case can proceed beyond the pleading stage so that more facts can be developed at the summary judgment stage to determine whether a “reasonable consumer” would be deceived by the empty boxes of chocolates.

The Hershey’s case is similar to a recent California case against Starbucks regarding whether Starbucks customers were being bamboozled because Starbucks puts so much ice in their iced coffees. But the judge in the Starbucks case tossed the suit on the pleadings, ruling that “reasonable consumers” could naturally expect ice to be inside their iced coffee.

This is in line with other California cases, but not all.

In 2014, a California District Court judge explained that, “Whether a business practice is deceptive is generally a question of fact not amenable to determination on a motion to dismiss.” Rojas v. Gen. Mills, Inc., No. 12-CV-05099-WHO, 2014 WL 1248017, at *3 (N.D. Cal. Mar. 26, 2014).

However, the Judge also stated that, at the pleading stage, there are occasionally times when it could be determined based on the pleadings that a “reasonable consumer” would not likely be deceived by the packaging or advertising, and thus the case must be thrown out.

The judge in Rojas stated, “[I]n certain situations a court may assess, as a matter of law, the plausibility of alleged violations of [the law].” (Emphasis added).

The judge then cited to a 2010 case where the court threw out a suit because it determined based on the pleadings that a “reasonable consumer” would not likely be deceived into believing that a cereal named “Crunch Berries” derived nutritional value from fruit.

If the “reasonable consumer” standard seems wishy-washy, that’s because it is. Law students are taught from their first day of law school to argue both sides of such a standard, and in practice, there are often good arguments for both sides. So, as with most things in the law, the answer in these consumer product false advertising cases is usually, “it depends.”

Is a customer more likely to be fooled by too much ice in a Starbucks coffee, or by a half empty box of chocolates? The distinction is subtle, which is why, if you think you’ve been deceived by a product and think you might have a false advertising case, you should contact a lawyer to discuss your potential case.

Private settlements framed as hybrid settlements of class action claims and PAGA claims helped recalibrate the incentives for employers and employees to comply with the Labor Code. Settlements tend to be allocated mostly to non-PAGA claims such that the worker keeps one hundred percent (100%) of that portion with a small amount allocated to PAGA claims for which the worker retains only twenty-five percent (25%). In cases that end in a settlement, the worker has similar prospects of recovering allegedly stolen funds. However, very recently, particularly since the failed Uber settlement, courts and the State are tightening the rules which have thus far allowed litigants to craft settlements where workers recover most of the money. New restrictions were added in the summer of 2016, and enforcement of the old rules has become stricter. The current trend is sharpening the edges of the jagged legal pill.

Has the era of PAGA ended? Since 2011, PAGA claims have been the workers’ hero or, perhaps anti-hero would be more accurate. After all, PAGA may help workers recover lost wages, but it sure does a lot of damage to companies along the way—arguably too much damage. The age of this anti-hero may be coming to a close. On August 22, 2016, the Ninth Circuit relied on the National Labor Relations Act to stop companies from forcing workers to agree to individual arbitration of Labor Code claims. See Morris v. Ernst & Young, LLP, 834 F.3d 975 (9th Cir. 2016), cert. granted, 137 S. Ct. 809 (2017). The NLRA’s purpose is to guarantee workers’ rights to “engage in . . . concerted activities for the purpose of collective bargaining or other mutual aid or protection.” On its face, this opinion would appear to revive employment class actions. If upheld by the Supreme Court, it will. But it hasn’t happened yet.

In January 2017, the U.S. Supreme Court agreed to review Ernst & Young. Unlike review by the California Supreme Court, this grant of review does not alter the precedential effect of the Court of Appeal’s order. Thus, in theory, Ernst & Young should be changing the landscape already. In reality, many judges are simply staying cases until the Supreme Court rules on Ernst & Young. For instance, on March 30, 2017, the Northern District stayed McElrath v. Uber Techs., Inc., No. 16-CV-07241-JSC, 2017 WL 1175591, at *1 (N.D. Cal. Mar. 30, 2017) pending the Supreme Court’s decision. And that decision is nowhere in sight at this time. Further briefs are due in August 2017, and no date has been set for oral argument.

