Wage Law

In Morris v. Ernst & Young, LLP (9th Cir. 2016) ___ F.3d ___, the Ninth Circuit held that the National Labor Relations Act prohibits employers from requiring, as a condition of employment, that employees waive their right to participate in concerted legal claims in the form of a class action.

Ernst & Young required employees to sign agreements saying that they would pursue any legal claims through arbitration, and only as individuals, in separate proceedings, barring the joining of multiple plaintiffs or a putative class in any such arbitration. In fact, the agreement expressly barred any claims to be brought on behalf of any other person. Plaintiffs filed a wage and hour class and collective action in District Court, and the court granted Ernst & Young's motion to compel arbitration. The Ninth Circuit reversed, holding that the agreement’s “separate proceedings” provision violates the essential, substantive right established by the NLRA to participate in concerted activities for the purpose of collective bargaining "or other mutual aid or protection.”  The Court distinguished Johnmohammadi v. Bloomingdale's, Inc. (9th Cir. 2014) 755 F.3d 1072, 1075 by noting that Ernst & Young offered its workers no opportunity to opt out of the agreement. The decision leaves a split between the circuits, with the 7tth Circuit and 9th Circuit holding in favor of employees, and the 2nd, 5th and 8th Circuits siding with the employers.

California, in Iskanian v. CLS Transp. Los Angeles, LLC (2014) 59 Cal. 4th 348, 373, upheld class action waivers, but suggested that in some instances, they could violate the NLRA. Morris would appear to at least offer a distinction, if not a broad limitation of Iskanian, which may give some employers pause when considering whether to cite CAFA and remove a case to District Court, since district courts in California will now be bound to follow Morris.

You can download the full text of Morris here in PDF.

In Esparza v. Sand & Sea, Inc. (CA2/4 B268420 8/22/16), an employer tried to have its cake and eat it, too, with respect to an arbitration agreement. It included the arbitration provision in an employee handbook, which also made clear that nothing in the handbook was intended to create a binding agreement between the employee and the employer.The court found that this rendered the handbook insufficient to establish an agreement to arbitrate.

"The question in this case is whether an arbitration provision in an employee handbook is legally enforceable.  The employee handbook containing the arbitration provision included a welcome letter as the first page, which stated, “[T]his handbook is not intended to be a contract (express or implied), nor is it intended to otherwise create any legally enforceable obligations on the part of the Company or its employees.”  The employee signed a form acknowledging she had received the handbook, which mentioned the arbitration provision as one of the “policies, practices, and procedures” of the company.  The acknowledgement form did not state that the employee agreed to the arbitration provision, and expressly recognized that the employee had not read the handbook at the time she signed the form.  Under these circumstances, we find that the arbitration provision in the employee handbook did not create an enforceable agreement to arbitrate.  We therefore affirm the trial court’s denial of the employer’s petition to compel arbitration."

You can download the full text of the opinion here in Word of PDF.

The Ninth Circuit has reinstated an arbitration decision that had been vacated by the U.S. District Court. In SW Reg. Council of Carpenters v. Drywall Dynamics, Inc. (9th Cir. 14-55250 5/19/16), the arbitrator ruled that an employer was bound by a memorandum of understanding extending the term of a labor agreement. The district court vacated the arbitration award on the grounds that the arbitrator’s interpretation of the parties’ agreement was not plausible and was contrary to public policy. The Ninth Circuit held that the district court’s decision exceeded its narrow authority to determine whether the arbitrator’s award was based on the parties’ contract and whether it violated an explicit, well-defined, and dominant public policy. You can read the entire opinion at this link. [PDF]

The Supreme Court has agreed to review the Court of Appeal's decision in Alvarado v. Dart Container Corp. of California (2016) 243 Cal.App.4th 1200 (SC S232607/E061645, review granted, 5/11/16), concerning overtime calculations and the "regular rate of pay" for employees paid flat sum bonuses.

In Alvarado, the employer calculated overtime as follows:

1. Multiply the number of overtime hours worked in a pay period by the straight hourly rate (straight hourly pay for overtime hours).
2. Add the total amount owed in a pay period for (a) regular non-overtime work, (b) for extra pay such as attendance bonuses, and (c) overtime due from the first step. That total amount is divided by the total hours worked during the pay period. This amount is the employee’s “regular rate.”
3. Multiply the number of overtime hours worked in a pay period by the employee’s regular rate, which is determined in step 2. This amount is then divided in half to obtain the “overtime premium” amount, which is multiplied by the total number of overtime hours worked in the pay period (overtime premium pay).
4. Add the amount from step 1 to the amount in step 3 (total overtime pay). This overtime pay is added to the employee’s regular hourly pay and the attendance bonus.

Plaintiff contends that this method fails to pay proper overtime in violation of Labor Code sections 510 and 1194 by not including shift differential premiums and bonuses in calculating overtime rates.

Defendant prevailed on a motion for summary judgment. The court found that there was no legal basis for plaintiff’s proposed formula because federal law did not conflict with the employer's method and there was no California law providing a formula for calculating overtime on bonuses, and plaintiff’s proposed formula was based solely on California public policy and void regulations from the Division of Labor Standards Enforcement (DLSE) Manual which have no force or effect.

Plaintiff contended that Marin v. Costco Wholesale Corp. (2008) 169 Cal.App.4th 804 applies and under that holding, the defendant’s formula dilutes and reduces the regular rate of pay by including overtime hours when calculating the regular rate of pay used to compute overtime on plaintiff’s flat sum bonuses.

The question presented on review is:

What is the proper method for calculating the rate of overtime pay when an employee receives both an hourly wage and a flat sum bonus?

You can follow the progress in Alvarado here.

In Corbin v. Time Warner (9th Cir. 13-55622 5/2/16), the 9th Circuit affirmed a district court’s summary judgment in favor of Time Warner Entertainment-Advance/Newhouse Partnership in a putative class action brought by a Time Warner employee.  In his rounding claim, plaintiff alleged that Time Warner's policy of rounding all employee time stamps to the nearest quarter hour deprived him of earned overtime compensation. The plaintiff also alleged that he was not compensated for one minute when he mistakenly opened an auxiliary computer program before logging into Time Warner’s timekeeping software.

The court held that Time Warner’s rounding policy complied with the federal rounding regulation, 29 C.F.R. § 785.48(b) and that the policy was neutral both on its face and as applied to plaintiff. They concluded that the district court properly interpreted and applied the regulation, and granted summary judgment to the employer.  The district court also properly granted summary judgment on plaintiff’s log-in claim and classified the one minute of uncompensated time as de minimis. The court held that all three factors in Lindow v. United States (9th Cir. 1984) 738 F.2d 1057, 1062 supported the district court’s conclusion that plaintiff’s one minute of uncompensated time was de minimis.

Finally, the 9th Circuit held that the plaintiff failed to demonstrate the existence of a material fact to his derivative California state law claims. Because the court affirmed the summary judgment to Time Warner on the rounding claim, there was no need for the district court to reconsider whether the claim can form the basis of a viable class action proceeding.