Wage Law

SB 390 (employee wage withholdings, failure to remit) amending Labor Code § 227 concerning employee wage withholdings, has been signed by Governor Brown:

Existing law makes it a crime for an employer to fail to make agreed-upon payments to health and welfare funds, pension funds, or various benefit plans. Existing law provides that the crime be punished as a felony or a misdemeanor, as specified, if the amount unpaid exceeds $500, and as a misdemeanor, if the amount is less than $500.

This bill would make it a crime, as described above, for an employer to fail to remit withholdings from an employee’s wages that were made pursuant to state, local, or federal law. The bill would prescribe how recovered withholdings or court-imposed restitution, if any, are to be forwarded or paid. By broadening the definition of a crime, this bill would impose a state-mandated local program.

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SB 435 (compensation, meal and rest or recovery periods) amending Labor Code § 226.7 concerning meal and rest periods, has been signed by Governor Brown:

Existing law prohibits an employer from requiring an employee to work during any meal or rest period mandated by an order of the Industrial Welfare Commission (IWC) and establishes penalties for an employer’s failure to provide a mandated meal or rest period.

This bill would make that prohibition applicable to a meal or rest or recovery period mandated by applicable statute or applicable regulation, standard, or order of the IWC, the Occupational Safety and Health Standards Board, or the Division of Occupational Safety and Health. The bill would exempt specified employees from the prohibition. The bill would require an employer to pay an employee, for any meal or rest or recovery period mandated by law, one additional hour of pay at the employee’s regular rate of compensation for each workday that the meal or rest or recovery period is not provided. The bill would define “recovery period” for those purposes.

© Walsh & Walsh, P.C., wage & hour, meal periods, rest periods, recovery periods.

SB 168 (farm labor contractors, successors, wages and penalties) has been signed by Governor Brown, adding Labor Code § 1698.9 concerning wages and penalties for farm labor contractors and their successors.

Existing law requires farm labor contractors to be licensed by the Labor Commissioner and to comply with specified employment laws applicable to farm labor contractors. Under existing law, a person who violates farm labor contractor requirements is guilty of a misdemeanor punishable by specified fines, or imprisonment in the county jail for not more than 6 months, or both.

This bill, in addition, would make a farm labor contractor successor to any predecessor farm labor contractor that owed wages or penalties to a former employee of the predecessor, whether the predecessor was a licensee or not, liable for those wages and penalties, if the successor farm labor contractor meets one or more specified criteria. By imposing a new requirement on farm labor contractor successors, the violation of which would be a crime, the bill would impose a state-mandated local program.

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Defendant Mid-Wilshire Health Care Center appealed from an order denying its motion to compel arbitration and to stay a wrongful termination action by plaintiff Maribel Mendez. The Court of Appeal holds hold that the arbitration provision in the collective bargaining agreement governing Mendez’s employment does not apply to Mendez’s statutory discrimination claims. Affirmed.

The trial court denied Mid-Wilshire‟s motion to compel arbitration of all of Mendez‟s claims, statutory and common law. Because the collective bargaining agreement did not clearly and unmistakably refer Mendez‟s statutory discrimination claims to arbitration, the trial court properly denied Mid-Wilshire‟s motion to compel arbitration of those claims. With respect to Mendez‟s common law claims, Mid-Wilshire has not presented any legal argument that the trial court‟s denial of Mid-Wilshire‟s motion to compel arbitration of those claims was erroneous. We therefore deem any claim of error forfeited.

The full opinion can be read here in Word or PDF.

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In Sonic-Calabasas A, Inc. v. Moreno (2011) 51 Cal.4th 659 (Sonic I), the California Supreme Court held as a categorical rule that it is contrary to public policy and unconscionable for an employer to require an employee, as a condition of employment, to waive the right to a Berman hearing, a dispute resolution forum established by the Legislature to assist employees in recovering wages owed. It further held that the rule prohibiting waiver of a Berman hearing does not discriminate against arbitration agreements and is therefore not preempted by the Federal Arbitration Act, and that, if one of the parties is dissatisfied with the result of the Berman hearing, it can move to arbitrate the wage dispute consistent with the arbitration agreement, just as a dissatisfied party can obtain a trial in court without such an agreement.