Unless or until the U.S. Supreme Court affirms Ernst & Young, plaintiffs’ class action regiment will include the jagged legal pill that is PAGA. The principle that PAGA claims cannot be forced into arbitration was made clear in a California Supreme Court case in 2014 and in a Ninth Circuit case in 2015, yet nothing on the horizon suggests either opinion will be overturned anytime soon. See Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal. 4th 348 (2014); Sakkab v. Luxottica Retail N. Am., Inc., 2015 U.S. App. LEXIS 17071 (9th Cir. 2015). If the current trend continues and the government increases supervision of PAGA claims, litigants will need to attribute a larger percentage to PAGA claims or, in some cases, the entire settlement will need to be deemed PAGA penalties. Plaintiffs and defendants alike will be eagerly awaiting the U.S. Supreme Court’s decision this term in Morris v. Ernst & Young. If it is affirmed, it would mean the pendulum in traditional class actions has swung almost completely in the direction of the worker as suddenly as it did for employers with the 2011 Dukes and Concepcion opinions. If it is affirmed, it will also likely result in PAGA’s almost immediate disappearance from dockets throughout California.

The prominent role of class actions in the U.S. legal system is far from certain after a pair of recent opinions by the U.S. Supreme Court.

In 2011, these two U.S. Supreme Court rulings all but eviscerated the class action tool—Wal-Mart v. Dukes, 564 U.S. 338 (2011) and AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011). While Dukes tightened the guidelines to maintain a class action, Concepcion made it easy for employers to convert class actions into individual arbitrations. Although debatable, this author would argue that Concepcion triggered a much larger but slower change to class actions. The Dukes case tightened the standards to maintain any similar class action, including a class action that had been pending for years. One of the core tests of class actions—whether the group had sufficient commonality to warrant class action status—became far stricter in State and federal courts alike. Indeed, a worker who was on the verge of filing a motion for class certification when Dukes was published would likely need to rewrite the motion itself and would likely need to conduct additional discovery and obtain a supplemental report from an expert witness. The effect from Dukes was immediate.

Regardless of which case resulted in a greater change, most would agree Concepcion’s impact was slower because it mostly affected newly filed class actions. Since the purpose of arbitration is swift justice that reduces the costs of litigation, many Courts refused to compel a years-old class action where expensive discovery had already been completed for all class members because, in such a case, the purposes of arbitration were already moot, as the parties had already spent the time and money to litigate. Many companies lost bids to compel arbitration because, among other things, judges ruled it would be unfair to force a worker into individual arbitration after the worker already expended thousands of hours and perhaps hundreds of thousands of dollars in attorneys’ fees investigating a class action based on what had been considered well-settled law. Judges found other ways to avoid compelling individual arbitration, such as by finding the agreements themselves to be unconscionable and therefore unenforceable. However, a wave of pro-arbitration opinions quickly whittled down the various arguments to avoid Concepcion’s reach.

Because Concepcion’s effect was mostly on new class actions, its impact would increase exponentially over the next few years.

After 2011, advice by corporate counsel was, for once, almost unanimous: companies should add a contract term stating that the employee would only bring claims on an individual basis in arbitration. Employee Handbooks almost invariably contained a “collective waiver” of some type, making clear that the employee waives the right to participate in class or group actions. Case law trended consistently in favor of the ease of forming a binding arbitration agreement: electronic signatures are generally sufficient and many judges will enforce an “agreement” that the employee never signed and which was sent with a message that the employee automatically accepts it if he or she fails to opt out by a specific deadline. As such, wise companies made sure collective waivers were in place. For a short time, those waivers resulted in millions or—more likely—billions of dollars saved in litigation costs by companies in California that avoided group actions altogether, until PAGA claims – which could not be forced into arbitration—became the new normal of employment litigation.

