Friday, July 26, 2013

Are truckers independent contractors?

Trucking companies have become the targets of lawsuits alleging that they misclassified their drivers as independent contractors. Such cases include Robles v. Comtrak Logistics, Inc., Case No. 2:13-CV-00161 (putative class action currently pending in the federal court in Sacramento) and Seacon Logix Inc. v. Labor Commissioner (Seacon ordered to pay $105,000 for violations against four of its drivers).

Truck drivers often own or lease their own trucks, and sign independent contractor agreements with the trucking companies. Those two factors alone are not sufficient evidence of independence to make the drivers independent contractors. As the California Court of Appeal explained in a 2007 case involving FedEx drivers: "The parties' label is not dispositive and will be ignored if their actual conduct establishes a different relationship." Estrada v. FedEx Ground Package System, 64 Cal. Rptr. 3d 327 (Ct.App. 2007). FedEx wound up paying $27 million for that misclassification case.

The factors to be evaluated in determining whether a driver is an independent contractor are: (1) whether the worker is engaged in a distinct occupation or business, (2) whether, considering the kind of occupation and locality, the work is usually done under the principal's direction or by a specialist without supervision, (3) the skill required, (4) whether the principal or worker supplies the instrumentalities, tools, and place of work, (5) the length of time for which the services are to be performed, (6) the method of payment, whether by time or by job, (7) whether the work is part of the principal's regular business, and (8) whether the parties believe they are creating an employer-employee relationship.

Under a California statute that became effective in January 2012, companies that "willfully" misclassify employees as independent contractors face increased penalties of up to $15,000 per violation (increased to $25,000 if there was a "pattern or practice" of misclassification. See California Labor Code sections 226.8 and 2753.

Before classifying workers as independent contractors businesses should make sure that they have carefully analyzed the nature of their relationships with those workers so that they do not incur the substantial liability that would be imposed if the workers have been misclassified.

Monday, June 24, 2013

U.S. Supreme Court adopts "but for" test for Title VII retaliation claims

In University of Texas Southwestern Medical Center v. Nassar, Case No. 12-484 (Jun. 24, 2013), the U. S. Supreme Court has directed courts to apply the "but for" test to retaliation claims brought under Title VII. This differs from the standard for assessing status-based discrimination claims that Congress enacted into 42 U.S.C. section §2000e–2(m). That section provides that a plaintiff may establish a case of discrimination based solely on proof that race, color, religion, sex, or nationality was a motivating factor in the employment action. If the employer proves that it would still have taken the same employment action in the absence of a discriminatory motive, it may avoid monetary damages and a reinstatement order.

The Court stated the "but for" test that will now apply to all Title VII retaliation claims as follows: "This requires proof that the unlawful retaliation would not have occurred in the absence of the alleged wrongful action or actions of the employer." Justice Ginsburg's dissenting opinion explained the impact on plaintiffs: "When an event is 'overdetermined,' i.e., when two forces create an injury each alone would be sufficient to cause, modern tort law permits the plaintiff to prevail upon showing that either sufficient condition created the harm. ... In contrast, under the Court’s approach (which it erroneously calls 'textbook
tort law'), a Title VII plaintiff alleging retalia­tion cannot establish liability if her firing was prompted by both legitimate and illegitimate factors."

Thursday, June 13, 2013

"Suitable Seats" Class Action by Cashiers

The California wage orders (available here) provide: "(A) All working employees shall be provided with suitable seats when the nature of the work reasonably permits the use of seats. (B)When employees are not engaged in the active duties of their employment and the nature of the work requires standing, an adequate number of suitable seats shall be placed in reasonable proximity to the work area and employees shall be permitted to use such seats when it does not interfere with the performance of their duties." Several large retailers have been targets of recent class actions alleging violations of these suitable seats requirements.

Most recently, Judge William Alsup of the United States District Court for the Northern District of California certified a one-store class of cashiers seeking damages for suitable seats violations against Kmart. He explained his reasoning in a June 11, 2013 decision, in a case entitled Delbridge v. Kmart Corp., Case No. C 11-02575 WHA.