The United States Supreme Court granted certiorari, vacated the judgment, and remanded the case for consideration in light of AT&T Mobility LLC v. Concepcion (2011) 563 U.S. __,  131 S.Ct. 1740. In Concepcion, the court clarified the limitations that the FAA imposes on a state’s capacity to enforce its rules of unconscionability on parties to arbitration agreements. In light of Concepcion, the Californa Supreme Court concludes that because compelling the parties to undergo a Berman hearing would impose significant delays in the commencement of arbitration, the approach in Sonic I is inconsistent with the FAA. Accordingly, the FAA preempts any state law categorically prohibiting waiver of a Berman hearing in a predispute arbitration agreement imposed on an employee as a condition of employment.

Nonetheless, state courts may continue to enforce unconscionability rules that do not “interfere[] with fundamental attributes of arbitration.” (Concepcion, supra, 563 U.S. at p. __ [131 S.Ct. at p. 1748].

Although a court may not refuse to enforce an arbitration agreement imposed on an employee as a condition of employment simply because it requires the employee to bypass a Berman hearing, such an agreement may be unconscionable if it is otherwise unreasonably one-sided in favor of the employer.

Furthermore, the Berman statutes confer important benefits on wage claimants by lowering the costs of pursuing their claims and by ensuring that they are able to enforce judgments in their favor. There is no reason why an arbitral forum cannot provide these benefits, and an employee’s surrender of such benefits does not necessarily make the agreement unconscionable. The fundamental fairness of the bargain, as with all contracts, will depend on what benefits the employee received under the agreement’s substantive terms and the totality of circumstances surrounding the formation of the agreement.

The employee in Sonic II contends that the particular arbitration scheme at issue is unconscionable, while the employer contends that its arbitration agreement offers adequate protections and advantages to facilitate the employee’s claim and is not unreasonably one-sided. Because evidence relevant to the unconscionability claim was not developed below, the Supreme Court remands the matter to the trial court to determine whether the present arbitration agreement is unconscionable under the principles set forth in Sonic II.

The full opinion in Sonic II can be downloaded here in Word or PDF.

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The Ninth Circuit has affirmed a district court’s denial of defendant grocery company’s motion to compel arbitration in an action asserting claims under California labor law on behalf of the plaintiff and a proposed class of other grocery employees. Chavarria v. Ralphs Grocery Store (9th Cir. 11-56673 10/28/13)

Ralph sought to compel arbitration of an individual claim pursuant to its arbitration policy, to which all employees acceded upon submitting applications for employment. The 9th Circuit affirmed the district court’s holding that the arbitration policy was unconscionable under California contract law and therefore unenforceable. It  was procedurally unconscionable because it was a condition of applying for employment and was presented on a “take it or leave it” basis.In addition, its terms were not provided to the plaintiff until three weeks after she had agreed to be bound by it. It was  substantively unconscionable because it was unjustifiably one-sided to such an extent that it “shocked the conscience.” Specifically, the arbitrator selection process would always produce an arbitrator proposed by the defendant in employee-initiated arbitration proceedings; the policy precluded institutional arbitration administrators, which have established rules and procedures to select a neutral arbitrator; and the policy’s arbitrator-fee-apportionment provision would have the effect of pricing employees out of the dispute resolution process.

The decision distinguishes Kilgore v. Key Bank National Ass’n (9th Cir. 2013) 718 F.3d 1052 (the mere risk that plaintiff will face prohibitive costs is too speculative to justify invalidating arbitration agreement), on the ground that the fee provision was not speculative and there were other unconscionable terms.

State law supporting the unconsionability holding was not preempted by the FAA because it applies to contracts generally and did not in practice impact arbitration agreements disproportionately. The Supreme Court’s decision in American Express Corp. v. Italian Colors Restaurant (2013) __ U.S.__, 133 S. Ct. 2304 did not preclude the court from considering the cost that the defendant’s arbitration agreement imposed on employees in order for them to bring a claim.

The matter is remanded for further proceedings.

© Walsh & Walsh, P.C., federal appeals, arbitration