An upcoming U.S. Supreme Court decision could end the era of PAGA claims, which refers to claims for the civil penalties set forth by the California Private Attorneys General Act of 2004 or “PAGA.” Although PAGA became effective in 2004, its widespread use began in or around 2011, when a pair of U.S. Supreme Court cases gutted the class action legal industry by tightening the standards to maintain a class action and, at the same time, limiting arguments available to stop a civil class action from being compelled into individual arbitration. In many ways, PAGA can solve both problems because some courts have refused to compel individual arbitration in a case filed as a PAGA representative action, while other courts have held that typical class action requirements do not apply. As a result, PAGA claims are currently viewed as a necessity to any worker who wishes to pursue a class or group action. However, a closer look at the incentives created by PAGA reveals that PAGA is a relatively poor substitute for traditional class actions.

Class actions in the United States can directly trace their lineage to medieval England in 1200, when group legal actions grew in popularity. A typical case involved one member of a recognized group suing on behalf of the pre-existing group. Similarly, group actions occurred where one member of a group defended the pre-existing group. Their prevalence rose over the next few hundred years, until about 1400. From 1400 until 1700, class actions declined in England.

Meanwhile, the United States was a seedling which, when it sprouted, did not have a well-organized body of common law, with pieces of the British system forming a patchwork of a legal system. At this point in time, group litigation’s place in the U.S. was anything but certain.

By 1820, the United States had a well-organized judicial system, and Justice Joseph Story penned what is considered to be the first U.S. legal opinion regarding class actions, West v. Randall, regarding the several parties that must be involved in one suit to properly divide the estate of a Revolutionary War general, William West. Justice Story also discussed group actions in two equity treatises, although he did not characterize them favorably.

In 1833, the first group litigation rule was codified: Equity Rule 48 which permitted a representative suit where too many parties were at issue to maintain separate actions. The law soon evolved such that Rule 48 was extended to allow a representative action on behalf of individuals who had not individually filed a suit. In 1938, the rules of equity and law were merged, and Equity Rule 38 became Federal Rule of Civil Procedure 23. Rule 23 still governs federal class actions and informally guides California class actions, despite the fact that the State has its own codified rules. Procedural changes to Rule 23 in the mid-1960’s—propelled by passionate movements in the fields of civil rights, environmentalism, and consumer protection—jettisoned class actions’ status into a high impact legal tool that is one of the most significant deterrents of unlawful conduct in the business world.

Class actions had grown to become a core aspect of America’s enforcement system. One of the most famous cases in U.S. history—Brown v. Board of Education—ended racial segregation in schools in 1954; most know of the famous case, but what many do not know is that this was a class action. The entire governmental system shifted as private class actions took on a larger and larger role in prosecuting unlawful behavior. This trend is evident in the employment industry, which accounts for a large percentage of overall class actions. Between 1980 and 2007, the number of inspectors enforcing federal minimum wage and overtime laws declined by 31 percent, even as the labor force grew by 52 percent. Similarly, the budget of the Occupational Safety and Health Administration was reduced by about $25 million between 2001 and 2007. A study by the Economic Policy Institute concluded that private attorneys recovered slightly more than one-half of the $933 million in wages recovered by U.S. workers in 2012.

In the early 21^st century, although scholars may debate the positive and negative effects of class actions, none can debate class actions’ prominent role in the legal system.

Americans have grown accustomed to Fox News’ reputation for airing scandalous news, but lately it has been the subject of scandalous news as often as it is reporting it. The wave of discrimination lawsuits against Fox News continues to grow, with several new lawsuits filed on May 22, 2017. At some point soon, the phrase “tsunami of suits” may not be hyperbole.