Although there have not been a large number of cases, employers should assess the feasibility of providing seats for those employees who currently do not have seats at their place of work. The wage order provisions impose a mandatory duty. Employers may not wait for their employees to request seating. Should a class action result in a substantial recovery, there will likely be a number of copy cat lawsuits filed. The damages exposure could be large, because courts have ruled that suitable seats claims may be enforced through the Labor Code Private Attorneys General Act (PAGA), which provides for penalties of up to $100 per employee per pay period for an initial violation, and $200 per employee per pay period for each subsequent violation, as well as attorney’s fees. Bright v. 99c Only Stores, 189 Cal.App.4th 1472 (2010).

Friday, June 7, 2013

Arbitration Agreement May Not Preclude PAGA Representative Actions

The Labor Code Private Attorneys General Act of 2004 (Labor Code sections 2698 - 2699.5) (PAGA) allows a aggrieved employee to recover civil penalties for violations of the California Labor Code on behalf of himself or herself and other employees. 75 percent of the amount recovered goes to the State and the balance to the aggrieved employees. The Federal Arbitration Act requires all courts in the United States to enforce arbitration agreements, "save upon such grounds as exist at law or in equity for the revocation of any contract." In AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740 (2011), the U.S. Supreme Court rejected a California Supreme Court ruling that class waivers in consumer arbitration agreements are unconscionable if the agreement is in an adhesion contract, disputes between the parties are likely to involve small amounts of damages, and the party with inferior bargaining power alleges a deliberate scheme to defraud. (See Discover Bank v. Superior Court, 36 Cal.4th 148 (2005).) The ruling stood as an obstacle to the accomplishment of the FAA's objectives.

The effect of the Concepcion case on class action waivers in the employment context is unsettled. The California Supreme Court has granted review in several cases that raise that issue. The lead case is Iskanian v. CLS Transportation of Los Angeles. Others include Franco v. Arakelian Enterprises and Flores v. West Covina Auto Group.

In Brown v. Superior Court, Case No. H037271 (Jun. 4, 2013), the Sixth District Court of Appeal has ruled that, when applied to the PAGA, an arbitration agreement that purports to waive the right to take representative action is unenforceable because it wholly precludes the exercise of this unwaivable statutory right. Concepcion does not require a different result, because a PAGA claim is asserted on behalf of the State and does not belong to the individual employee.

Sunday, May 26, 2013

Can an employee do exempt and nonexempt work at the same time?

"Not in California" was the answer that Safeway recently received from the Second District Court of Appeal in Los Angeles. Heyen v. Safeway Inc., Case No. B237418 (May 23, 2013).

Linda Heyen was responsible for all store operations at Safeway's Oceanside store, but, she also had to do bookkeeping and other nonexempt work. She was able to manage the store while doing lower level work. For example, when she was stocking shelves, she was also observing general conditions in the store. Safeway classified her as an exempt employee, but she sued for overtime, claiming that she was really a nonexempt employee.

The California wage orders establish an "executive" exemption for those who manage a customarily recognized unit of the employer and are "primarily engaged" in executive duties. (Wage Order No. 7-2001 applied to Safeway.) "Primarily" means "more than one-half the employee’s work time."

Safeway argued that Heyen spent more than half her time on executive duties, because whenever she was performing nonexempt work she was also keeping an eye on general operations. The Court of Appeal disagreed. The test requires the fact finder to determine the employee's purpose for each task. If the purpose is to supervise employees or contribute to the smooth functioning of the unit, the task exempt work. Otherwise, it is nonexempt work.

The result might have been different under the federal Fair Labor Standards Act. The FLSA regulations use a "primary duty" rather than a "primarily engaged" test. Under that test, "assistant managers in a retail establishment who perform exempt executive work such as supervising and directing the work of other employees, ordering merchandise, managing the budget and authorizing payment of bills may have management as their primary duty even if the assistant managers spend more than 50 percent of the time performing nonexempt work such as running the cash register. However, if such assistant managers are closely supervised and earn little more than the nonexempt employees, the assistant managers generally would not satisfy the primary duty requirement." 29 CFR 541.700(c).