Where did this wave of suits begin? Like any wave, it’s hard to identify a precise starting point, but the current wave had grown to sizeable proportions by the summer of 2016, when Chief Executive Officer Roger Ailes was fired as a result of mounting claims of sexual harassment. Last month, in April 2017, the famed Bill O’Reilly was fired after advertisers began a boycott in light of the New York Times investigative report that Fox paid $13 million to settle sexual harassment claims against O’Reilly but kept him on the air. The wave of suits continues to grow. Indeed, three new lawsuits were filed on May 22, 2017, asserting similar allegations of racial and/or sexual discrimination and harassment.

Allegations of discrimination and harassment have been lodged against many high-level Fox employees, including the Chief Executive Officer and the Head Comptroller, as well as against top-rated newscasters. “We have a culture of systemic and institutional racial bias,” Plaintiff Kelly Wright said. “I can no longer sit in silence.” His attorney, Douglas Wigdor of Wigdor LLP—which represents twenty-three individuals suing Fox News—commented that, “When it comes to racial discrimination, 21st Century Fox has been operating as if it should be called 18th Century Fox.”

Although many discrimination lawsuits have been filed against Fox News, a single, local law—the New York City Human Rights Law, New York City Administrative Code § 8-101 et seq.—is the entire basis for many of these high-profile cases. These lawsuits’ complete reliance on the New York City Administrative Code claim may be surprising at first glance, but a review of the available remedies makes abundantly clear why it is all a litigant needs for a multi-million dollar case.

For purposes of illustration, consider the cases of Julie Roginsky v. Fox News Network LLC, et al., filed in New York’s Supreme Court and the case of Gretchen Carlson v. Roger Ailes [former Fox CEO], filed in the Superior Court of New Jersey where Ailes resides. The two lawsuits, filed in different states, one against the individual executive and the other against Fox News itself and several defendants, both rely exclusively on the New York City Human Rights Law.

New York Administrative Code section 8-120 is the key provision defining the remedies of a private litigant. Those remedies include:

(1) hiring, reinstatement or upgrading of employees;
(2) the award of back pay and front pay;
(5) the extension of full, equal and unsegregated accommodations, advantages, facilities and privileges;
(6) evaluating applications for membership in a club that is not distinctly private without discrimination based on race, creed, color, age, national origin, disability, marital status, partnership status, gender, sexual orientation or alienage or citizenship status;
(7) selling, renting or leasing, or approving the sale, rental or lease of housing accommodations, land or commercial space or an interest therein, or the provision of credit with respect thereto, without unlawful discrimination;
(8) payment of compensatory damages to the person aggrieved by such practice; and
(9) submission of reports with respect to the manner of compliance; and
(10) payment of the complainant’s reasonable attorney’s fees, expert fees and other costs. The commission may consider matter-specific factors when determining the complainant’s attorney’s fee award….
Thus, Section 8-120 provides for the potential to recover almost any type of remedy, including back pay, front pay, compensatory damages, reinstatement, costs, and attorney fees.
Even more striking than the private remedies are the remedies the State can recover. Section 8-126 provides that the commission may impose a civil penalty of $125,000 against any person that “engaged in an unlawful discriminatory practice” and, “[w]here the commission finds that an unlawful discriminatory practice was the result of the respondent’s willful, wanton or malicious act, the commission may, to vindicate the public interest, impose a civil penalty of not more than two hundred and fifty thousand dollars [$250,000].” In addition, Section 8-124 provides additional penalties for violating a commission order, and Section 8-129 provides criminal penalties.
With such a comprehensive list of potential remedies, it is not surprising that many suing Fox News have based their entire lawsuits around the New York City Human Rights Law. It’s not yet clear how pervasive these Fox allegations will become. Dozens have already come forward and revealed they too experienced discrimination and harassment at the network. One thing is clear: the New York Human Rights Law will continue to be a centerpiece of these mounting disputes.